The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Time to Refocus

On July 3rd, 2017, posted in: Industry, Uncategorized by

locked hornsWho you’ve been mad at over the years seems to be misguided. That’s the message I would convey to those in the local banking community. For years (as many as I can remember), the bank lobby has stood up to, lobbied against, written droves of letters, and generally solicited the support of legislators and the general public against credit unions. After all, credit unions and their exemption to paying federal taxes are killing them.

The bankers believe that the overriding solution to their success is to tax credit unions. As a result, many will go away due to the costs of taxation, the herd of competition will be thinned, and banks will gather up the consumers left in a lurch. Voila, problem solved. Everything is right with the banking community. Now they grow, baby, grow.

OOPS!  The numbers don’t pan out on this theory. Let’s go back to 1992 to start the meter on what’s happening. In 1992, Wayne’s World was the movie, U2 was the band, and L.A. Law was the TV show.  Oh yeah, and 53% of the country’s assets were managed by community banks. Today that number is 17%. OUCH!  For those of you who love percentages (and who doesn’t?), that’s a 68% drop in market share. DOUBLE OUCH!!!

So based on all the fuss related to the need for credit unions to be taxed, one would surmise that credit unions have bullied and beat community banks to a pulp. Think again. Credit unions (during the same period from Wayne’s World to Wonder Woman) have increased their market share from a paltry 5.6% to a paltry 6.8%. Over the 25 years of measurement, credit unions have averaged a less than 1% annual gain in market share.   WHAT? Something’s woefully wrong. After all, banks have spent how much time, effort and money fighting back this market-killing disease called credit unions?

There are two pieces of bad news in the previous paragraph. First, banks have targeted the wrong enemy. We’re not critical mass to their concerns. Less than 7% of the market goes to credit unions. Banks need to refocus their angst. It ain’t us. Second, credit unions have their own set of problems as it relates to growth. Are we relevant and significant in the lives of consumers? By the numbers, only a small percentage thinks so.

The top 100 financial institutions managed about 41% of all assets in 1992. Today, that same 100 holds 75% of all assets. Well, well, well.

It would appear to me that our local banking community would be better served by understanding what might be happening within their own rank and file. Big banks have won the battle. Seems obvious. This begs the question: What advantage do large banks have over community banks? That’s where resources should be spent — not fighting credit unions.

I have lots of banking friends and admire them greatly, but credit union taxation to save community banks seems fruitless. The real problem with market share lies elsewhere.

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