Frequently Asked Questions

What are the different kinds of financial institutions?
Not all financial institutions are exactly the same. There are commercial banks, savings banks, savings and loan associations (S&Ls), cooperative banks and credit unions. Today they offer many of the same services, but at one time, they were very different from one another.

Commercial banks originally concentrated on meeting the needs of businesses. They served as places where a business could safely deposit its funds or borrow money when necessary. Many commercial banks also made loans and offered accounts to individuals, but they put most of their effort into serving business (commercial) customers.

Savings banks, S&Ls, cooperative banks, and credit unions are classified as thrift institutions or “thrifts,” rather than banks. Originally, they concentrated on serving people whose banking needs were ignored or unmet by commercial banks.

The first savings banks were founded in the early 1800s to give blue-collar workers, clerks, and domestic workers a secure place to save for a “rainy day.” They were started by publicspirited citizens who wanted to encourage efforts at saving among people who did not earn much money.

Savings and loan associations and cooperative banks were established during the 1800s to help factory workers and other wage earners become homeowners. S&Ls accepted savings deposits and used the money to make loans to home buyers. Most of the loans went to people who did not make enough money to be welcome at traditional banks.

Credit unions began as a 19th-century solution to the emergency needs of people who were unable to borrow money from traditional lenders. Before the opening of credit unions, ordinary citizens had no place to turn when they faced unexpected home repairs, medical expenses, or other emergencies. Credit unions were started by people who shared a common bond such as working in the same factory, belonging to the same house of worship, or farming in the same community. Members pooled their savings and used the money to make small loans to one another.

What is the difference between a "national bank" and a "state bank"?
The terms "national bank" and "state bank" refer only to what organization a bank is regulated by. It has nothing to do with where a bank is owned, chartered or located.

A national bank is a financial institution regulated by the Office of the Comptroller of the Currency. National banks can usually be identified because they have the words "national" or "national association" in their titles or the letters N.A. or NT&SA following their titles. National banks represent about 23 percent of all insured commercial banks in the United States, holding 68 percent of the total assets of the banking system.

A state bank, meanwhile, is regulated by that particular's state's State Banking Department. State banks can sometimes be identified when they have the term "state" in theri titles. Oklahoma state banks are regulated by the Oklahoma State Banking Department.

GLOSSARY OF BANKING TERMS

Cash advance: A cash loan obtained by a cardholder through presentation of the card at a financial institution, ATM, or through a mail request.

Certificate of deposit: A formal receipt for funds left with a bank as a special deposit. Such deposits may bear interest, in which case they are payable at a definite date in the future or after a specified minimum notice of withdrawal; or they may be non-interest-bearing, in which case they may be payable on demand or at a future date. These deposits are payable only upon surrender of the formal receipt, properly endorsed.

Credit rating: A formal evaluation of an individual's loan-repayment history or potential.

Credit report: A factual data report from an independent agency that verifies the applicant's current employment and income, and provides information on current and previous debts and liabilities.

Debit card: A plastic card enabling the cardholder to purchase goods and services, or make cash withdrawals, the cost of which is immediately charged to his or hear bank account.

Grace period: A formally specified extension of time beyond a payment due date.

Lien: A legal claim or attachment, filed on record, against property as security for payment of an obligation. A lien is the guaranteed right of a lender or investor to specific property in case of default.

Overdraft: The amount by which a debit or charge against an account exceeds the balance of the trust account.

PITI: Principal, interest, taxes and insurance. The components that commonly are included in a monthly mortgage payment.

Refinancing: The retirement of existing securities, or the repayment of a debt from the proceeds of new borrowings.

Secured loan: A loan against which a tangible asset has been pledged in case of default on the loan.

Unsecured loan: Funds loaned with no pledge of collateral or with collateral.

Yield: The annual percentage rate of return on capital, calculated by dividing annual return by the amount of an investment.