FOREST GROVE, Ore.-Within 50 years it's likely that less than 5% of all credit unions will be SEG-based, according to one analyst.
David Bartoo, president of Merger Solutions Group, contends the loss of SEG-based CUs is something not many inside the credit union community are paying close attention to, yet it's a trend bankers are likely picking up on.
At today's credit union consolidation rate (3.49% during 2012), scooping up about 220-250 CUs a year, within the next half century 95% of the SEG-based CUs will be gone from their peak of 23,876 in 1969, said Bartoo.
Community charted CUs will still serve SEGs, but that exclusive relationship, often from the smaller shop that's well known by the sponsor's workers and is inside the plant or office will be gone, Bartoo noted.
Fodder For Bank Lobby?
"What concerns me is that the origins for which credit unions were founded in this country by serving single SEGs and then multi SEGs is rapidly approaching its end," said Bartoo. "Can you imagine, 95% of an industry's base gone within a century." SEG-based CUs number approximately 3,100 today, added Bartoo.
Bartoo sees the trend as another sign of the erosion of the "American dream" and lost businesses in the country. "The mom-and-pop businesses that held communities together are disappearing-that fabric of society that bound things together. We built things ourselves, we were industrious, we took care of our own. Yes, things change and we all adapt to survive, but that doesn't mean the changes are for the best."
The evolution away from SEGs and into larger community-based credit unions, said Bartoo, could provide the bank lobby more ammunition to throw Washington's way.
The Bankers' Argument
"Bankers will argue that credit unions have become too much like banks. At what point will the banking industry say the original purpose for which credit unions were founded-single- and then multi-SEG charters-is all but gone? If this trend, if not slowed or reversed, creates a compelling argument that the credit union industry has evolved to mirror the banking industry. There has been no significant development of new SEG-based credit unions over the last several decades. It's essentially a bucket with a hole and no water being poured in to replace it. What happens when the water runs out? "
Bartoo is concerned that the single-SEG CUs could start falling by the wayside at a much faster rate in the coming years due to what he says is a lack of support from the industry.
"Most mergers we work on now are small CUs under pressure to merge in an increasingly regulated industry. Although majority are healthy, most small CUs feel there is little to no support left from the leagues, large credit unions and the cooperative effort that was once the credit union culture."
