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Study: Credit unions' gains began long before Bank Transfer Day

July 31, 2012|By E. Scott Reckard
  • Protesters march in downtown Los Angeles on Bank Transfer Day last November. Deposit growth at credit unions began outpacing that of banks about three years earlier, after the financial crisis struck in 2008, a study by SNL Financial shows.
Protesters march in downtown Los Angeles on Bank Transfer Day last November.… (Genaro Molina / Los Angeles…)

Consumers began shifting deposits out of banks and into credit unions right after the financial crisis erupted in 2008, nearly three years before populist rhetoric escalated into Bank Transfer Day last November, a study by SNL Financial shows. 

A burst of advertising that portrayed credit unions as the friendlier and healthier alternative to banks beginning in 2009 may have contributed to the shift. But advocates of the nonprofit financial firms attribute the gains by credit unions to a crisis in confidence for traditional banks, the study said.

Banks and credit unions alike have seen deposits flood in since the financial meltdown spooked investors away from riskier places for their money, such as stocks and real estate. So it's a question of relative growth, not bank deposits declining.

Indeed, the tendency for businesses to hoard assets instead of expanding in these uncertain times has kept bank coffers bursting while having less of an effect on credit unions, most of which are oriented to consumers and mom and pop businesses. 

Deposit growth as measured on a percentage basis grew equally at banks and credit unions from the end of 2006 through the end of 2008. Since then, credit union deposits have grown faster, and at last count were up about 43% since 2006 compared with about 31% at banks.

The study notes that disruptions in the banking system -- such as Washington Mututal Inc.'s 2008 failure and acquisition by JPMorgan Chase & Co. -- were followed by floods of deposits into thrifts such as Tukwila, Wash.'s Boeing Employees Credit Union.

Still, the single largest catalyst for the trend remains Bank of America Corp.'s abortive attempt to charge a $5 monthly fee to basic checking-account customers for using their debit cards, SNL said.

BofA's announcement, attacked by critics from the White House on down, occurred at the height of the Occupy protests and provided fuel for Bank Transfer Day, a Facebook-inspired movement encouraging customers to dump big banks.

Even with the gains, credit union deposits are dwarfed by those at the big banks. Navy Federal Credit Union in Vienna, Va., the nation's largest, had $35.6 billion in deposits at the end of the first quarter this year. SchoolsFirst Federal Credit Union of Santa Ana, California's largest, had $8 billion.

By contrast, New York's JPMorgan Chase & Co.'s deposits totaled $1.19 trillion and Bank of America in Charlotte, N.C., had $1.09 trillion.

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