Over the past year, the Fed cut rates 275 basis points and the
Wall Street bear awoke from a long hibernation. Credit unions had
the opportunity to show members why credit unions are not just another
financial institution. Giving members better rates than they can
find anywhere else has proven fruitful as credit union shares continue
to grow at a tremendous pace.
Callahan's 231 First Look Credit Unions, totaling $146.1 billion
in assets, have posted outstanding share growth. These credit unions'
shares have grown 16.7% in the last twelve months, and 5.6% in the
first quarter alone (NCUA just released preliminary first quarter
information that shows industry share growth at 17% for twelve months
and 5.6% for the first quarter). Money market share growth contributed
heavily to this boom.
The First Look credit unions averaged 44.4% money market growth
over the last twelve months with 10.7% growth in the first quarter
alone (compared with 41.7% twelve month and 10.2% first quarter
growth figures that NCUA released). It's easy to speculate that
the stock market's post-bubble bursting volatility inspired many
to turn to the safety of money market accounts. But it can't be
overlooked that aiding this growth was the First Look credit unions'
average money market rate of 2.09%; a rate that is over 20 basis
points higher than the average bank money market rate of 1.87% at
the end of the first quarter according to bankrate.com.
Even within the First Look credit unions it is not difficult to
see how strong rates lead to stronger growth. The ten credit unions
with the highest money market rates and at least $1 million in money
market shares a year ago experienced even higher growth than the
industry as a whole. They averaged a money market rate of 2.92%,
and grew their money market accounts 51.7% over twelve months and
12.4% during the first quarter.
With short-term interest rates so low, credit unions had a real
opportunity to bring back the liquid funds their members hold by
giving them greater value for their savings than other financial
institutions. Credit unions took full advantage of this opportunity,
once again demonstrating why they are the preferred financial institution.