DOWNLOAD DECEMBER 2013 REPORT
Employer sponsors are the bedrock of the U.S. credit union industry. Every credit union began with a group of individuals coming together to form a cooperative source of credit — from parishes to factories, school districts to city services — and every employee of the select employee group, or SEG,knew about the credit union and its offerings. Often, credit unions kept office space on the sponsor property, free of charge, so cooperative members could conveniently deposit and withdraw funds, apply for loans, and make loan payments.
The single-sponsor credit union landscape began to change in the early 1980s. An economic recession forced many companies to close or relocate jobs outside of the United States. The industry faced both declining membership and diminishing sponsor generosity. Credit unions trying to strengthen themselves by diversifying typically took one of two routes: They embraced multiple SEGs under the theory that healthier sponsors could compensate for weaker ones, or they converted to a community charter.
Many credit unions have grown and prospered under a community charter; however, that strategy officially severs the special credit union-sponsor relationship, and with it much of what historically helped the credit union stand apart from competitors. Despite the successes and growing numbers of community-chartered credit unions, the majority of the industry’s institutions are available to consumers that meet specific membership criteria. According to data filed on the 5300 Call Report, of the 4,189 federal credit unions today, 3,047 of them reported having a closed-charter membership as of June 30, 2013.
The SEG-credit union relationship remains the heart of the credit union industry, but nurturing a successful, mutually beneficial arrangement is far from easy. The strongest SEG-credit union bonds are formed when both the credit union and its SEGs understand each other. SEGs must understand the credit union’s mission, how the cooperative works, and why greater employee participation benefits the credit union as well as the SEG. Conversely, credit unions that understand their SEGs and its employees’ needs are better at providing appropriate products and services. This kind of comprehensive understanding helps all entities flourish.