Pluses, Minuses of Credit Union Shrinkage

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The number of credit unions in the United States is expected to fall to below 10,000 by yearend, the lowest since 1948.

Meanwhile, the number of Americans who claim credit union membership continues to soar: About 80 million belong to credit unions, and credit union assets at midyear were $514 billion; 54 years ago 3.7 million Americans pooled savings of $700 million at credit unions 54 years ago.

The steady decline in the credit union population is worth marking. The industry is losing about 3% of its credit unions each year, and if the pace continues there will be fewer than 8,000 by the end of the decade, said Bill Hampel, the Credit Union National Association's chief economist. It probably will not stop there, though the number "won't go lower than one," Mr. Hampel joked.

The count peaked at 23,866 in 1969. But the environment was different then.

"We started organizing credit unions mostly in the East during the 1930s, '40s, and '50s," Mr. Hampel noted. "Then in the '50s and '60s they started to spread throughout the country." But in the early 1970s the trend started to go the other way.

Jay Johnson, executive vice president of Callahan & Associates, a Washington consulting firm, said most of the mergers are combinations among institutions with assets of less than $10 million and that they are primarily a result of the fact that the National Credit Union Administration now permits single-sponsor credit unions to serve more than one group.

The consolidation has actually created a "healthier, stronger, more robust industry," Mr. Johnson said.

Success has meant an increasing number of large-asset-size credit unions but also presents public-image challenges, he said.

"To make the distinction" between banks, he said, "credit unions are going to have to have ... better rates and lower fees."

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