Federal Credit Unions In 1979 - NCUA

national credit union administration

1979

Annual Report

q? the

National Credit Union Ad111inistration

October 1980

Additional copies may be obtained by addressing the National Credit Union Administration, Was~ington , D.C. 20456

Foreword

For the Federal Credit Union Program, the decade of the 1970's was one of profound change and development. The decade opened with the establishment of the National Credit Union Administration (NCUA) and the enactment of Federal share insurance for credit unions and closed with the creation of a three-person Board of Directors to manage NCUA a nd the successfu l organizatio'ri of the Central Liquidity Facility. In the intervening years, credit unions, aided by the availability of Federal share insurance and expanded credit unio n powers weathered a major national recession, and the most turbulent fin ancial markets in three decades.

The persistent high rate of inflation , rising interest rates and substantial outflows of savings made 1979 the most disruptive year credit unions have had to face since 1974. Many credit unions saw rising expenses and large share outflows erode their liquidity and capital positions and affect their ability to operate efficiently. As a result, Federal credit union growth fe ll sharply during the year and was considerably below the prior year's growth and, in fact, was the slowest in the history of the Fede ral credit union program. Total assets, for example, expanded by just 4. 9% in 1979, compared to 17.fi% in 1978. Loans outstanding and members' savings rose 3.1% and 6.8%, respectively, compared to gains of 22.3% and 16.5% in 1978.

Federally-insured State credit unions were similarly affected with growth rates far below the 1978 experience. On the positive side, 407 State credit unions became federally-insured during 1979 bringing the total number insured to 4,769. These credit unions had a total membership of more tha n 12.2 million with total savings of a lmost $15.9 billion. As of December 31, 1979, more than 80% of the number of U.S. credit unions and their total savings were protected by Federal share insurance.

The years ahead will continue to present problems and cha llenges to c redit unions. Adverse economic conditions have not abated and are likely to continue for some time. Some of the operational constraints that affected credit unions in 1979 have been alleviated by legislation enacted in early 1980. Among other things, that legislation provided permanent share draft authority and an increase in the Federal credit union loan interest rate ceiling.

There remains a great deal more to be done to overcome the challenges of the 1980's. We must work together to consolidate the achievements of the 1970's to assure the continued success and viability of the Nation's credit unions throughout the decade of the 1980's.

LAWRENCE CONNELL Chairman P. A. MACK, Jr. Vice Chairman HAROLD A. BLACK Member

Historical Sketch

A credit union is a cooperative nonprofit organization of individu a ls with a common bond of occupation , association, or residence. Credit unions may be incorporated in the United States under a Federal law or one of the 46 State laws.

Individuals in the field of membership of a Federal credit union may become members and participate in all benefits by subscribing to a share in the credit union, par value of which is $5. The objectives of a credit union are to promote thrift among its members and to provide them with a source of c redit for provident purposes at reasonable rates of interest.

Credit unions are managed by a board of directors and com mittees m ade up of members of the credit union. No director, committee member, or other officer except the treasurer of a Federal credit union, may be compensated . After expenses and legal reserve requirements are met, most of the earnings of a credit union are returned to the members in the form of dividends on share holdmgs.

Credit unions originated in Germany in the middle of the 19th century. Their principal early objective was to com bat usury which was further depressing the economic wellbeing of the poor. The early cred it union philosophy was closely connected with moral a nd huma nitarian goals and credit unions were frequently organized in and supported by churc hes.

Cred it unions operated in many countries of Europe by the turn o f the centu ry. The first credit union in the United States was organized in New H amps hire in 1908. Credit un.ions were chartered on ly under State laws until the Federal Credit Un ion Act was passed in 1934. At that time, there were 2,028 State-chartered cred it unions in operation in 38 States and the District of Columbia.

The admin istration of the Federal Credit Union Act was origina lly the respo nsibility of the Farm Credit Administration. In 1942 this responsibility was transferred to the Federal Deposit Insurance

Corporation. The FDIC adm inistered the Federal Credit Union Act until 1947 when the powers, duties and fun ctions of supervising Federal cred it unions were transferred to the Federal Security Agency. This arrangement continued until 1953 when th e Bureau of Federal Credit Unions became a part of the Department of H ealth, Edu catio n and Welfare. In 1970, P.L. 91-206 amended the Act and created the National Credit Un ion Administration as an independent age ncy under the Executive Branch of the Federal Government. The authority for the chartering of State credit unions stems from the respective State credit union laws which are generally administered by State banking departments.

Growth tn U.S. credit unions accelerated

rapidly after the end of World War II. During the decade of the 1950's, the number of operating credit unions in the U.S. doubled. M e mbership increased by 2 1/2 times and assets by six-fold. In the 1960's, growth continued to be vigorous with membership nearly doubling to 21,629,000, and assets more than tripling to almost $16 billion. With the passage of Federal share insurance legis lation in late 1970 ( P.L. 91-468) , growth in credit union resources accelerated rapidly. Legislation e nacted in 1977 ( P.L. 95-22), which greatly expa nded the powers of Federal credit unions in the basic areas of lending a nd saving, further stimu lated growth. During the decade of the 1970's, total assets of Federal credit unions have increased more tha n 4 I/2 times to $36.5 billion and State credit union assets have expanded 3 1/2 times to $29.9 billion. By the end of 1979, some 22,000 credit unions with 43.3 million members and total resources of $66.4 b illion were in operation in the United States.

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download