“Bank or credit union?” is a question many people have asked themselves over the years.
From the standpoint of safety and financial soundness, you can’t go wrong with either.
Both insure depositors for up to $250,000 for each qualifying account at each qualifying institution — banks through the Federal Deposit Insurance Corp. and credit unions via the National Credit Union Share Insurance Fund, which is federally backed and offers the same protections as the FDIC.
In Nebraska, records show both are solidly profitable, financially sound, strong and solvent.
It then often comes down to personal preference. Consumers should compare interest rates, fees, service, convenience and online features. Credit union and bank association leaders outline some basic differences here:
They are democratically owned and controlled institutions that have a “people helping people” philosophy, said Scott Sullivan, president of the Nebraska Credit Union League.
Credit union boards of directors are elected by members; each member has an equal vote, regardless of how much he or she has on deposit. Only members may serve as directors, and directors generally serve without pay.
Also, Sullivan said, credit unions have no outside stockholders. After reserves are set aside, earnings are returned to members in the form of dividends on savings, lower rates on loans and fees, and additional services.
About 450,000 Nebraskans are member-owners of the state’s 69 credit unions. There are many to choose from, from small workplace-oriented ones centered on one employer to the giant SAC Federal, with 75,000 members and about 20 branches. At most credit unions, anyone who lives, works or goes to church within a fairly large geographic area is eligible to join.
“As not-for-profit financial cooperatives, credit unions generally offer more attractive savings and loan rates as well as generally lower fees,” Sullivan said. “Surveys consistently rank credit unions first among financial institutions in consumer satisfaction.”
Sullivan said credit unions primarily engage in consumer, small business and mortgage lending, as opposed to arranging complex derivatives and trading for their own accounts, like at the Wall Street investment banks that failed and required federal bailout money in 2008.
That means credit unions rarely run into trouble with unpaid loans — some do, but it is rare. In any case, Nebraska credit union asset quality remains very high, with mortgage delinquencies at .59 percent and overall loan delinquencies at .80 percent as of June 30, Sullivan said.
When it comes to regulation and supervision, there is plenty at credit unions, Sullivan said. Federally chartered credit unions are regulated by the National Credit Union Administration, an independent federal agency. NCUA’s three board members are nominated by the president and confirmed by the U.S. Senate.
State chartered credit unions are regulated by the Nebraska Department of Banking and Finance. NCUA administers the National Credit Union Share Insurance Fund, and has authority to subject all federally insured credit unions to insurance examinations.
“No taxpayer money is used to regulate or oversee credit unions, as the activities of NCUA and NCUSIF are funded by credit unions,” Sullivan said.
Safety and soundness is stellar at Nebraska’s commercial banks.
Banks are well-positioned to handle economic downturns and, if necessary, take steps to put losses behind them, said Joni Sundquist, vice president of communications at the Nebraska Bankers Association.
“The most important thing for insured depositors to know is that their money is safe, protected and accessible,” she said. “Customers’ deposits are protected. In the entire history of the FDIC, no depositor has ever lost a penny of insured deposits.”
The banking industry’s capital — which serves as a “rainy day fund” in case of losses — is near historic highs. As of September 2013, the industry nationally held just over $1.6 trillion in capital plus $142.6 billion in reserves for a total buffer of almost $1.75 trillion, according to the FDIC.
“The vast majority of banks, nearly 98 percent, are ‘well capitalized’ — the highest rating available — according to the FDIC,” Sundquist said.
Nor do Nebraska banks have any problems of note with unpaid loans, which in large quantities can threaten a bank’s capital and solvency. At last FDIC count, such loans comprised .77 percent of loans at Nebraska banks, lower than the national average of 1.74 percent.
With all that in mind, there are dizzying arrays of choices when it comes to a bank.
“When choosing a bank, consumers should start with their own needs and preferences first,” Sundquist said. “The number and location of branches and ATMs may be most important to some people while others prefer to do their banking via the Internet.”
A bank like First National Bank of Omaha, the leader in deposit share and the largest privately held bank in the nation, of course is going to offer more branch and ATM locations than a single-location bank.
Other people still prefer to write a lot of checks.
“Packaged or multiservice accounts offer a variety of services for one fee,” Sundquist said. “No-frills accounts offer a minimum number of services at an extra-low price. But always ask about minimum balance requirements and limits on monthly or quarterly transactions.”
Sundquist said fees and service charges vary widely. It will not be hard, she said, to find the right combination of price, location and technology to satisfy most any requirement.
“Banking today is very, very competitive,” Sundquist said.