Going toe to toe for your dollars.

• Author: Forker, Jennifer
• Position: Market share of banks and credit unions

Banks fight to keep your business while credit unions try to grab it.

No longer small and specialized, credit unions wield considerable financial power in Alaska. For example, Alaska USA Federal Credit Union, with nearly 200,000 members and assets exceeding $1.5 billion, is the state's second-largest financial institution - and will grow with a pending merger.

Gone are the fairly narrow membership requirements that limited credit unions' expansion. Today, nearly anyone can join. For some credit unions, the stipulations are as simple as living and working in Alaska.

"Typically, if you're breathing and have a body temperature within a degree of 98.6, you can become a member in a credit union," explains P.J. Hill, associate professor of economics at the University of Alaska, Anchorage.

Banking executives are none too pleased about their competition's growing influence in Alaska, noting that while credit unions mirror banks in the services they provide, they are exempt from income taxes. Local bankers question whether credit unions have outgrown their original intent to provide financial services for a small group of people joined together in what is called a common bond, either through one's employer, church or community association. If so, bankers say, credit unions should be taxed.

According to industry sources, 60 percent of the state's population takes advantage of credit unions' consumer-based services. While that's substantial, many of these people also do business with area banks, which prevail in the commercial banking arena.

Historically, credit unions served specific trade groups, and members were joined in their common bond. In Alaska, the federal government and the military launched the first credit unions, open only to employees, in the 1940s. But in 1982, the National Credit Union Administration, which regulates credit unions, allowed its charges to diversify their memberships so that each could serve an increasing variety of businesses.

This is where credit unions overstep their bounds, according to Marc Langland, president of Northrim Bank, and Mike Burns, president of Key Bank. The result is tantamount to a war of the financial worlds in which neither side will back down.

"The common bond was the original intent and probably made sense when they put them together," Langland says. "Credit unions have strayed considerably from that. All the original intents have fallen apart. If you're going to open up to have the world be your membership, you'd damn better well pay taxes."

"I'm not blaming credit unions," he continues. "I'm blaming the government for allowing it to happen. Credit unions are just taking advantage of what exists in the market."

Burns also takes issue with the disintegration of credit unions' common bonds, a sore point that the American Bankers Association is zeroing in on.

"We have some issues with how they operate but the broader issue is who qualifies to be a member at a credit union," Burns says. "I think (their common bond status) has been abused over the last few years."

Donna Rylander, president of the Alaska Credit Union League, the industry's local trade association, adamantly disagrees.

"The bottom line is credit unions nationally are one-tenth (banks') size," says Rylander. "Are we a competitor? It seems to me they wouldn't worry about us."

Ron Kukas, president of First Interstate Bank of Alaska, answers Rylander's argument with two words: "Alaska USA." The credit union's $1.5 billion in assets raises it far ahead of its sister institutions and places it on the heels of National Bank of Alaska, with $2.3 billion in assets. Alaska USA's pending merger with Eielson Federal Credit Union will add an additional $14 million to its coffers.

Kukas explains Alaska USA's success this way: "It's because they haven't stayed within their boundaries of what a credit union was created for. They've lost their special group direction."

Yet credit unions appear to be a good deal for consumers. A survey released a few months ago by the Consumer Federation of America, a consumer lobby, found that credit unions...