CHARLOTTESVILLE, Va. (8/6/12)--Consumers were moving money out of banks and into credit unions long before Occupy Wall Street protests and Bank Transfer Day, according to a study by financial research firm SNL Financial.
The SNL report indicates deposits at banks and credit unions from year-end 2006 remained steady until about the beginning of 2009, when credit union deposit levels increased from 2006 levels.
Big banks have made few adjustments to stop the exodus of customers, said an article in the Huffington Post Thursday. However, the article also noted that small and mid-size banks are closing their doors as they struggle with low interest rates, weak loan demand, and compliance costs for regulations.
The Huffington Post article highlighted East Windsor, N.J.-based McGraw Hill FCU's latest video campaign asking potential members to make video testimonials about leaving big banks, in a program called "We Hear You."
Credit union advertising after 2008 and before the fall of 2011 may have positioned credit unions to gain members as individuals searched for an alternative to banks, Adam Denbo, a credit union consultant and managing partner at Samaha & Associates, told SNL. The U.S. has shifted from a net-spending country to a net-savings country, resulting in more deposits and all financial institutions, Denbo said.
But there has been a growing dissatisfaction with banks and thrifts in general and steady faith in the nonprofits, Mike Schenk, Credit Union National Association vice president of economics and statistics, told SNL via e-mail. During the financial crisis and credit crunch, deposit rates at credit unions remained consumer-friendly.
Credit unions opened up their lead in deposits when banks such as Washington Mutual and Wachovia ran into trouble during financial crisis, said SNL.
BECU, Tukwila, Wash., saw an increase in deposits in the fall of 2008 through the end of the year after Seattle-based Washington Mutual Inc. failed and its banking operations were purchased by JPMorgan, said Tom Berquist, senior vice president of member strategies, told SNL. BECU grew deposits 9.44% between 2007 and 2008, from $7.2 billion to $7.88 billion, according to SNL. Since 2006, deposits have grown 54.80% at the credit union.
Bank of America Corp.'s attempt to charge a $5 monthly debit card fee also contributed to BECU's deposit surge, Berquist told SNL. BofA has the largest market share in the state. BECU conducted no marketing campaigns about BofA's fee or the National Bank Transfer Day movement, but membership still spiked to 16,000 that month, up from an average between 6,000 and 7,000 a month.
State Employees' CU, Raleigh, N.C., spokeswoman Leigh Brady attributed its growth to a flight to safety from Wall Street banks. The credit union is also accessible: It has branches in every county of the state. Deposits grew 11.27% from 2007 to 2008 and 19.34% between 2008 and 2009. Since 2006, deposits increased 78.20%.
In spring 2011, SECU's frontline staff began informing members about additional services and encouraged them to switch checking accounts to SECU. The campaign helped grow checking accounts for the year.
SECU has lowered its deposit rate for several years because lending remained tight. Deposits continue to grow, although more slowly, Brady said. SECU tries to lend 85% of deposits, but is currently lending 60% and invests the rest in U.S. Treasuries, Brady told SNL. To offset the lost margin, the credit union emphasizes its noninterest products and services, and capitalizes on its being the primary financial provider for 70% of its members.
To read the SNL report and the Huffington Post article use the links.