Credit Unions With Steel Companies As Sponsor Groups Face Uncertainty As Mergers, Bankruptcy Continue

CLEVELAND – With the recent announcement of International Steel Group’s $1.5 billion offer to buy Bethlehem Steel, some credit unions continue to take a poignant look at community and multi-occupational charters for survival. Bethlehem Steel Corp. filed for bankruptcy protection in October 2001 and has since been negotiating with potential buyers or joint-venture partners as well as attempting to reorganize the business to continue as a stand-alone company. A decision to accept or reject the offer is expected by Jan. 16. If a sale is completed, ISG, formed in 2001 to acquire bankrupt steel companies, would become the largest steel maker in North America. Meanwhile, despite calls from Credit Union Times, officials at Bethlehem Steel Workers No. 2 Federal Credit Union weren’t available to comment on whether the potential ISG acquisition would impact membership and operations. Chartered in 1938, Bethlehem has 4,408 members and $6.9 million in assets. According to its last NCUA Call Report in September 2002, the credit union had $6.7 million in shares and deposits, $5.3 million in outstanding loans and leases and $371,978 in delinquent loans and leases. ISG valued the offer of Bethlehem Steel’s assets and mills at $1.5 billion and industry experts estimate as much as 50 percent of the company’s 13,000 employees may be laid off. The nation’s second largest integrated steel producer, Bethlehem Steel had $4.2 billion in revenue in 2000. The company was a giant of 20th century industry, once employing nearly 300,000 people to produce steel for skyscrapers and bridges and to build ships for World War II. But its sprawling plant along the Lehigh River in Bethlehem hasn’t produced steel since 1995. Bethlehem Steel has operations in Illinois, Indiana, Maryland, New York and Pennsylvania. In a Jan. 6 conference call, Robert S. Miller Jr., Bethlehem Steel’s chairman and chief executive officer, said if the offer is accepted, the new company would be headquartered in Cleveland, where ISG is based, and the office building in Bethlehem, Pa. would be sold. Miller declined to comment on likely work force reductions, but noted that ISG cut employment about 40% when it took over the mills of bankrupt LTV Corp. last spring. LTV Corp., the fourth-largest integrated steel maker in the nation, filed for bankruptcy protection in 2001 and has since been bought by ISG. LTV was a select employee group for several credit unions in several states including Hennepin Steelworkers Credit Union in Hennepin, Ill. The credit union, which served 552 members, has since changed its name to River Valley Credit Union and moved its headquarters to Spring Valley, Ill. and is currently in the midst of a merger. For Steel Valley Federal Credit Union in Cleveland, which considered LTV its largest sponsor, asset downsizing and negative losses proved to be a difficult 2002, said David Lawhun, general manager. Of Steel Valley’s 10,000 members, 2,500 were LTV employees and despite many of them getting their jobs back when LTV was acquired by ISG, many severed ties with the credit union when they took other jobs or relocated. “I got a few gray hairs last year,” Lawhun said. “We really bit the bullet in 2002. Ohio fared worse than other states like California because we’re a heavy industrial area.” Steel Valley’s assets went from $24 million in 2002 to less than $20 million in 2002 and because the credit union had “so much liquidity,” downsizing had to occur to survive. The multi-occupational credit union has several large SEGs including an area hospital and recently got charter approval to offer membership to ISG employees. Lawhun said the credit union is putting together a strategic marketing plan for those employees to be rolled out within the next six months. Hoyt Lakes Community Credit Union also considered LTV one of its SEGs but because of its conversion to a community charter in the 1970s, it was not greatly impacted by the steel maker’s acquisition, said Don Werdick, president/CEO. “Our aim now is to shift from the traditional credit union model to becoming a primary financial institution so that we can offer services to members who want to keep their financial needs under the credit union umbrella,” Werdick said. Nearly 550 of Hoyt Lakes’ 5,100 members at the time were laid off when one of LTV’s area mills ceased to operate. Werdick said the credit union immediately sprang into action offering on-site counseling and restructured loans that allowed for up to 180-day extensions. As a result of LTV, Hoyt Lakes got approval to double its allowance for loan losses in 2000. Of the 16 bankruptcies that year, three were LTV-related and in 2001, of 15 bankruptcies, only five came from LTV employees. Last year, three former LTV employees had bankruptcies. “Many of our members came to us early on for assistance,” Werdick said. “This year, we’re looking at .85 percent return on assets and 1.70 percent in delinquencies. We’re coming alone fine.” Indeed, Hoyt Lakes launched its CUSO, CU Financial Services of Minnesota in 2000, offering investment and insurance to members. The credit union has aligned with Blandin Area Federal Credit Union to share services and products and currently has $4 million in assets under administration through the CUSO. A contract to offer trust services is in its final stages and is expected to roll out in the second quarter. Hoyt Lakes also began offering risk-based lending and expanded its loan offerings to new construction and end financing, products that have contributed to the credit union’s bottom line, Werdick said. At least a handful of other credit unions including LTV Steel Salaried FCU in Cleveland and LTV Steel #1 FCU in Aliquippa, Pa. served LTV employees. -