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Journal Article
Credit unions and the common bond
A distinguishing feature of credit unions is the legal requirement that members share a common bond. This organizing principle recently became the focus of national attention when the Supreme Court and the U.S. Congress took opposite sides in a controversy regarding the number of common bonds (fields of membership) that could coexist within a single credit union. In this article, Emmons and Schmid develop and simulate a model of credit-union formation and consolidation to examine the effects of common-bond restrictions on the performance of credit unions. The performance measures are ...
Journal Article
Mortgage applicants turn to credit unions after the crisis
Journal Article
Membership structure, competition, and occupational credit union deposit rates
How do occupational credit unions set deposit rates? This article shows that the answer to this question will depend on (i) who actually makes business decisions in credit unions (who is in control), and (ii) whether local deposit market competition is important. It is not obvious who controls occupational credit unions. If the sponsor (the employer) is in control, then loans and deposits are priced to maximize the surplus received by all of the credit union?s current and potential members (those eligible to join). If members are in control, then a group of members with a majority can ...
Journal Article
Economies of scale and continuing consolidation of credit unions
This Economic Letter shows that, in contrast to banks, larger credit unions, on average, have decidedly lower average costs and higher net incomes, as we might expect in the presence of important economies of scale. It further notes that these economies of scale put pressure on the credit union industry to continue consolidating into fewer, larger credit unions. It also describes how some recent legislation may have further added to the pressures on both the banking and credit union industries to consolidate.
Journal Article
Credit unions, conversions, and capital
While credit unions have been able to convert their charters more easily since the late 1990s, two conversions of very large credit unions--over $1 billion in assets each--in 2006 have put the issue on the front burner for the industry. ; This Economic Letter outlines some costs and benefits to their member-owners of credit unions' converting to stock thrifts and describes one way to reform the process in order to spread the benefits of conversion more broadly to credit union members.
Journal Article
Credit union failures and insurance fund losses: 1971-2004
Over the past few decades, assets in the credit union industry have grown considerably and have grown relative to banking. As with banking, the credit union industry has experienced considerable structural change that, in part, involved failures. While the data on failures in the banking industry have been analyzed at length, the same has not been true for credit unions, so far. ; This Economic Letter presents newly produced data on losses in the federal insurance program for credit union shares and on the rates at which federally insured credit unions (FICUs) failed. (Shares in credit unions ...
Journal Article
Credit union mergers: efficiencies and benefits
Mergers tend to improve credit union cost efficiency. When the acquirer is much larger than the target credit union, target members benefit in terms of lower loan rates and higher deposit rates, while acquirer members see little change. When merger partners are more equal in size, these benefits are shared more evenly. Over time, credit union mergers have shifted from, on average, only benefiting targets to also benefiting acquirers to some extent.
Working Paper
Credit unions, community development finance, and the Great Recession
Community development credit unions (CDCUs) have a long history of serving low-income and minority markets. They played an important role in the founding and leadership of the Community Development Financial Institutions (CDFI) Coalition, which successfully advocated for the establishment of the CDFI Fund and has monitored and supported the CDFI Fund throughout its history. Yet, the role of credit unions in the CDFI movement is often overlooked. The term, ?CDFI? is frequently understood by researchers and policymakers to mean CDFI loan funds, the unregulated institutions that dominate the ...
Working Paper
Are credit unions too small?
Since 1985, the share of U.S. depository institution assets held by credit unions has nearly doubled, and the average (inflation-adjusted) size of credit unions has increased over 600 percent. We use a non-parametric local-linear estimator to estimate a cost relationship for credit unions and derive estimates of ray-scale and expansion-path scale economies. We employ a dimension-reduction technique to reduce estimation error, and bootstrap methods for inference. We find substantial evidence of increasing returns to scale across the range of sizes observed among credit unions, suggesting that ...