The Dynamics Of The Share Portfolio In Third Quarter 2018

Share certificates at credit unions are on track to post the highest growth of any deposit account.

 
 

Consumer confidence in the marketplace remained high in the fall of 2018, and the spending habits of credit union members reflect that. Third quarter loan growth is on track to outpace share growth by 4.5 percentage points, according to available performance data representing more than 99% of the industry’s assets.

Callahan & Associates projects share growth among the nation’s credit unions will decelerate for a second consecutive year. It is currently on pace to drop 1.5 percentage points year-over-year to 5.2%. 

 

 

Still, balances have increased across all share types except IRA and Keogh accounts. The growth for that account code is down 0.5% over the year to $78.6 billion. Share certificates are on track to increase 9.2% year-over-year, and balances are set to reach $230.3 billion as of Sept. 30, 2018. The third quarter growth rate in share certificates is 39 basis points faster than one year ago. This is the highest certificate growth since the first quarter of 2008 and is the only accelerated annual growth in the share portfolio.  

12-MONTH GROWTH IN SHARES OUTSTANDING

FOR U.S. CREDIT UNIONS | DATA AS OF 09.30.18

Share certificates are the only product in the share portfolio to post stronger annual growth.

Source: Callahan & Associates.

Consumers looking for competitive deposit options are gravitating toward interest-bearing accounts like share certificates. The Fed hiked rates three times in 2018. The latest increase of 25 basis points occurred on Sept. 26, 2018, and pushed the Fed funds rate to 2.25%. Economists expect a fourth hike in December, and consumers will likely continue to move money into certificates. Certificates now comprise 18.8% of the share portfolio at credit unions — up from 18.1% one year ago. The share of the portfolio has declined for all other deposit products as members look to capitalize on interest rate hikes.

SHARE COMPOSITION

FOR U.S. CREDIT UNIONS | DATA AS OF 09.30.18

The share of the portfolio dedicated to share certificates at credit unions is on the rise. It is on pace to increase 7 basis points from third quarter 2017 to third quarter 2018.

Source: Callahan & Associates.

To remain competitive in a rising rate environment, credit unions are deploying new pricing strategies, such as offering certificate specials that enhance a member’s savings portfolio. Here are two examples: 

1st Advantage FCU 

1st Advantage Federal Credit Union ($688.6M, Newport News, VA) is offering a certificate special that provides members a favorable savings opportunity. The credit union has maintained a share certificate growth of 14.3%, roughly 1.5 times the national average of 9.2%. It has offered various certificate specials to members, including an 18-month certificate special at 2.60% APY. 

Directors Choice Credit Union

Directors Choice Credit Union ($8.8M, Albany, NY) offers a 12-month “step up” share certificate that gives members the option to change their rate one time during the term to take advantage of a rate increase. That approach helped Directors Choice post share certificate growth of 18.7%, which is more than twice the 9.2% national average. 

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Nov. 27, 2018


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