Future trends in banking and credit unions

Posted: March 22, 2010 in Uncategorized
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By 1920, there were almost 30,000 banks in the U.S., more than the rest of the world put together. Overwhelmingly they were small, “unitary” banks with capital under $1 million. As each of these unitary banks was tied to a local economy, if that economy went south, the bank often failed. As the depression began to spread through American agriculture in the 1920s, bank failures averaged over 550 a year. Today there are slightly more than 6800 banks with assets totaling $11.9 Trillion and Equity of $1.3 Trillion. A decline of 78% in the number of banks that still exist from the peak. Banks are continuing to fail as well as their credit union brethren, and the new insurance levies are eating into capital for both banks and credit unions.

Here is a listing of the bank failures since 2000. One of the banks American Sterling was a hundred year old bank.

In contrast to the banks, it took til the early 1970’s to reach its peak of 23,000 credit unions in the U.S. Today there are approximately 7800 credit unions with assets of approaching $900 billion. A decline of 67% in the number of credit unions left since its peak. Asset size of banks are 12 times greater than credit unions, and the biggest banks have asset sizes that are greater than all the credit unions combined. Here is a listing of the credit unions by state.

One major difference that a lot of people do not know. Banks are for profit, while Credit Unions are not-for-profit. One can surmise with profit margins continually getting squeezed, there will be more demands from the banking community to revoke the not-for-profit charters of Credit Unions. Credit Unions are in a great position to take advantage of the bashing the banks have been taking lately from the press and public. It remains to be seen whether they have the marketing savvy of the banks to gain market share at their expense. One thing is for sure for both the banks and credit unions. Look for more mergers and failures to decrease the numbers of institutions, and the choices we as consumers will have.

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