SIC 6061 Credit Unions, Federally Chartered
SIC 6061
This industry classification includes cooperative thrift and loan associations (accepting deposits) organized under Federal charter to finance credit needs of their members.
522130
Credit Unions
Credit unions experienced significant growth between 1980 and the mid-2000s. Membership grew by approximately 225 percent from 36.9 million members in 1980 to more than 86 million members by 2004. During the same period, assets expanded from $61 billion to $668 billion. Despite this rapid expansion of the industry, credit unions continue to make up just a fraction of the national banking industry, which is dominated by commercial banks. The largest commercial banks hold assets in excess of the entire credit union industry, and the total commercial bank industry held roughly $8.6 trillion in assets in March, 2005. According to the National Association of Federal Credit Unions (NAFCU), the median size of a credit union is $11 million, compared to over $100 million for an average bank.
Relaxed regulations allowed credit unions to expand their services during the first half of the 2000s, and many larger credit unions broadened their offerings to customers to remain competitive with "one-stop" commercial banking. The future of smaller credit unions, however, was a source of concern in the industry, as their smaller memberships limited their ability to provide additional services.
A credit union is a collective, cooperative financial institution created and owned by its members for their own benefit. Credit unions collect members' savings and make loans to members from these accumulated savings. Unlike commercial banks, credit unions are non-profit organizations. The formation of credit unions was encouraged by a broad cooperative movement in the early years of the industrial revolution that focused on providing affordable financial services to people of modest means.
Membership in a credit union is limited to individuals or groups who are members of the organization (employer, association, residence, etc.) specified in its charter. These membership criteria are collectively known as the common bond provisions. Individuals qualified under these provisions may submit an application and, if approved, become members with voting rights similar to those of shareholders in public corporations. At the end of 2004, 86.1 million members belonged to 9,346 federally-insured credit unions nationwide. Assets stood at $668 billion.
The system of credit unions in the United States is quite extensive. In 2004, some 5,572 credit unions were chartered under federal law and 3,774 chartered under state laws. At the beginning of 2004, federally-chartered credit unions had 41,155 members and $336.6 billion in assets and state-chartered credit unions had 36,273 members and $273.6 billion in assets.
Credit unions are organized according to a general philosophy called the Rochdalian Principles. This doctrine emphasizes self-help, a mutual form of organization, and "one-person, one-vote" democratic rule.
The credit union industry is supported by the Credit Union National Association (CUNA), the professional society for credit union executives, which collects, processes, and disseminates information on credit unions and engages in advocacy and publicity for the industry as a whole. Eighty-nine percent of all credit unions were members of CUNA in 2004.
A number of bodies are charged with ensuring the financial soundness of the nation's credit unions, including at least one state regulator and an array of local regulators in each state. The National Credit Union Administration (NCUA), created in 1970, oversees the system of federally charted credit unions. It has six major functions:
to promote self-help security through privately owned and democratically controlled federal credit unions
to stimulate systematic savings to provide capital and cash reserves for credit union members
to make credit available to individuals with modest means for reasonable purposes
to help stabilize the U.S. economy by promoting sound thrift, savings, and personal financial management practices
to study the financial problems of individuals with modest means to determine the benefits of cooperative savings and loans and to publish the results
to insure the accounts of members of all federally-chartered credit unions and those of state credit unions that apply for insurance and are qualified.
These goals are achieved through four primary means: chartering, supervising, and examining credit unions, as well as providing an insurance system for federal and state use.
Credit unions encourage savings on the part of their members. The board of the credit union then creates guidelines for loaning these accumulated savings back to the credit union's members. These board members are elected by the credit union's members at an annual meeting, which is similar to a shareholders meeting. Each member has one vote, regardless of the number of shares owned. This board then elects the credit union's officers from its own membership and appoints a supervisory committee. The board, officers, and supervisory committee usually serve on a volunteer basis.
Any net earnings realized are distributed to the...
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