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HEADLINE: Credit Unions to Expand Bell Federal of Omaha hopes to add members as law takes effect Bell Federal Credit Union Net Income

BYLINE: STEVE JORDON

SOURCE: WORLD-HERALD BUSINESS EDITOR

BODY:

 
  After a 2 1/2-year wait enforced by a federal court,
multi-employer credit unions can add members from new employer
groups starting Monday morning.
 
  Among the first to sign up will be 24 employers waiting to
affiliate with Bell Federal Credit Union of Omaha, Nebraska's
largest credit union. Bell Federal hopes to add at least 1,000 new
members over several years from the newly eligible employees.
 
  The long membership hiatus and Monday's break in the logjam
results from a dispute that reached the U.S. Supreme Court and then
Congress, pitting the nation's commercial bankers against its
credit unions.
 
  The end came when Congress passed a new law on credit union
membership, negating a Supreme Court ruling that had prohibited new
employer groups from joining federally chartered employer-credit
unions like Bell Federal.
 
  "We've won this battle, yes. The war will continue," said Donald
Mahan, president and chief executive officer of Bell Federal. The
credit union's membership has been stagnant since a federal
District Court judge ordered a halt to the new employer group
membership in July 1996.
 
  Banking groups already are objecting to some of the new rules
adopted under the new law by the National Credit Union
Administration, which regulates credit unions. For example, bankers
say the new rules would let credit unions venture into the
unfamiliar territory of commercial lending.
 
  But for the 400 members and retirees of Ironworkers Local No. 21,
the new rules provide a welcome choice. The union's members may be
able to join Bell Federal by the end of this month.
 
  "I'm thrilled to death," said Bill Biede, the union's business
manager. "The more options our people have to save their money or
mortgage their houses, the better off they'll be when it comes to
retirement."
 
  Biede said the union has been waiting since October 1997 to
affiliate with Bell Federal. He expects half of them may join the
credit union once they get the chance.
 
  That's the sort of thing that the banks tried to stop when the
American Bankers Association sued AT&T Federal Credit Union of
Raleigh, N.C., seven years ago, saying credit union regulators had
gone beyond the intent of Congress in allowing credit unions to
expand beyond their original employee groups.
 
  Under the 1934 federal law on credit unions, the only people who
could join were those with a "common bond" such as an employer or a
community. But in 1982 the regulatory group began to allow multiple
common-bond arrangements, in part to strengthen the credit unions'
deposit insurance fund.
 
  U.S. District Court Judge Thomas Jackson of Washington ruled in
the banks' favor, imposing a ban on new employee groups that was
upheld by the Supreme Court. After an intensive lobbying campaign,
Congress approved the new law allowing the expansion to resume,
voting 411-8 in the House and 92-6 in the Senate.
 
  Despite language in the bill endorsing a continued federal income
tax exemption for credit unions because of their nonprofit status
and cooperative ownership, bankers continue to say the exemption is
unfair.
 
  "If you believe in the free enterprise system, it's just
ludicrous that you have two competing businesses with different tax
treatments," said Leslie R. Anderson, president and CEO of the Bank
of Bennington, Neb., and an executive committee member of the
Nebraska Bankers Association.
 
  "It would be like having two convenience stores right across the
street from each other, one pays the taxes and the other doesn't."
 
  Anderson said her bank competes directly with credit unions like
Bell Federal for products such as auto loans. It galls her that
Bell Federal, which is eight times larger than the Bank of
Bennington, can skip paying income taxes and not have to follow
bank-style restrictions, yet it can accept many more members than
just those from its original membership group, Bell System
employees.
 
  Bankers have no quarrel with small credit unions that continue to
provide basic savings and lending services to limited numbers of
people, she said. It's the big credit unions, which offer
memberships and a wide variety of services to nearly anyone, that
attract bankers' ire.
 
  "You're subsidizing them with your taxes to the tune of $ 1
billion a year," Anderson said. "They're a commercial enterprise,
and they get a tax subsidy every year."
 
  Still, she said, it is unlikely that Congress will consider
credit union legislation again this year, since it voted so
strongly for the 1998 law.
 
  "The banks are still going to try to get the playing field level
somehow," Anderson said.
 
  Christopher Kennedy, president of the Nebraska Credit Union
League, said just under half of the state's 86 credit unions could
seek to add membership groups under the new rules. Others, such as
SAC Federal Credit Union of Bellevue, are community- based credit
unions that were not affected by the court restrictions. And some
choose not to recruit new member groups and instead are content to
serve their original employers.
 
  Kennedy said the membership restrictions hurt the state's credit
unions "a little bit, but probably not as much as we thought it
would." Community credit unions have continued to grow, while
employer-related credit unions have leveled off under the
membership rules. About 150,000 people belong to credit unions in
Nebraska and about 785,000 in Iowa.
 
  Pat Jury, vice president of the Iowa League of Credit Unions in
West Des Moines, said no Iowa credit unions are affected directly
by the new rules since none of the four federally chartered credit
unions in the state have multiple employer groups.
 
  But many of the 200-plus state-chartered credit unions in Iowa
have multiple employer members, he said, and some Iowa legislators
had said that if Congress had restricted credit union membership,
they would try to follow suit in the state.
 
  "We think a fair balance was hammered out in Congress," Jury
said. "Credit unions are able to grow, and I think that's an
important choice for the citizens of Iowa."
 
  It's also important to Bell Federal, Mahan, its CEO, said. At
$ 240 million in assets, Bell Federal is still only one-thirtieth
the size of First National Nebraska, the state's largest bank.
 
  Bell Federal has about 42,000 members, slightly fewer than when
the membership restriction started. Most of its 301 affiliated
employers are too small to support separate credit unions of their
own, and yet their employees want to belong.
 
  Mahan said adding new members is the only way to bring in younger
people, who tend to be borrowers while older members tend to be
savers. During the ban on new member groups, the credit union's
lending level dropped to 86 percent of its savings from 93
percent.
 
  Bell Federal cut costs and took other steps to maintain its
financial health, Mahan said, and continued to have adequate
retained earnings and to offer competitive rates for loans and for
the share accounts that serve as deposits for credit union
members.
 
  If Bell Federal couldn't grow as a credit union, he said, it
might have to give up its nonprofit status and convert to another
form of financial institution, such as a savings bank. But that
would change the cooperative character that attracts many of its
members and might eliminate member benefits such as free financial
counseling, small installment loans and low fees,.
 
  "We're looking forward to being able to start growing again and
regain some of the momentum we lost two years ago," Mahan said. "If
we could get 1,000 new members, I would be very pleased, but that
may take several years."
 
Bell Federal Credit Union Net Income
 
Bell Federal's net income for 1996 included a $ 1.3 million gain from the sale of its downtown Omaha headquarters. Net income for 1997 was reduced by a $ 600,000 dividend payout to members from the proceeds of the headquarters sale.
 
1998 (est)  2.3 million
 
1997    2.0 million
 
1996    4.2 million
 
1995    1.7 million
 
1994    1.7 million
 
1993    1.1 million
 
1992    1.6 million
 
1991    1.2 million
 
1990    1.2 million

 
Source: Bell Federal Credit Union
 


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LOAD-DATE: January 4, 1999