Many of the deposits that moved out of banks in the wake of
While U.S. banks lost 2.5% of their deposit base in the first quarter compared to the end of 2022, total shares and deposits increased 2.1% at credit unions, according to an S&P Global Market Intelligence analysis of call report data. This translates to credit unions picking up $39.85 billion of shares and deposits compared to the $481.79 billion that banks and thrifts lost, according to S&P Global.
Credit unions' growth in shares and deposits in the first quarter also outpaced growth in total loans and leases for the first time in two years, according to S&P. This followed a period of
One of the credit unions on the receiving end of those deposits was Deseret First Credit Union in West Valley City, Utah. The $1 billion-asset institution experienced a 3.5% quarter-over-quarter increase in total deposits at the end of the first quarter, bringing its total to $909 million.
Many consumers reassessed their concentration exposure with different financial institutions after seeing the
Deseret First was able to attract those deposits to its own accounts by marketing higher interest rates, according to London. For example, Bank of America is offering .03% annual percentage yield on a one-year CD in Utah, and JPMorgan Chase's rate is .01%. By comparison, Deseret First is paying 4.75%, according to the institutions' websites.
But the effect of that marketing may be short-lived.
"I've heard a number of economists indicate they felt that the deposit growth will be slowing as the year progresses and consumers begin to settle down and will not be shifting funds as frequently as they've been doing," London said.
Desert First's loan portfolio is still experiencing some growth, but it has slowed considerably from previous years, London said. That is primarily due to the higher interest rate environment for loans combined with the
"Add to that the impact interest rates have had on significantly slowing the mortgage market, and it's challenging," London said.
Only three of the 20 largest credit unions by assets reported contraction in shares and deposits during the first quarter, S&P found.
And even some smaller credit unions have reaped the deposit windfall.
The $96 million-asset Pinnacle Credit Union in Atlanta has marketed CD specials that paid "way more" than local banks. For example, Well Fargo is offering 1.5% annual percentage yield on a one-year CD in Atlanta, according to its website. JPMorgan Chase's rate is .01%, but Pinnacle is paying 5% on that product, Selke said.
Yet the credit union is seeing members return to pre-COVID spending habits, even spending down the balances they accrued during the pandemic, said Matt Selke, CEO of Pinnacle.
Pinnacle experienced a 1.3% quarter-over-quarter increase in total deposits at the end of the first quarter, reaching a total of $84 million.
"We have seen funds flow into the credit union from the bigger banks. It seems more folks are paying attention to bank failures and the reason why," Selke said.
And the credit union has taken the time with some members to show its financials and to assure them that Pinnacle is in a much stronger financial condition "than the SVBs and First Republics," he said.
"Money is not cheap any more, and we will see deposit wars to come in the near future," Selke said. "But the Atlanta area continues to run hot, and loan demand is still strong."
Credit unions have fewer uninsured deposits than banks, due to being more consumer-oriented, and that gives people comfort, said Vincent Hui, managing director at Cornerstone Advisors.
"Some credit unions were proactive in promoting this safety and soundness aspect to gain deposits," he said. "It helps on the lending side as it provides more liquidity when everyone's loan-to-deposit ratios are so high. They can take advantage of loan demand when others cannot."
Hui added that credit unions are pursuing all avenues to improve liquidity and add deposits — including small-business deposits.
"But I don't see many [credit unions] changing their efforts on gaining bank deposits beyond what they have done in the past," he said.
