Battle between banks, credit unions rages on

Nationally, credit unions account for 6 percent of a community's financial deposits; but officials at Colorado Springs-based Ent Federal Credit Union estimate its membership encompasses more than 40 percent of the market share and 20 percent of all deposits in the Pikes Peak region and surrounding areas.

That above average growth is an achievement Ent officials say is the result of the hard work and dedication of its staff, members and volunteers. Local bankers, on the other hand, say the growth is the result of the unfair advantage Ent has as a nonprofit organization, and that Ent has expanded its business beyond its original purpose as a credit union.

Ent, which is celebrating its 50th anniversary this year, has 25 branches in Colorado Springs, Schriever Air Force Base, Peterson Air Force Base, Falcon, Jackson Creek, Pueblo, Rye, Woodland Park, Fountain and Aurora, and dozens of ATM locations. Ent has more than $2 billion in assets, making it the largest credit union in Colorado and the 37th largest federally chartered credit union in the United States, according to the National Credit Union Administration.

Since it opened at Ent Air Force Base in 1957, the credit union's list of products and services has grown from loans and savings accounts to include mortgages, lines of credit, investment and insurance products, and loans to small and mid-sized businesses.

Mission deviation?

Many in the banking world say Ent has deviated from its original mission of serving a membership with a common bond and has expanded its services to the point that it is operating exactly like a bank.

"The original intent of a credit union made sense. But today, in my opinion, it's become a joke because they are becoming dominant financial institutions," said Bruce Alexander, president and CEO of Vectra Bank Colorado. "There are many credit unions that are trying to get into the commercial lending business and that's just an outright violation of what credit unions were intended to do.... They've expanded way beyond the original intent of their charter."

Ent was formed for "those having the following common bond of association, occupation or residence: Civilian employees and military personnel of the United States government who work at or are assigned to Ent Air Force Base and Peterson Field, Colorado Springs, Colo.; persons employed by or with military organizations on Ent Air Force Base and Peterson Field; employees of this credit union; members of their immediate families; and organizations of such persons," according to a company history.

In 1999, the National Credit Union Administration approved a charter change that allowed Ent to be a community-chartered credit union. This expanded its potential membership to include anyone living in El Paso and Teller counties. In 2004, the NCUA allowed Ent to expand its membership reach to include Denver and Pueblo counties. As of January, Ent had nearly 178,000 members.

"We still have several constraints on where we can get our capital source," said James Moore, senior vice president of Ent. "We are also constrained in that we can only serve individuals that meet the criteria of our charter."

Bankers don't see the constraints.

"If you can fog a mirror you can be a member of a credit union these days," said Doug Woods, president of the Southern Colorado market for First Community Bank. "The fact that you hear advertisements on the radio for a credit union shows that it has no common bond in its membership."

Credit unions originated in Europe in the 1840s, but really gained a foothold in the United States in 1934 with the signing of the Federal Credit Union Act by President Franklin D. Roosevelt, who saw credit unions as a way to help the nation recover from the Great Depression.

Credit unions were established to "make more available to people of small means credit," in hopes of "helping to stabilize the credit structure of the United States," and were therefore organized as nonprofits that were owned and governed by their members.

Tax issues

Because of their nonprofit status, credit unions do not have to pay taxes on their profits.

Many bankers say that this tax exemption gives Ent and other credit unions an unfair advantage because banks must make a third more money than the credit unions to obtain the same level of profit each year, since the corporate tax rate is from 30 to 35 percent, and because credit unions are able to reinvest profits into membership by offering better rates on deposits and loans than banks, some times as much as one percentage point better.

The Credit Union National Association recently conducted an analysis of a recent government report on the banking industry and found that, measured by return on assets, banks are generally more profitable than thrifts, and both are more profitable than credit unions. In 2006, banks posted 1.27 percent return on assets, thrifts posted 0.96 percent and credit unions posted 0.81 percent, according to the report.