Regular Shares Lead Highest First Quarter Share Growth in Three Years

Can credit unions start to build up core deposits, or will the industry continue to generate its share growth through certificates?

 
 

Quarterly share growth for the first quarter of 2006 is at the highest in three years – with $17.9 billion added in the first three months. The amount is 23 % more than the $14.5 billion added during the first three months of 2005. The highest dollar increase came from regular share balances, which grew $8.8 billion. When you add in the money market and share drafts, core deposits account for 45.8 % of the growth this quarter. For the most part, the rest of the growth continues to come from share certificates, which have risen 21.6 % over the past 12 months.

Dollar Amount of Share Growth by Category
Reg. Shares
$ 8,846,271,000
49.3%
Money Market
$ 1,177,267,000
6.6%
Share Drafts
$ (1,810,268,000)
-10.1%
IRA/Keogh
$ 489,974,769
2.7%
Certificates
$ 6,766,764,725
37.7%
Total
$17,935,476,000

Share certificate growth is not surprising considering that these rates have increased almost 200 basis points since last year and are more aligned with the Fed Funds than most core deposit rates. Although credit unions, on average, have increased rates in all categories, regular shares and share drafts have gained minimally in comparison to money market, IRAs and share certificates, all jumping at least 97 basis points.

Average Rates for Credit Union Industry
1Q05
1Q06
Reg. Shares
0.60
0.84
Money Market
1.31
2.30
Share Drafts
0.21
0.26
IRA/Keogh
2.04
3.01
Certificates
2.49
4.43

Share certificates continue to be a large source of growth given the enticing rates. With many certificate depositors simply looking for the best rate however, these may not be a “sticky” source of share growth. As core deposits represent the largest dollar increase, the industry can look to this as an opportunity to grow core deposits and create deeper, more loyal relationships with members. Assuming the Fed stops increasing rates, we will see whether credit unions can build their core deposits or if share certificates will carry the industry throughout 2006.

The first quarter of 2006 sets the pace for the rest of the year. Learn more about first quarter trends and analysis with Callahan & Associates’ 1st Quarter Research & Data Report.

 

 

 

June 26, 2006


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