As of third quarter 2011, credit union checking accounts grew at 3.6% annually, or five times the 0.7% growth rate of credit union membership. Why is this significant? Because checking accounts are viewed as a proxy for where a member holds their primaryfinancial institution relationship, and many credit unions track checking (share drafts) accounts with direct deposit in their key organizational success measures. The growth of checking accounts indicates that more members are turning to credit unionsfor their day-to-day banking needs.
| Checking Accounts Are Growing At 5 Times The Rate Of Membership |
| For all U.S. credit unions | Data as of 09.30.11 |
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| Source: Callahan & Associates’ Peer-to-Peer Software. |
Today, more than 49% of members have a checking account and the growth is being shared across the industry. More than 70% of credit unions grew their checking accounts and 13% grew at double digits!
Gaining Steam
Some might attribute this activity to Bank Transfer Day, but check out the timeline. The data above is as of Sept. 30, well before Nov. 5. And the trends were moving in the right direction even before then.
The FDIC releases deposit levels by branch each year as of June 30. When overlayed with credit union deposits, that data shows market share that can be analyzed down to the branch level. According to BranchAnalyzer,an online deposit market share tool from Callahan & Associates, deposit market share stands at 9.07%, having increased in 31 states between June 2010 and June 2011. The top 10 states in growth are listed below. Click on the map to see each state’smarket share as of June 2011.
| Top 10 States By Largest YOY Change In Deposit Market Share | |||
| Data as of 09.30.11 | |||
| YOY Change In BPS |
2011 | 2010 | |
| Vermont | 104 | 18.20% | 17.20% |
| South Carolina | 80 | 11.00% | 10.20% |
| Alabama | 74 | 14.50% | 13.80% |
| Washington | 72 | 20.00% | 19.30% |
| New Mexico | 72 | 19.40% | 18.70% |
| South Dakota | 61 | 2.40% | 1.80% |
| Michigan | 60 | 18.50% | 17.90% |
| Idaho | 58 | 17.30% | 16.70% |
| Iowa | 52 | 10.40% | 9.90% |
| West Virginia | 52 | 8.00% | 7.50% |
| Source: Callahan & Associates’ Peer-to-Peer Software. |
| Deposit Market Share |
| For all U.S. credit unions | Data as of 06.30.11 |
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| Source: Callahan & Associates’ Branch Analyzer | Click the map to view full size. |
Why Are Deposits Important?
In today’s landsape, it’s difficult for financial institions to generate income. Interest income is tight and fee income opportunities are limited. Many banks (and some credit unions, too) are chasing off deposits because of interest expensesand servicing costs. So what’s the argument for pursuing deposits?
The answer is simple: Deposit accounts are the first stepping stone in building deeper member relationships. While banks are dropping free checking and debit reward programs, credit unions are doubling down on enticing deposit strategies. Here are someexamples:
- First Community FCU ($662, MI),Freedom CU ($510, PA),Postal CU ($508, MN) and Randolph-Brooks FCU ($4.6B, TX) are offering cash back on debit purchases.
- Through November 30,Velocity Credit Union ($566M, TX) offered rates of 1.51%, 2.12%, and 2.83% on 2-, 3-, and 5-year CDs, respectively. Navy Federal ($45.5B, VA) is offering a 3.0% return via its 1-year Easy Start Certificate.
- Nebraska, North Carolina, and Washington joined Michigan in passing legislation that allows credit unions to participate in prize-linked savings contests.
- NASA FCU ($1.1 B, MD) is encouraging direct deposit enrollment by providing members access to their paychecks up to 24 hours earlier.
- FORUM ($927M, OH), Jeanne D’Arc ($917M, MA),Redwood($1.9B,CA),Florida Commerce ($340M, FL) and Wright-Patt($2.2B, OH) credit unions are sponsoring financial fitness competitions that encourage savings and healthy spending habits.
Senior Editor Rebecca Wessler provides more in-depth analysis of RBFCU’s program as well as an interview with SAFE Credit Union CEO Henry Wirz on his Perfect Cents programin the third quarter 2011 edition of Credit Union Strategy & Performance (CUSP), available soon.
Next Steps: Turning Deposits Into Loans
Helping credit unions leverage new deposit relationships into profitable full-service ones will be the focus of CreditUnions.com for the next few months. Starting in January, we are launching theme weeks which will provide a range of perspectives on challenges and opportunities facing credit union executives. January kicks off with Credit Card week on January 9. We’ll look at successful affinity relationships,how to measure card program profitability, the latest technological advances in cards, whether to offer rewards, and more. We’ll also have commentary and analysis from guest author and credit card expert Timothy Kolk of TRK Advisors. In February,we’ll tackle Mortage Lending and March brings Auto Week.
Stay tuned.