Brief highlight, emphasized the highlight the differences and similarities how these other

institutions differed or similar or are similar to banks

Savings institutions actually very similar to banks they are thrifts and they have served a
very important function one thing that is distinct or unique about saving institution in
contrast to Bank is that some saving institutions are call mutual so and they’ll have the
name neutral

Banks by definition are all stock own meaning that the banks are in constructed as a
corporation

Some banks start off with partnership but almost all banks nowadays are corporations
so saving institutions are distinguished from savings and loan or thrift is that some of
them are considered mutual and in the mutual ownership the institution is owned by the
depositiors

Makes it unique is that the interest that is earned by the depositors is actually a function
of the profitability of the institution so when u join savings and normal savings
institutions that is a mutual ownership structure, the depositor automatically becomes
part owner of the institution so bcoz odf that they tend to be smaller than commercial
bank and most of them are regional

Saving institutions (thrifts)

 Ownership structures
 Mutual ownership – institution is owned by depositors
 Stock – institution is structure as a corporation
 Tends to be smaller than commercial banks and more local in their service areas
 Main source of funds (liabilities) is deposits from households
 Main use of funds (assets) are mortgages loans, commercial property loans, and
business loans
 Many savings Inst. Have merged with commercial banks over the years.
 Some savings inst. Adopted an aggressive business strategy to expand
nationally

Financial crisis and savings inst

- Savings inst (savings & loans) traditionally invest heavily in mortgages, they
suffer significant losses during several financial crisis related to mortgage
defaults.
 - In the 1980s following the first wave of deregulation many institutions made very
risky loans and investments. Defaults of these high risk loans combined with
adverse interest rate movements, and fraud resulted in heavy losses and
bankruptcies.
- In the 2008 financial crisis savings institutions invested heavily in subprime loans
and no doc loans, which led to major problems.
- Notable failures include:
1. Countrywide Financial – acquired by Bank of America in 2008
- IndyMac lost a significant portion of its 32 billion dollars portfolio
- Washington Mutual became the largest depository institution ever to fail in the
US in 2008

Credit Union – non profit organizations composed of members with a common bond,
such as an affiliation with a particular labor union, church, university or even residential
area./ not taxable

OWNERSHIP

- Technically owned by the depositiors

- Advantages and Disadvantages
1. The institutions is not taxed because it is a non-profit
2. Interest income earned by depositors is taxable
3. Noninterest expenses are relatively low because their office and furniture are
often donated or provided at a very low cost through the affiliation of their
members.
4. Small scale,difficult to attract qualified professionals

REGULATION REQUIREMENTS OF CREDIT UNIONS

1. Deposit Insurance for Credit Unions

2. Federal CUs are supervised and regulated by the National Credit Union
Administration (NCUA)
3. State-chartered CUs are regulated by their respective states.
4. Examiners classify each CU into a specific risk category, ranging from Code 1
(low risk) to code 5 (high risk)
5.