1. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-1 Credit Unions and Savings Institutions Chapter 5

2. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-2 The Thrift Industry Includes Savings banks Savings & loan associations Provides services to individuals including Demand deposits (checking accounts) Time deposits (savings accounts) Certificates of deposit Loans for certain purposes, primarily ◦ Mortgages ◦ Consumer loans

3. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-3 Savings Banks Founded in early 1800s Provided savings accounts for individuals Existed then and now only in New England Have self-perpetuating Board of Directors Also known as mutual savings banks

4. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-4 Savings & Loan Associations Founded in mid-1800s Members pooled funds to loan to members to buy houses Grew dramatically in 1930s Originally all were mutual associations, the board elected by members; now some are stock- issuing corporations

5. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-5 Savings Institutions: A Brief History and Recent Regulatory Changes Thrift Industry Structure Mutual and Stock Thrift Trends Unitary Thrift Holding Companies Mutual Holding Companies for Thrifts Windfall Concerns and Regulations for Thrift Conversions from Mutual to Stock Ownership Risky Behavior? Changing Legislation to Ease Restrictions and Foster Conversions: Qualified Thrift Lender Requirements.

6. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-6 Credit Unions Membership Requirements and Regulations Fields of Membership CU Offers Lower Average Fees and More Competitive Rates than Banks do Credit Union Support Systems Credit Union National Association Corporate Credit Union Central Credit Union

7. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-7 NCUA Organizational Chart Office of Corporate Credit Unions NCUA Board & Chairman Executive Director National Credit Union Share Insurance Fund (NCUSIF) Administration Central Liquidity Facility (CLF) Regional Directors Other Support Office & Programs Office of Examination & Insurance Federally Insured Credit Unions (both state and federally Chartered Corporate Credit Unions

8. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-8

9. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-9 Credit Unions (continued) Recent Developments New Credit Union Conversion Rule Community Development Credit Unions (CDCUs) Expanding to a Community Charter

10. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-10 Types of Loans by Institution Page 195

11. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-11 Composition of Liabilities by Institution Page 195

12. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-12 Comparison of Assets and Liabilities: Banks, Thrifts, and Credit Unions Comparison of Equity-to Asset Ratios and Trends for Banks, Thrifts, and CUs Components of Equity Capital for Credit Unions Components of Equity for Thrifts Trends in Equity Capital Ratios over Time Capital Accounting Gimmicks for Thrifts in the 1980s Trends in Market-to-Book Values for Thrifts

13. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-13 Performance of Depositories: A Comparison Annual Compound Growth Rates in Assets Banks Savings Institutions Credit Unions Thrift and Credit Union Closures

14. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-14 Profitability by Type Page 201

15. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-15 Performance of Depositories: A Comparison (continued) Relative Profitability of Depository Institutions Thrifts Decline in the 1980s and Rebound in the 1990s Comparison of Simplified Income Statements by Depository Institution type Analysis of NIM Analysis of PLL% Analysis of the Burden% Comparison of Operating ROAs More on the Thrift Crisis of the 1980s

16. Copyright © 2004 by Thomson Southwestern All rights reserved. 5-16 ROE Comparison by Type Page 202