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Credit unions in the United States (US) are exempt (benefit from subsidies) from federal corporate income taxes, which are traditionally justified by their non-profit cooperative status and mission of meeting the financial needs of individuals of modest means. In recent years, the efficacy and fairness of these subsidies has been debated extensively as the traditional demarcation between banks and credit unions and their respective customer bases have blurred. To investigate how credit unions allocate subsidies to various stakeholders, we estimate a structural profit model for matched pairs of credit unions and commercial banks. We find that credit unions use most (approximately 90%) of their tax exemption for the benefit of their membership via above-market deposit interest rates. • US credit unions are exempt from federal income taxes. • We investigate how credit unions allocate the subsidies arising from the tax exemption to various stakeholders. • We use a profit function-based approach to compare the performance of credit unions to similar commercial banks. • We find economically large profit inefficiencies at credit unions relative to banks. • Most benefits from the tax subsidy are passed by credit unions through to members as above-market deposit interest rates. [ABSTRACT FROM AUTHOR]

We exploit an exogenous change in the coverage of insured deposits following the passage of the Emergency Economic Stabilization Act (2008) to investigate the impact of deposit insurance on the volume, composition and quality of credit union lending. Using a difference-in-difference approach, we find changes in the volume, composition and riskiness of credit union lending. Specifically, we find that affected credit unions increase total and unsecured lending, leading to a decline in loan quality. Overall, our results suggest that an increase in the maximum coverage of insured deposits induces credit unions to lend more at the expense of loan quality. • We investigate whether deposit insurance affects credit union lending. • We use a change in deposit insurance coverage to overcome identification concerns. • This change was sudden and did not affect all credit unions equally. • Credit unions increase total and unsecured lending. • I Overall loan quality declinesFollowing the change in the maximum level of deposit insurance coverage. [ABSTRACT FROM AUTHOR]

This study examines the firm size distribution of US banks and credit unions. A truncated lognormal distribution describes the size distribution, measured using assets data, of a large population of small, community-based commercial banks. The size distribution of a smaller but increasingly dominant cohort of large banks, which operate a high-volume low-cost retail banking model, exhibits power-law behaviour. There is a progressive increase in skewness over time, and Zipf’s Law is rejected as a descriptor of the size distribution in the upper tail. By contrast, the asset size distribution of the population of credit unions conforms closely to the lognormal distribution. [ABSTRACT FROM PUBLISHER]