Federal Credit Unions in 1977 - NCUA

1977

Annual Report of the

National Credit Union Ad:ministra tion

June 1978

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

FOREWORD

The substantial growth achieved during the year coupled with the legislative advances made 1977 one of the most successful and significant years for the Nation's Federal credit unions since the Federal Program began in 1934. Federal credit unions established new highs in 1977 as record growth was experienced in most major areas of operation. Total resources, for example, increased by $5.3 billion (21. 7%) and amounted to $29.7 billion at yearend. Loans outstanding and members' savings also expanded by record amounts during the year and totaled $22.7 billion and $25.6 billion, respectively, on December 31.

Federally-insured State-chartered credit unions ?also enjoyed another year of substantial growth in 1977. The number of State credit unions insured by the National Credit Union Share Insurance Fund increased by 363 and totaled 3,882 at yearend. These credit unions had a total membership of about 9 million with members' savings of almost $11.8 billion. As of December 31, 1977, almost three-fourths (74.1%) of the number of U .S. credit unions and four-fifths (80 .2%) of total members' savings were protected by Federal share insurance.

In the legislative area, enactment of P.L. 95-22, on April 19, 1977, significantly revised the original Federal Credit Union Act by greatly expanding the powers of Federal credit unions in the basic areas of lending and saving. We in the National Credit Union Administration and the credit union industry at large have worked long and hard to achieve our new authority to improve service to members. It will be this Agency's responsiblity to ensure that credit union members, as well as consumers in general, benefit from these new services.

~=E~ Administrator, NCUA

Historical Sketch

A credit union is a cooperative nonprofit organization of individuals 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 credit for provident purposes at reasonable rates of interest.

Credit unions are managed by a board of directors and committees made 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 holdings.

Credit unions originated in Germany in the middle of the 19th century. Their principal early objective was to combat usury which was further depressing the economic lot of the poor. The early credit union philosophy was closely connected with moral and humanitarian goals and credit unions were frequently organized in, and supported by churches.

Credit unions operated in many countries of Europe by the turn of the century. The first credit union in the United Stales was organized in New Hampshire in 1908. Credit unions were chartered only under State laws until the Federal Credit Union Act was passed in 1934. At that time, there were 2,028 State-chartered credit unions in operation in 38 States and the District of Columbia.

Growth in 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. Membership increased by 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 legislation in late 1970 (P.L. 91-468), growth in credit union resources accelerated rapidly. Since yearend 1970, total assets of Federal credit unions have increased about 8l12 times to $29.7 billion and State credit union assets have increased more than 2Y2 times to $24.5 billion. By the end of 1977, some 22,450 credit unions with 36.7 million members and total resources of $54.2 billion, were in operation in the United States (all 1977 data are preliminary).

Contents

Page Federal Credit Unions in 1977 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Examination and Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Legal Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Internal Audit and Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Research and Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Administrative, Planning and Financial Developments . . . . . . . . . . . . . . 43 Public Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Regional Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Statistical Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 NCUA Staff and Board Members......... . . . . . . . . . . . . . . . . . . . . . . 105

Federal Credit Unions in 1977

The Economy

Growth of the Nation's economy in 1977 was strong and broadly based with most sectors making a significant contribution to the overall expansion. The Gross National Product-the value of goods and services produced-rose 4.9% for the year after allowing for price increases. Industrial production increased steadily throughout most of the year resulting in significant gains in total employment and a sharp reduction in the unemployment rate despite a large increase in the labor force (Chart 1).

Disposable income (personal income less taxes) expanded 10.4% during the year while personal consumption expenditures rose to new highs and contributed to a record expansion in consumer installment credit.

Early in the year the expansion was stimulated by large increases in consumer spending and inventory investment. As the year progressed, increased activity in other sectors combined to stimulate the expansion. Large gains occurred in housing as construction activity rose sh arply in response to strong demand and an ample supply of mortgage funds. Government spending was on the upswing and business investment provided substantial support although gains in this activity moderated somewhat later in the year.

Although the expansion was brisk but uneven ? throughout the year, the economy was not without problems. While the Federal Reserve's monetary policy sought to promote economic expansion and at the same time help to curb inflation, prices continued to increase during the year. As a result, the consumer price index rose 6.8% in 1977, compared with 4.8% the year before. Higher prices for food and energy, mainly during the first half of the year, contributed heavily to the overall increase. In addition, with consumer and business demand for credit relatively high throughout most of

the year, by yearend rates had crept up to their highest levels since the spring of 1975. Nevertheless, at the end of the year most indicators pointed to continued growth in the near term and consumer sentinent remained high.

Chart 1. - Index of Industrial Production and Unemployment Rate, Seasonally Adjusted, 1974-77.

INDEX

INDUSTRIAL PRODUCTION

(1987 - 100)

140 ~------------------------------~~

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