Where Has All the Share Growth Gone?

Low share growth across the industry was one of the top concerns facing credit unions in 2005. In 2006, credit unions will be challenged to find new deposit strategies.


Slowing growth, a low return on assets, and a flat yield curve are all critical factors affecting the credit union industry. In fact, share growth has fallen to 4.2 percent as of June 2005, which is just above the 10-year low of 4.0 percent. Nearly three-quarters of all credit unions grew shares below the industry average (see below graph). To maintain liquidity, credit unions are increasingly borrowing overnight rates from corporate credit unions and/or the Federal Home Loan Banks.


In contrast, a representative sample of banks that are tracked by Bloomberg grew their deposits 19.8 percent in the 12 months ending June 2005. The multiple between bank and credit union share (deposit) growth stands at 4.7, in comparison to 1.1 in December 2002.

Where’s the Growth?

While overall share growth is modest, many credit unions are experiencing high growth in their share certificate accounts as they can offer competitive rates (see below graph). ''We can ladder our share certificates rates so that we have money that reprices in any given month based on our ALM needs,'' said Amy Sink, CFO of Teachers Credit Union ($1.5 billion in assets, South Bend, IN).  ''Share certificates are sensitive to rate movements.''



Most credit unions are challenged to find innovative strategies to grow their core deposits. Some offer a monthly or seasonal teaser rate to attract new deposits. However, the same members who rush to the teaser rate may just as quickly switch products or institutions when a better rate is available.

Rewarding the Loyal

How can a credit union reinforce a long-term relationship with its members and encourage new deposits? One idea is to offer a one-time bonus dividend.

''We’re not going to tell our members ahead of time that we will be offering a bonus dividend,'' said Kelley. ''Rather, we want to reward our current members and therefore reinforce the value of the credit union.''

Arizona Federal plans to offer a uniform dollar reward to all its qualifying members while Navy Army Federal Credit Union ($347 million in assets, Corpus Christi, TX) offers a bonus dividend in the form of a higher rate for 30 days approximately once a year strictly to its higher tier share accounts. ''We are trying to take care of the 10% of members who hold 90% of the overall share balances,'' said CEO Wayne Vann.




Nov. 7, 2005


  • Intellegent and timely piece. Nice work.
  • Very interesting as our credit union struggles here.
  • Would love to see articles about high loan/share ratios. We are at 90% and my board thinks that's bad because our peer is at 65%. Can't seem to convince them. Need help!
  • I would have liked analysis as to WHY the credit unions are lagging the banks. As it's a percentage increase and not a dollar increase, it can't just be an issue of number of branches.
  • The money available may have been diverted into real estate.
  • Did not answer the question- or should the reader assume where deposits went based on comments in the article ? I would discount the comment from 11-8 at 12:49 unless spelling is no longer important.
  • Has anyone actually "followed the outflow of cash" to determine where it is ending up? ie stock market, competitors CD's, money market accounts, debt reduction, etc
  • Banks tend to focus on penetrating market share by having their frontline focus on checking account growth and wealth management. The people who handle wealth management also focus on mortgages. Credit Unions tend to drive more consumer lending business into their branches. Until we learn that consumers do not view "loans" as a relationship driving business (they will go where they get the best rate) our deposit growth will continue to be dismal.