ENTERING NEW TERRITORY; CREDIT UNIONS TO OFFER BUSINESS LOANS

Dayton Daily News (Dayton, OH) January 31, 2004 | Jim Bohman jbohman@DaytonDailyNews.com Some banks unhappy at newest competitor For decades, nonprofit credit unions quietly provided savings accounts and loans to workers, often at their job sites. Now the financial cooperatives are moving into business lending, long the domain of banks.

CODE Credit Union along with giant Wright-Patt and smaller Day Air and River Valley credit unions have joined MidFirst and Aurgroup in Middletown and Chaco credit union of Hamilton in offering business accounts and commercial loans.

The seven area credit unions have formed Cooperative Business Services LLC, a Middletown-based credit union service organization. CBS has loan officers trained in corporate lending, said Scott Rutherford, president of CODE Credit Union.

He said business loans will be aimed particularly to the small companies that make credit unions available to employees.

“We can be very competitive on rates,” Rutherford said.

In addition to the Dayton city government, whose workers CODE was created to serve, the credit union provides banking services to workers at 160 employee groups, including small retailers such as Accent Video and medical groups including Kettering Cardiothoracic & Vascular Surgeons. website chaco credit union

In addition, CODE and other credit unions now offer memberships to whole communities including everyone living in many of the cities and townships in Montgomery County.

Rutherford said credit unions have been permitted to offer business loans since the 1930s. “But that hasn’t been our niche.” Size of loans can run into the millions of dollars, but federal insurance limits loans to 12.25 percent of a credit union’s assets. However, several credit unions can pool their resources on a large loan, said Gary Easterling, vice president for business development at Wright-Patt Credit Union.

Wright-Patt is the largest credit union in Ohio with $950 million in assets, 1,200 employee groups and 150,000 members.

Easterling said Wright-Patt has been offering business loans for about a month and participated with other credit unions in its first transaction. He declined to name the company involved.

Easterling said credit unions are moving into business lending because mergers are gobbling up community-based banks.

He said Bank One is being acquired by New York-based J.P. Morgan Case and Unizan Bank will become part of Columbus-based Huntington National Bank. here chaco credit union

“There’s a segment of the population that wants to do business with a lender that is locally owned and locally managed,” Easterling said. “They like to have a little bit more access to the decision makers.” Cliff Northrop, a spokesman for the National Credit Union Administration, an oversight agency, said a key reason credit unions are turning to business lending is because cheap car dealer loans have cut into revenues.

“Some credit unions are finding this a way to diversify,” Northrop said. But he said a well-trained staff is needed to have sound loans. “This isn’t right for all credit unions.” Bankers aren’t happy credit unions are targeting another piece of their business.

“Banks pay taxes on their earnings,” said Charlotte Birch, spokeswoman for the American Bankers Association in Washington. She said credit unions, which look and act much like banks, are not taxed.

Small community banks, which form the bulk of ABA membership across the United States, are at a disadvantage competing against giant credit unions that offer everything from securities brokerage and insurance to banking products, she said.

“We’d like to see some discussion of this,” Birch said. “Should credit unions, which have morphed into full-service financial institutions, be allowed to retain their tax and Community Reinvestment Act exemptions?” Contact Jim Bohman at 225-2242.

Jim Bohman jbohman@DaytonDailyNews.com