Banker Attacks Brought `Tumultuous Year' For Utah CU, but Optimism Reigns Despite Legislative Defeats, Earl Departure

SALT LAKE CITY – The pundits were right: Utah in 2003 would be the epicenter of those “ferocious” bank attacks on credit unions, but no one imagined the kind of tumult that eventually occurred. The tax-CU uproar-something the banking lobby has skillfully nurtured and bankrolled for years in the media and in the state legislature-in 2003 triggered a panoply of events in the legislature, the courts and within the Utah League of Credit Unions – but not all of it turned out negative to the industry. Indeed, the bank attacks did trigger a tough new state law barring business loans and brought on headline-grabbing state-to-federal conversions, but the switches actually fostered both asset and membership growth by the targeted CUs which included two of the state’s largest – America First of Ogden and Mountain America of Salt Lake. In essence, the bank attacks, while causing a deep rift in the Utah League and the subsequent high profile resignation of its CEO, Scott Earl, three weeks ago, have in some ways boomeranged. “I feel like I’ve been reborn,” quipped Shelley Clarke, president/CEO of Goldenwest FCU of Ogden, referring to a 17-18% jump in loans, an ROA of 1.20 and a 20% boost in members following the CU’s federal conversion May 2. “I’ve learned to live without the shackles and it seems to be me the public obviously appreciates credit unions and have turned aside the mean-spirited” bank attacks. Along with America First and Mountain America, Goldenwest figured in the March bank-driven anti-CU law which barred business loans and almost included a first-time 5% franchise tax on the CUs. That provision was lifted from the bill after a successful lobbying effort led by the League. The $280-million credit union was one of seven former state-chartered credit unions that converted to a federal charter during the year because of restrictions on SCCUs. But over the summer nearly a dozen CUs, worried over the 2004-5 sessions imposing a tax on them, saw what many said was the “handwriting on the wall” and began implementing conversion moves. By last count, there were seven already approved, an eighth to be completed by Dec. 31, but half a dozen or more in the NCUA pipeline. Meanwhile, the industry was rocked in mid-July by the filing of a lawsuit against NCUA in a federal district court here by the American Bankers Association, the UBA and four Utah banks seeking to overturn “as capricious and unlawful” the agency’s approval of multi-county FOM expansion for America First, Goldenwest and a third, Tooele FCU. Within weeks of the July 15 filing, the NCUA was joined as intervenors by CUNA, NAFCU, the Utah League as well as the three CUs accorded new FOM powers under their new federal structure. ABA has charged NCUA “grossly” over-reached its authority by granting FOM expansion asking the court to declare the FOM expansion “null and void.” The court suit is being watched nationally as a new legal test of NCUA FOM powers. Intervenor briefs on discovery, the administrative record and depositions from the parties are due in the court by the end of December with actual hearings beginning in January or later on a possible summary judgment. (see related story on page 38.) Hearing the suit is U.S. Judge Dale A. Kimball, who took over the presiding role after the initially-appointed judge, Thomas J. Greene, excused himself apparently because of former ties to a law firm which does work for Zions Bancorp, the chief CU antagonist in the state. Zions, led by its chairman, Harris Simmons, who has long vowed to shackle CU growth and make Utah a laboratory for banks on how to curb CUs’ growth, played a predominant role in the anti-CU tax bill with one of its so-called “henchman,” Republican Rep. Jeff Alexander, of Provo, introducing the bill under the guidance of House Speaker Marty Stephens (R-Farr West), a vice president of Zions. Stephens, who is running for Utah governor to succeed Michael Leavitt who was appointed to the Bush cabinet as head of the Environmental Protection Agency last August, said he has resigned from the bank to pursue the governor’s job and was forecasting Utah CUs “would likely play a part” in the 2004 election battle. If nothing else, the bank assaults including those on the political level “keep you from becoming complacent,” maintained Gordon Dames, president of the $1.3 billion Mountain America FCU (formerly a state-charter), who also agreed the bank attacks have indeed boomeranged since his Salt Lake CU just finished “its best year in history with a 20% increase in loan growth, loan asset ratio of 80%” and a surge in SEG membership jumping from 150 before May 1 when it converted to over 750 today. Certainly the most stunning development to hit the Utah industry came late last month with the surprising resignation “by mutual agreement” of Scott Earl, the articulate and well-known League CEO, who said the battle with the banks and the schism among big and small CUs had taken a personal toll. Earl, the former chairman of the American Association of Credit Union Leagues who for years had developed CUNA strategy in dealing with bank attacks, apparently became a “casualty” of the bank-CU wars. Though many on the Utah League Board were effusive of Earl’s performance, others said “it was time for a change” and there were too many “management differences.” “I got along fine with Scott and I will miss him,” said Steven Christensen, chairman of the League and president of Tooele FCU, but he added considering the diversity of the Utah CU structure “you are bound to have half of your membership mad at you at any one time.” Some League directors indeed will view Earl’s departure “as a positive development,” said Christensen citing the five large CUs which resigned early in the year over the handling of the anti-bank strategy. Still others see Earl’s resignation “as the bankers winning” the battle with banks. “I don’t agree since I’m not really worried about our future,” concluded Christensen. -