Credit unions in Oklahoma are growing at a faster rate than banks, which banks attribute to credit unions' tax-exempt status, according to a new report from the American Bankers Association.
Credit unions in the state posted annualized growth of 7.34 percent from 2002 to 2012, compared to 6.17 percent for Oklahoma banks, according to the report.
Oklahoma banks paid more than $1.6 billion in state, federal and other taxes in 2012, the report said. Nonprofit credit unions don't pay taxes.
The banking industry has long taken issue with credit unions' nonprofit status, said Roger Beverage, president and CEO of the Oklahoma Bankers Association.
Credit unions were introduced in the United States by federal legislation in the 1930s to help serve the financial needs of the poor and working class, but the industry has outgrown its nonprofit status, Beverage said.
Matthew Stratton, vice president of marketing for Tinker Federal Credit Union, said the banking industry's campaign against credit unions' nonprofit status is like health clubs criticizing the YMCA's nonprofit status.
“I find it interesting that there doesn't seem to be any other industry in which the for-profits get so angry at the nonprofits,” Stratton said.
Beverage said credit unions have expanded customer bases and have begun offering more of the same products and services as banks.
“Their status as nonprofit gives them a competitive advantage that, frankly, bankers think is unfair,” Beverage said.
The American Bankers Association report specifically targets Tinker Federal Credit Union, the state's largest credit union. With $2.9 billion in assets, Tinker Federal is larger than 99 percent of all Oklahoma-based banks, the report said.
The report claims that if it were a bank, Tinker Federal would have paid $6.1 million in taxes in 2012.
Stratton said while Tinker Federal does not pay state and federal taxes, its members pay taxes on dividends they receive from the credit union.
While credit unions use income to pay dividends and increase their lending base for members, a bank's profits go to increase the wealth of its shareholders, said Gary Jones, president of the Credit Union Association of Oklahoma.
Although credit unions are tax-exempt, many Oklahoma banks are organized as S corporations for tax purposes, allowing them to avoid paying federal income taxes, Jones said. Instead, shareholders in banks organized this way divide a bank's tax liability, paying a lower tax rate in some cases.
“Although they are fussing about the advantages and benefits we get, I have yet to see any banks trying to convert to a credit union,” Jones said. “It suggests they kind of like keeping their profits.”