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Credit Unions Compete for Deposits

Credit Unions Compete for Deposits By Gina Ragusa
Published March 1, 2013
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Credit unions outpaced community and super-regional banks from 2011 to 2012 in deposit growth, strategic planning firm, Bancography reported.

During that year alone, credit unions experienced a deposit growth rate of 3.8%, only slightly less than national banks at 3.9%.

The latest surge is new as Bancography points to credit unions historically lagging in deposit growth. Trends over the past four years have placed community banks as being the consumer “go to” financial institution (16.9%) followed by credit unions at 16.3% (with super regional, national and super community banks trailing).

Credit Union Deposits Trending Upward

Credit union deposit gains from 2011 to 2012 may point to higher credit union awareness.

For example, five of the largest credit unions in Louisville, Kentucky grew deposits and shares by 11% from the end of 2012 to $1.682 billion. These credit unions included L&N Federal Credit Union ($800 million, Louisville, KY), Park Community Federal Credit Union ($457.3 million, Louisville, KY) and Jefferson County Federal Credit Union ($120.2 million, Louisville, KY). Going back to 2008, the Kentucky Credit Union League reports that the leading five state credit unions held $1.3 billion in deposits and shares.

Individual credit unions, like UMassFive College Federal Credit Union ($361 million, Hadley, MA) report annualized deposit growth of 5% during 2012.

“Growth has been continuing with credit unions for some time,” Robert B. Kimmett, senior vice president for public relations and marketing for Massachusetts Credit Union League to MassLive.com. “They are enjoying popularity and success because people seem to be paying more attention to home-grown alternatives and want local, responsive institutions that are sensitive to their needs with pricing and services that reflect that.”

Barry F. Crosby, president and CEO of Freedom Credit Union ($517 million, Springfield, MA), told MassLive.com that 2012 brought deposit growth despite low rates.

“Deposits continue to grow despite historically low interest yields on deposits,” he said. “We work hard to manage expenses because if you have lower expenses, you have more money to give back to members in the form of dividends.” Freedom Credit Union’s deposits increased by 10% in 2012 to $439 million.

Increased Awareness Pushes More Deposits

Following the impact of Bank Transfer Day in November 2011, a new light was shed on the credit union industry driving thousands away from big banks.

According to Credit Union National Association CEO Bill Cheney, credit unions experienced record growth during the months leading up to and following Bank Transfer Day.

Cheney submitted an article to The Huffington Post in November, and wrote, “Looking at the one-year ending June 30, 2012 -- a period that encompasses the months leading up to and after Bank Transfer Day--we've seen the biggest increase in new credit union members in more than a decade -- a net of nearly 2.2 million new members.”

“To give you a sense of perspective, that is almost double the 1.2 million average growth we've seen in similar 12-month periods over the past 10 years, and it is four times greater than the 550,000 total of new credit union members who joined over that same period the prior year.”

Credit union CEOs point to frustrations and the search for a cost effective alternative as the reason why more consumers are seeking a credit union.

Community First Credit Union ($121.1 million, Santa Rosa, CA) reports record growth across the board in 2012. “We continue to be the recipient of a renewed focus by consumers to place their deposits locally so that their money helps the economy where they live, as well as consumers placing greater importance on getting the best value for their money,” President and CEO Todd Sheffield told Patch.com.

Community First experienced a 95% increase in real estate loans, 28% increase in auto loans, membership growth of 19% and a 19% increase in new checking accounts.

Conduct your own study and compare and contrast the benefits of bank versus credit union deposits. Let us know what you find.

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