The effect of common bond on credit union performance: The case of black-controlled credit unions
This article compares the financial characteristics of black-controlled credit unions by type of common bond. The study found that many of the operational differences of these credit unions can be attributed to institutional characteristics associated with the three distinct types of credit unions. It also found that black credit unions are viable financial institutions, regardless of type of common bond. This finding is linked to the ownership of credit unions by its membership. This unique relationship has implications for black economic development.
Effects of financial structure and instruments on income of low income credit unions
The effects of loan to asset ratio, investment to asset ratio, management composition and delinquency rate on income to asset ratio of low income credit unions (LICUs) were evaluated. Specific attention was given to risk income behaviours of LICUs. It was found that loan to asset ratio positively influenced the magnitude of income to asset ratio, while the investment to asset ratio had a negative effect on the income to asset ratio. LICUs that employed managers had higher incomes to asset ratios than those with volunteer managers serving in this capacity. The delinquency rate and income to asset ratio were positively related, but negatively related to delinquency rate squared indicating that when the delinquency rate increased at an increasing rate the income to asset ratio fell. LICUs portrayed three risk behavioural patterns, each associated with size or income of the organization: (1) small LICUs had high risk behaviour, (2) middle income LICUs were risk neutral, and (3) large LICUs accepted higher risks as income increased.
An Analysis of the Portfolio Behavior of Black-Owned Commercial Banks
THE SUBSTANTIAL INCREASE IN the number of Black-owned commercial banks over the past 15 years has stimulated a great deal of interest regarding the viability of these institutions. In 1976, 50 Black-owned banks were operating in the U.S.; 40 of these banks had been formed during the 14-year period ending December 31, 1976. The viability of Black banks appears to be firmly established by Boorman and Kwast's findings [4] that those banks chartered in the 19631965 period were operating (in the early 1970's) as efficiently as comparable nonminority banks. Less adequately understood is the degree to which Black banks can serve as vehicles for financing their communities. Indeed, Brimmer [6] has stated that "Black banks as a group appear to possess very little potential as instruments of urban economic development." Much of Brimmer's conclusion [7] is based upon his observation that Black banks hold relatively large proportions of their assets in liquid forms, particularly U.S. government securities and federal funds. Data analyzed in this study do not support this pessimistic view of Black banks. These institutions face a number of problems that are completely unrelated to the presence or absence of management risk aversion. Specifically, the newer institutions face the start-up problems of running a bank, undercapitalization resulting from rapid deposit growth that has outstripped bank capital growth, and deposit instability that arises from several sources. Black banks have lower average deposit account sizes than non-minority banks and the variability of these deposits is substantial. Because of extreme deposit volatility, Black banks must hold relatively more liquid assets than their non-minority counterparts if they are to meet the withdrawals of their depositors. In addition, Black banks hold U.S. government deposits that are a relatively large proportion of their total deposits. Because government regulations require that these deposits be invested largely in liquid forms, the greater liquidity of Black banks is partially accounted for by their heavier reliance upon the U.S. government as a source of funds. When such traits as deposit structure and bank age are controlled for, our findings show that Black bank holdings of liquid assets are essentially the same as those