Credit Unions


Credit unions play an important role in consumer banking by offering financial services to nearly one-third of all Americans, with 86.8 million memberships. Compared to all depository institutions, credit unions are relatively small with <10% of the U.S. market (National Credit Union Administration (NCUA) Annual Report, 2007). Roughly 75% of credit unions have total assets <$100M, while 80% of commercial banks and 85% savings institutions have assets >100M. Less than 2% of credit unions have assets >$1B (U.S. Central, 2007). Credit unions, like commercial banks and thrifts, are both Federal and state government chartered. There are currently 5,036 federally chartered credit unions (FCUs) holding $418B in assets and 3,157 state chartered credit unions (SCCUs) holding $336B in assets (NCUA Statistics, 2007).

Like all other financial depository institutions, credit unions take deposits and offer loans to its consumer base. While credit unions resemble banks, they have several distinctive legal differences: they are not-for-profit cooperatives with an IRS tax exemption status. They return earnings to their membership in the form of reduced fee (interest) on loans and increased interest (dividends) on deposits, or they may re-invest earnings into the credit union. Traditionally credit unions were formed with stringent membership criteria based on a "common bond" such as employment, association, religious, or community organization (Frame, 2002). Following Federal legislation in 1977, credit unions expanded their services to include share certificates and long-term mortgage lending, making them competitive in the financial sector. Some credit unions may be designated "low-income credit unions" by the National Credit Union Administration, or, in some instances, a state regulatory agency. This designation allows the credit union to accept non-member deposits and secondary capital in order to better serve its membership and community. Many of these low-income designated credit unions serve narrow fields-of-membership, such as groups of employees.


The model for modern credit unions was developed in Germany in the mid-19th century. Influenced by the example and principles of the Rochdale Pioneers in England, these credit cooperative societies spread quickly in Europe. The first credit union in the U.S. opened in 1909, in Manchester, New Hampshire, and by 1920 there were credit unions in New York, North Carolina, and Massachusetts. They provided credit for consumer purchases, and opportunities for savings. The prosperity of the 1920s created a strong demand for credit, and many states approved statutes permitting the organization of credit unions. Strong leadership led to the development of state credit union leagues, which supported the growth of the emerging industry.

By 1929, 32 states had credit union legislation, and 1,100 credit unions had been formed. In 1934, the Federal Credit Union Act was passed, which permitted the formation of federally chartered credit unions in states that did not have a credit union law. This precipitated the formation of thousands of additional credit unions during the 1930s. Most credit unions were formed in work places, or sponsored by membership organizations or churches. These early credit unions depended on a network of volunteers who served on the board and often ran the credit unions. As the industry developed, it became more professional and also created strong support institutions. Credit unions formed a self-funded share insurance fund, a mutually owned credit insurance company (Credit Union National Association (CUNA), 2007), and cooperatively owned central banking services (state or regional corporate credit unions and U.S. Central Federal Credit Union). These organizations have supported a significant expansion of consumer services. Since the 1970s, many credit unions have repositioned themselves to serve as full service financial institutions for their members.

Organizational Structure

Credit unions are organized in a three-tiered system. At the top isU.S. Central, a wholesale credit union, that provides support and financial services to corporate credit unions (CCUs). CCUs occupy the middle tier and provide financial services to 8,834 natural person credit unions. All three tiers of the system are governed by the NCUA, which is comprises a three-member board appointed by the President and confirmed by the Senate. NCUA authorizes all federally chartered credit unions, while individual states charter those subject to state regulation. Most SCCUs have parity power clauses that allow individual SCCUs to adopt Federal credit union rules if they are more progressive. Currently, no laws permit the chartering of SCU's in Delaware, Dakota and Wyoming.

All FCUs and 95% of SCCUs are insured by the National Credit Union Share Insurance Fund (NCUSIF), which was voluntarily capitalized by individual credit unions and is backed by the "full faith credit" of the U.S. government. Credit unions participate by investing 1% of their savings which NCUSIF uses to invest, cover expenses and rescue failed credit unions. Members deposit accounts are insured by NCUSIF for $100K. American Share Insurance (ASI) insures the remaining 165 SCCUs. In the late 1970s, Congress created two member-owned supporting organizations: the Central Liquidity Fund (CLF), which can borrow up to 12 times its capital stock and surplus, and the Corporate Development Revolving Fund (CDRF). The CRDF with Congressional appropriations and interest has grown to $16.7M. The CLF's primary purpose is to serve as a lender of last resort and to provide liquidity to its members during times of economic volatility. The CDRF provides support to low income credit unions through technical assistance grants and loans.

Trade associations such as CUNA, the Association of Corporate Credit Unions (ACCU), the National Association of Federal Credit Unions (NAFCU), the National Association of State Credit Union Supervisors (NASCUS), and the National Federation of Community Development Credit Unions,  provide legislative and regulatory advocacy for credit unions.

Population Discovery and Data Sources

All data for the credit union system are available from the NCUA website, annual reports from individual corporate credit union, and the U.S. Central Federal Credit Union website. For the purposes of this analysis, we used 2007 data. 

Economic Impacts

Table 4-4 shows that the 8,344 credit unions account for $760B in assets and $40B in revenue, and pay >$9B in wages. There are nearly 100 million credit union memberships and 237,000 employees. As Table 4-4.1 shows, by adding indirect and induced impacts to this activity, credit unions account for close to $75B in revenue, close to 500,000 jobs, $20B in wages paid, and >$42B in valued-added income.

Table 4-4.1: Economic Impacts for Credit Union Cooperatives
Economic Impact Multiplier   Units Direct Indirect Induced Total
Revenues 1.868   million $ 40,088 15,579 19,215 74,882
Income 1.764     23,961 7,823 10,486 42,270
Wages 2.144     9,421 4,854 5,927 20,201
Employment 1.994   jobs 236,459 94,502 140,588 471,549
Figure 4-4.2: Average Revenue and Distribution per Credit Union by County


Figure 4-4.3: Average Assets per Credit Union by County


Figure 4-4.4: Average Membership per Credit Union by County


Figure 4-4.5: Total Credit Union Employment by County