WASHINGTON-Checking accounts are growing at five times the rate of CU membership, indicating that more members are making the credit union their PFI.
In addition, share of the mortgage lending market also rose among credit unions.
Callahan 3Q Trendwatch data pegged checking account growth at 3.8% through the first three quarters and membership growth at .7%. "It's the fastest growing account today. Balances are up almost 15% year over year," said Jay Johnson, Callahan & Associates EVP.
Johnson asserted those numbers indicate the rapid checking growth is coming more from credit unions' existing membership. He pointed out that a handful of credit unions are not skewing the checking numbers, but that strong checking growth is being experienced by 75% of credit unions across the country.
Both Johnson and Callahan & Associates President Chip Filson suggested that checking and membership growth will likely move even higher as the results of Bank Transfer Day are more accurately reflected in fourth quarter numbers. But Filson reminded that as people rush to join the CU or deepen their existing relationship, the marketing pitch should not be focused as much on better rates and no fees as it should be on the cooperative model.
"Bank Transfer Day was actually 100 years in the making," said Filson. "It highlighted that consumers are looking for better options to manage their finances. As much as rates and fees might have been the trigger, I believe consumers today have a feeling of 'us versus them' when they think about their banking relationship. In the cooperative model we are 'them.'"
Meanwhile, Callahan & Associates noted that the 6% share in mortgage lending year-to-date is even greater than that recorded at the trough of the recession when credit unions were one of the few options still active. "Credit unions have been especially active in refinancing members' mortgages," Callahan's noted. "The total originations for 2011 of $54.4 billion are giving members access to some of the lowest first-mortgage rates ever. This activity is expected to pick up even further when the new HARP refinancing guidelines are issued."
Other Notes From Q3 Data:
• Pre-assessment ROA is .92%, beating earnings as far back as 2006 (.90%)
• Sand states saw the biggest jump in earnings.
• Operating expenses (3.04%) excluding assessments continue to decline
While third quarter numbers show share balance growth at 5%, loan balances were off .04%-and credit unions next year may not get the jolt from the economy they need to get members borrowing again. John Olivo, VP, Goldman Sachs Asset Management, said U.S. economic policy and problems in Europe have dragged down predictions of 2.5% GDP growth in 2012 to 1.5%. He also sees a one-in-three chance the country will slip into a shallow recession.
Olivo said long-term rates will gradually rise in 2012 and he expects the Fed will keep short-term rates unchanged into 2013. "We also see a somewhat tougher financial environment next year could lead banks to tighten lending standards," Olivo shared.
