FORT WORTH, Texas – Amid profound shifts in the financial landscape that have made Texas a prime target for mergers and acquisitions, the state's 641 credit unions are feeling the impact of a banking boom that resounds from North Carolina to New York. Credit union managers and regulators across the state say they're watching as branch banks pop up at the rate of several per week along suburban streets around Dallas, Fort Worth and Houston. Engaged in a heated battle with the Texas Bankers Association over Congressional efforts to tax credit unions, officials blame the Texas banking boom for aggravating the federal debate and helping fuel the push to convert two major North Texas credit unions – the $1.4 billion Community CU and the $1.2 billion OmniAmiercan CU- into mutual savings banks. Texas Credit Union Commissioner Harold E. Feeney, who's among the regulators required to approve the conversions, sees a broader impact from the migration of outside banks. "There's concern about the number of credit unions and banking institutions over the years having to slice the deposit pie," Feeney said. "There are a lot more institutions competing for the same slice." Bob Bacon, director of the Bank & Trust division at the Texas Department of Banking says the majority of bankers coming from Charlotte, N.C. and Birmingham, Ala. aren't seeking state charters. "Through mergers and acquisitions, we continue to see the numbers drop, but the total assets continue to increase," Bacon said. Still consider the following bank moves into Texas: * Charlotte-based Wachovia Corp. sounded a major alarm when it acquired SouthTrust Banks in 2004 and picked up 64 Texas locations. On Dec. 7, Wachovia opened its Texas headquarters near Dallas and announced plans to build 200 financial centers in Austin, Fort Worth, Dallas, Houston and San Antonio between 2005 and 2008. Six of the locations will be open by year's end. Pete Jones, Wachovia's Texas president, said the state's projected demographic growth was too profound to ignore. He estimated Texas will account for 12% of the nation's growth over the next quarter century. * Washington Mutual has framed its rebound from last year's mortgage troubles with the addition of 250 retail branches across the U.S. next year and said at least 20 of the $1 million facilities will be built in Texas. * New York-based Citigroup, the nation's largest financial institution, landed 100 Texas locations with its purchase of First American Bank of Bryan, Texas, in August 2004. The deal gave Citigroup a Texas foothold and three branches in three of North Texas' most affluent areas. * Chase, which merged with Bank One last year, has announced plans for 15 to 20 new North Texas branches by 2007. The moves didn't surprise Bill Gordon, a former banker who runs the Fort Worth City Credit Union. Unlike Community, OmniAmerican and the state's other largest, Gordon's credit union remains limited to city employees. By contrast, Community has branched into 80 Texas communities and amassed a membership of 225,000. Gordon said the banking explosion has pitted credit unions against banks – and against each other as bankers assume credit-union executive jobs and develop bonus plans based upon growth normally measured by profit. He said the phenomenon is pronounced in Fort Worth. Fort Worth became the nation's 19th largest city between July 2003 and 2004 – and the fifth fastest growing behind Phoenix, Los Angeles, San Antonio and Las Vegas. "The whole market has become much more competitive. For one reason, the credit unions are competing with each other," Gordon said. "You've got credit unions doing business loans, although they're limited by federal law. Banks on the other hand are limited to making loans of 10 percent of their net worth to one borrower." The federal limits, said Feeney, compelled Community and OmniFederal into the conversion push. In exchange for nonprofit status, member business loans are capped at 12.25%. Added to the push in Texas' highly competitive environment are voting differences afforded mutual savings banks, said Gordon and Feeney. Each of Gordon's 12,540 members gets a vote on credit-union decisions, as long as they maintain the required minimum $25 balance. Conversions for Community and Omni would allow a vote for every $100 in deposits, capped at 1,000 votes per depositor. Nowhere is the competition fiercer than on the Web sites of the Texas Bankers Association and the Texas Credit Union League, which solicits contributions to the league's political action committee and flashes the warning, "If Banks Win YOU Lose." The Bankers Association, which formed a credit-union task force in 2003 to lobby the federal tax issue, calls credit unions "the tax-free Taj Mahals." The TBA has declared war against what it calls "morphed credit unions" and argues Texas credit unions would have paid $121 million in federal income taxes in 2002 if taxed. They said 29% of the state's credit unions already provide small-business services in head-on competition with banks Community CU, which could not be reached for comment, meanwhile, holds millions of dollars in real estate that wouldn't be reflected in its book value if sold, Gordon said. And banks are selling at two to three times book value. "It's a big market. That's why you're going to see the big boys trying to buy up branches," he said. "They (Omni and Community) could be in a position to sell to the big boys two or three years down the road." Feeney and others argue credit unions still serve a different market. In its March 24 report, CUNA argued that credit unions averaged interest rates of 4.75% on new car loans during 2004 – compared to 6.44% by banks. Interest from regular savings accounts average .74% at credit unions, compared to .48% at banks. A little more than 72% of loan applications made by low-income borrowers were approved at credit unions, while non-credit union lenders approved 47.8% of the applications, CUNA reported. Feeney and the Banking Department's Bacon see similar trends as the big boys arrive. Texas has lost a net five state-chartered credit unions between 2003 and 2004, while assets increased 5.9%. The number of state-chartered banks dropped from 335 to 325 for the year ended March 31, while assets continued to climb to $71.3 billion. Those numbers convince Bacon and Gordon that small financial institutions will survive against the incoming competition. "I think it helps. Credit union and bank people get tired of new management and having to go to New Orleans to get a decision," Gordon said. "Besides (in North Carolina) they don't know how to make barbeque."