1. J. K. Dietrich - FBE 524 - Fall, 2005 Deposit-Taking Institutions Week 2 – August 31, 2005

2. J. K. Dietrich - FBE 524 - Fall, 2005 Types of Financial Institutions u Deposit-taking –Commercial banks –Thrifts u Insurance type –Insurance companies –Pension funds u Managed assets - mutual funds, trusts, etc. u Securities firms and pool operators

3. J. K. Dietrich - FBE 524 - Fall, 2005 Classification of Deposit Firms u Deposit-taking –Commercial banks –Savings institutions or thrifts (savings and loans and savings banks) –Credit unions (also included among thrifts) –Some finance companies u Banks are largest u Assets differ between thrifts

4. J. K. Dietrich - FBE 524 - Fall, 2005 Deposit Institutions: 1970-2004 u Total Financial Assets (billions) 19702004 U.S. Chartered Banks $ 489.7 $ 6,398.1 Foreign Bank Offices 9.0 569.7 Savings Institutions 252.6 1,691.2 Credit Unions 17.7 654.7 u Banks have maintained relative share at  69% of deposit-taking institution assets u Effects of thrift crisis and deregulation

5. J. K. Dietrich - FBE 524 - Fall, 2005 Commercial Banks u Bank charters are licenses to operate (take deposits) –National banks –State-chartered banks –Dual banking in the U.S. versus other countries –National versus domiciled nation treatment u Membership in the Federal Reserve system u Deposit insurance with Federal Deposit Insurance Corporation (FDIC)

6. J. K. Dietrich - FBE 524 - Fall, 2005 Banks and Branches 1997

7. J. K. Dietrich - FBE 524 - Fall, 2005 Banks and Branches 2003 Number of Operating Commercial Banks in the U.S. at Year-end 2003

8. J. K. Dietrich - FBE 524 - Fall, 2005 Other Deposit-Taking Institutions u Charters –Savings and loan –Mutual savings bank –Savings banks –Industrial loan or thrift and loan –Credit unions u State charters versus federal charters –Office of Thrift Supervision (OTS) and history –National Credit Union Administration (NCUA)

9. J. K. Dietrich - FBE 524 - Fall, 2005 Thrift Activities u Savings and loans, mutual savings associations and savings banks –Concentrate in small savers’ deposits –Concentrated until 1980 in home loans –Tax advantaged in terms of home mortgages u Credit unions –“Promote thrift and affordable source of credit” –Charters and deposit insurance issues –Tax advantages

10. J. K. Dietrich - FBE 524 - Fall, 2005 Savings and Loans

11. J. K. Dietrich - FBE 524 - Fall, 2005 The Credit Union Movement

12. J. K. Dietrich - FBE 524 - Fall, 2005 Credit Unions

13. J. K. Dietrich - FBE 524 - Fall, 2005 Bank and Thrift Balance Sheets u Short-term funds –Transactions accounts –Small savings accounts –Time and certificates of deposit u Demand for deposit assets –Households –Corporations u Assets - Securities and Loans

14. J. K. Dietrich - FBE 524 - Fall, 2005 Deposit Firms’ Income u Revenue: Interest income –Loans and leases –Investments Fee income –Deposit charges and loan fees –Other fees Credit Losses u Expenses: Interest expense Non-interest expense –Labor and related expenses –Communication, fees

15. J. K. Dietrich - FBE 524 - Fall, 2005 Bank Income Statement (WFC)

16. J. K. Dietrich - FBE 524 - Fall, 2005 Bank Balance Sheet (WFC)

17. J. K. Dietrich - FBE 524 - Fall, 2005 Bank Ratio Analysis (WFC)

18. J. K. Dietrich - FBE 524 - Fall, 2005 Bank Affiliates u Bank holding companies –one-bank holding companies –multiple-bank holding companies –financial holding companies (new with Gramm-Leach-Bliley Act of 1999) u Separation of banking and commerce u Service corporations as subsidiaries of banks u Section 24 and Edge Act subsidiaries of banks

19. J. K. Dietrich - FBE 524 - Fall, 2005 Thrift Income Statement (WM)

20. J. K. Dietrich - FBE 524 - Fall, 2005 Thrift Balance Sheet (WM)

21. J. K. Dietrich - FBE 524 - Fall, 2005 Thrift Ratio Analysis (WM)

22. J. K. Dietrich - FBE 524 - Fall, 2005 Largest Banks and BHCs The Top Banks and Bank Holding Companies in the United States Measured by Asset Size (Ranked as of 12/31/03)

23. J. K. Dietrich - FBE 524 - Fall, 2005 Holding Companies pre-GLB u Bank holding companies –Banks “take deposits and make loans” –Allowable activities closely related to banking »Finance companies, mortgage and leasing companies »Discount brokerage, etc. u Non-bank holding companies –Thrifts –Insurance companies –Securities firms

24. J. K. Dietrich - FBE 524 - Fall, 2005 Banks with Glass-Steagall Finance CompanyCommercial Bank Bank Holding Company Discount Broker Securities Subsidiary (Section 24)

25. J. K. Dietrich - FBE 524 - Fall, 2005 Financial Holding Company Investment BankCommercial Bank Financial Holding Company Insurance Company Thrift Institution Asset Management Company

26. J. K. Dietrich - FBE 524 - Fall, 2005 Reserves and Credit Creation

27. J. K. Dietrich - FBE 524 - Fall, 2005 Reserves and Credit Destruction

28. J. K. Dietrich - FBE 524 - Fall, 2005 Next class: September 14 u Read Chapter 16 of Money and Capital Markets u Bring a Wall Street Journal to class every Wednesday