Introduction to Finance

Commercial banks
are depository institutions that accept deposits, 
issue check-writing accounts, and make loans to businesses and individuals. Depository institu-
tions also include three thrift institutions in addition to commercial banks. 
Thrift institutions
are noncommercial bank depository institutions referred to as savings and loan associations 
(S&Ls), savings banks, and credit unions that accumulate individual savings and lend primarily 
to other individuals. S&Ls engage in some lending to businesses but focus primarily on loans to 
individuals. Savings banks and credit unions focus on providing consumer and home mortgage 
loans to individuals seeking to purchase items such as automobiles and houses.
Savings banks made their appearance in 1812, emphasizing individual thrift savings and 
safety of principal. 
Savings banks
accept the savings of individuals and lend pooled savings 
securities fi rms 
accept and 
invest individual savings and also 
facilitate the sale and transfer of 
securities between investors
fi nance fi rms 
provide loans 
directly to consumers and 
businesses and help borrowers 
obtain mortgage loans on real 
property
commercial banks 
depository 
institutions that accept deposits, 
issue check-writing accounts, and 
make loans
thrift institutions 
noncommercial 
bank depository institutions that 
accumulate individual savings 
and primarily make consumer and 
mortgage loans
savings banks 
accept the savings 
of individuals and lend pooled 
savings to individuals primarily in 
the form of mortgage loans
FIGURE 3.1
Types of Financial 
Institutions
Financial Institutions Categories
Primary Sources of Funds