STUDENT SCHOLAR Showcase
A Comparative Study of Credit Unions and Banks in Wisconsin
Mike Brierton Senior Research Assistant, CBEI
Introduction Wisconsin is famous for many things, dairy and beer being two iconic symbols of our great state, but what truly sets us apart is the friendliness of Wisconsinites. Our ‘Midwest Nice’ reputation precedes us around the country, and our culture of being thoughtful, considerate, and amicable, have spread into the largest institutions that call our state home. Mutuals, cooperatives, and ESOPs cover Wisconsin’s business landscape, with the National Center for Employee Ownership ranking Wisconsin #6 on states with the highest share of population working for an ESOP company. This holds true for credit unions as well, with Wisconsin ranking #10 on population compared to number of credit unions ratio, according to NCUA data. Credit unions are a form of financial institution which is owned by their members. Typically, when you open an account at a credit union, your first $5 - $10 deposited is used to purchase a ‘share’. After that, credit unions work just like a bank. Most credit unions offer a wide variety of personal loan and deposit products, with larger credit unions offering commercial products. Your accounts are federally insured by the National Credit Union Association (NCUA). The NCUA is almost identical to their banking counterpart, the Federal Deposit Insurance Corporation (FDIC). Both types of financial institutions receive insurance of their deposits, both are subject to capital and liquidity requirements, and both receive regular examinations. All credit unions must establish a “Field of Membership”.
The field of membership is supposed to be a common bond that all members share, uniting them as a singular group. Otherwise, the credit union must operate in a well- defined local community, neighborhood, or rural district. Essentially, there must be something in common that all members have. For example, the Valley Communities Credit Union lists their field of membership as: “Our credit union’s current charter area includes all persons who live, work, or own property in Adams, Clark, Juneau, Lincoln, Marathon, Portage, Shawano, Taylor, Waupaca, Waushara, or Wood counties”. This has grown from their roots as the Mosinee Paper Credit Union, which restricted their field of membership to Mosinee Paper Corporation employees and their families. In my research, I look at the growth and resilience of banks and credit unions in Wisconsin over the past 30 years. I compared their asset size, annual asset growth, number of charters, and more. For the purposes of my research, I considered any bank with assets over $1 billion to be a large bank. While the Federal Reserve defines banks with under $10 billion in assets to be community Banks, the size and scope of banks in Wisconsin differ from other, more populated, parts of the country. So, for the purposes of this study, I separated banks into categories of >$1 billion, and <$1 billion. To compare banks to credit unions, I analyzed the averaged offered rate for a variety of deposit and loan products. To collect information regarding deposit and lending rates, I randomly selected 10 credit unions with
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Center for Business and Economic Insight
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