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NONBANK OPERATIONS (Insurance Companies (Other types of insurance…

- - - - Obtain much from premiums, about 31% of total income
      - The most impotant source of fund is the provision of annuity plans
      - The third largest source is investment income
      - Capital: built by retaining earning and issuing new stock.
      - Insurance companies maintain an adequate capital level
    - - Government securities
      - Corporate securities
      - Corporate securities
      - Mortgages
      - Real estate
      - Policy loans
  - - - Protect investors that purchase bonds
- - - - There are many different categories of open-end mutual funds
      - Investors can purchase shares directly from and sell
        their shares back to the open-end fund at any time.
    - - Stock mutual fund
      - Bond mutual fund
      - Money market mutual funds
      - Exchange-traded funds
- - - - provide personal loans, financing and mortgage loans
        for customers of retail stores or whole salers
    - - loans to small businesses.
        provide financing in the form of credit cards.
    - - provide wholesale financing to distributiors of the parent’s company products,
        and purchase receivables of the parent’s company.
  - - - Loans from banks
        
        loans commercial banks
        can consistently renew the loans over time.
      - Commercial paper (CP)
        
        can issues CP through direct placement, others use dealers.
      - Deposits
        
        finance companies obtain funds by
        offering customer deposits
      - Bonds
        
        finance companies in need of long-term
        funds can issue bonds
      - Capital
        
        finance companies can build their capital
        base by retaining earnings or issuing stock
    - - Business loans and leasing
        
        finance companies also provide
        business (commercial) loans.
      - Consumer loans
        
        They normally offer automobile loan,
        home improvement, mobile homes, and others.
      - Real estate loans
        
        mortgages on commercial real estate and second mortgages on residential real estate.
- - - - Include saving banks and
        savings and loan associations
      - Ownership of savings institutions (SIs)
      - SIs are classified as either stock owned or mutual
    - - Sources of funds
      - Borrowed funds
      - Capital
      - Uses of funds
        
        Cash
        
        Mortgages
        
        Mortgage-back securities
        
        Other securities
        
        Consumer and commercial loans
        
        Other uses of funds
      - Credit Unions (CUs)
        
        CUs are nonprofit organizations
        composed of members with a common bond
        
        Ownership of CUs
        
        Technically owned by the depositors
        
        CUs can be federally or state chattered
        
        Most CUs are very small.
        
        Their objective is to safety those members
        
        Credit Unions (CUs)
        
        Advantages
        
        CUs are nonprofit so they are not taxed
        
        CUs increasingly have been merging
        
        disadvantages
        
        Employees may not have incentive to manage efficiently
        
        Many CUs are unable to diversify geographically
        
        CUs sources of funds
        
        CUs obtain most of their funds from share deposit by members
        
        CUs also offer checkable accounts called share drafts
        
        CUs can borrow from other CUs or from CLF
        
        CUs uses of funds
        
        CUs use the majority of their funds for loas to members
        
        CUs purchase government and agency securities
        
        Securities Operations
        
        Services provided by Securities operations
        
        Facilitating new stock offerings
        
        Origination
        
        Underwriting
        
        Distribution
        
        Advising
        
        Private placement of shares
        
        Facilitating leveraged buyouts
        
        Assess the market value of the firm
        
        Arrange financing
        
        Help the acquirer purchase any
        common stock of the target that is outstanding.
        
        May be retained in an advisory capacity
        
        Facilitating arbitrage
        
        Facilitating corporate restructuring
        
        Providing brokerage services
        
        Investing their own funds