A Holistic Look at Member Growth

Americans continue to join credit unions in record numbers. Each person joins for their own reasons, but together they’re energizing a movement that now accounts for more than one-third of the U.S. population.

They may be attracted to higher interest on their savings and lower interest on their loans than competing banks. They may also be attracted to the member-focused, not-for-profit model that often comes with a heavy dose of financial wellness.

Mergers and expanding fields of membership are a few ways that individual credit unions can grow their membership base. Quality member service and keeping up with technology also help the cause, and credit unions aren’t shy about making sure Americans know the difference this type of financial institution can make.

“We’re seeing credit unions investing time and energy into creating experiences beyond rates to attract new members,” Alix Patterson, chief experience officer at Callahan & Associates, said.

Those experiences include being exposed to increased marketing and sharing more of the profits. Marketing expenses per member increased 50 cents year-over-year, from $14.23 in March 2018 to $14.73 as of March 2019.

Simultaneously, total dividends given to members in the first quarter of 2019 was 52.1% higher than the first quarter of 2018. Dividends across the country totaled $2.7 million and averaged $23 per member.

Measures of Growth

So, how much are they growing? There were 5,451 credit unions in the Callahan & Associates database at the end of the first quarter of 2019, compared to 5,530 at the same point of 2018. Those 5,451 cooperatives added 4.6 million members in the past year, and first-quarter growth itself has stayed at 4% or greater for the past three years.

This growth rate far exceeds the population growth rate of 0.60% for the U.S. itself. Currently, there are about 327.2 million U.S. residents and 118.6 million U.S. credit union members.

This is not a new trend. Nationally, credit union membership has grown by more than 20% in the past five years, and in the past 10 years, has increased 31.02%, surging from 90.5 million in March 2009 to 118.6 million in March 2019.

Member growth is not even across asset classes. The 312 credit unions with assets above $1 billion in the first quarter grew their membership 6.4% year-over-year and account for 70.7 million of the 118.6 million total membership. The 261 credit unions in the $500 million to $1 billion group grew 3.4% to 15 million members.

The 1,053 credit unions in the $100 million to $500 million peer group grew 2.0% in the first quarter to reach 21.5 million members. The only group that saw a decrease was the largest group of all: The 3,819 credit unions of $100 million in assets or less. They fell 0.18% over the past year and now account for 11 million members.

Measures of Engagement

Credit unions are not only recruiting new members, but enticing members to use more products and use those products more.

Overall, the average member relationship – loan balances excluding member business plus share balances – was $19,156 as of March 2019, up $3,175 from the first quarter of 2014. Driving that most recently is a 1.6% increase year-over-year in the average share balance to $10,756 and the average loan balance jumping 5.0% to $8,400.

Drilling down, we can see that strong performance occurring across the product set. The first mortgage market share was a healthy 8.0% at the end of the first quarter, while the credit card market share was 6.1%. Some data is not yet final on the state level, but currently the movement’s share of the national auto lending market is 18.6% for the first quarter.

Now, let’s look at penetration rates within the credit union membership. The credit card penetration rate was 17.5% at quarter’s end, up 1.5 percentage points from the same quarter in 2014. Real estate penetration was level at 4.4% then and now.

Auto penetration continues to be a particularly strong spot. Fully 21.2% of credit union members have such loans at their cooperative, up 60 basis points in the past year and 450 basis points from this point five years ago. New auto loans, in fact, were the fastest-growing loan product in the past year, jumping 12.1%.

And perhaps even more striking is share draft penetration, considered a good measure of how many members are looking to credit unions as their primary financial institution. Share draft penetration stood at a record high of 58.1%, up more than five percentage points from the 53.1% notched in the first quarter of 2014.

Portfolio Dynamics

“The combination of rising new car prices and the record number of used vehicles on the market, and entering the market off-lease, has contributed to much more competitive pricing dynamics in recent years,” Sam Taft, Callahan’s associate vice president of analytics and business development, said. “With the growth of auto loans over the past five years we have seen a pronounced shift in the makeup of the average credit union portfolio since 2014.”

Indeed, real estate loans have historically made up the majority of the loan portfolio. However, this concentration has fallen 3.0 percentage points in the past five years to 49.6% of total loans in 2019. Auto loans increased their share of the loan portfolio in that same period, from 31.1% of the portfolio in the first quarter of 2014 to 34.9% in the first quarter of 2019.

The Deposit Side of the Bottom Line

Similar dynamism exists on the other side of the balance sheet, where interest rates that have come up from rock bottom have sparked interest in savings products, at the same time as many credit unions are incenting such deposits as a way to fund a growing appetite for loans.

The fastest-growing share product is certificates. As a whole, share certificates grew 18.0%, or $38.5 billion, year-over-year to $256.9 billion as of the first quarter of 2019. This product accounted for 30.6% of total share growth over the first quarter of 2019 and 55.8% of the share growth for the entire year.

The bread and butter, however, remains regular shares, which at 37.0%, comprised the largest portion of the total share portfolio. Up 3.9% annually, regular share balances reached $477.2 billion as of March 2019. The next largest piece of the deposit portfolio, money market shares, increased 0.2% to total $267.0 billion.

It’s also worth noting that IRA/Keogh accounts are growing, too, as members are looking at credit unions long term when it comes to saving for their futures. It’s just another indicator of their deepening relationship with their cooperatives as critical providers of financial services.

Samantha Cristobal is an Industry Analyst for Callahan & Associates. She can be reached at 800-446-7453 or marketing@callahan.com.