Already well established as providers of financial products like CDs, money market accounts and mortgages, credit unions are trying hard to move even further into territory once dominated exclusively by banks. Case in point: Over the past three years, credit unions have increased their business lending in Florida by some 264% -- almost 10 times the 29.9% increase in commercial lending by banks over the same period.

Credit unions accounted for less than 1% of business loans in Florida in 2005, a total of $369.3 million, according to a study by the Credit Union National Association (CUNA), and they clearly see potential in the sector.

Miramar-based Eastern Financial Florida Credit Union started its own commercial lending operation just two years ago and sees such a bright future in it that last year it set up CU Business C/apital, a subsidiary to help other credit unions get into the business lending game. Gary Lanier, senior vice president of sales and member services for Eastern Financial, says Eastern has signed up five credit union clients (four are in Florida) and is in discussions with two dozen more.

The credit unions' move into commercial lending has heated up their longstanding war with banks. By federal law, credit unions cannot loan more than 12.25% of their assets to business. Credit unions want that limit increased to 20%, and banks are determined to keep the limit where it is. "The credit unions' attempt to double their commercial lending capacity has failed" in the last two Congresses, says Alex Sanchez, CEO of the Florida Bankers Association. Raising that threshold on business lending remains a key part of credit unions' legislative agenda.

The trends

Like many credit unions in Florida these days, Eastern Financial is big, with assets of about $2 billion and deposits of $1.75 billion. Having grown to a membership of some 214,000, it's operating a long way outside its original mandate, serving employees of Eastern Airlines, which has been defunct since 1991. And it will continue to aggressively market to those who still believe incorrectly that they must work for a company or be related to someone who is affiliated with a credit union, says Lanier. Eastern Financial's scope and ambition is reflected in its website: YouCanJoin.com.

For most of credit unions' history, not everybody could join: They were designed for groups underserved by banks, and for decades a credit union's "membership" usually consisted of the employees of a single company or industry group.

Credit unions began the break with their original mandate in the early 1980s. A recession led the National Credit Union Administration (NCUA), a federal regulatory agency, to allow credit unions to add members outside their original company or group. "That prevented a wholesale meltdown of credit unions," says Mark Ivester, vice president of communications for the Florida Credit Union League. It also raised the hackles of banks, which saw the potential for competition from rivals that don't have to pay federal corporate income taxes. The banks filed suit in 1990. The U.S. Supreme Court ruled against the credit unions in 1998, but within six months Congress passed the Credit Union Membership Access Act, which established credit unions' right to expand their memberships but imposed the 12.25% cap on business loans.

That 1998 law set in motion twin trends of growth and consolidation for credit unions. Since 1998, their membership in the state has grown from 3.7 million to almost 4.5 million members, a 22% increase that outpaces Florida's 15% population growth.

Credit union deposits in Florida have grown even faster, doubling from $16 billion in 1998 to some $32 billion in 2005, according to CUNA. That's still only about an 8.5% share of the market, however. Bank deposits in Florida, meanwhile, rose by 76.5% to some $343 billion during the same period.

Along with growth has come consolidation. Over the past decade, the number of Florida credit unions has actually dropped 22%, according to statistics from CUNA. "Five or six credit unions a year go out of existence by merging," says Ivester.

Credit unions also are expanding in other ways. In the 1990s, Suncoast Schools Federal Credit Union, the largest in Florida with $5 billion in assets, began offering its services to small employee groups that might not otherwise have access to a credit union. Today, Suncoast's members in-clude public and private school employ-ees in 14 counties and more than 1,000 employee groups. In 1986, the Pinellas County Teachers Credit Union expanded to serve everyone who lives and works in the county. Two years ago, it changed its name to Achieva Credit Union and stretched into Pasco and Hernando coun-ties. "Our core membership is still teach-ers," says Dawn Dixon, Achieva's vice president of marketing. But today, only about 30% of Achieva's 60,000 members work in the education field, according to Achieva.

Credit unions from outside Florida also are getting into the mix. Virginia Beach-based Chartway Federal Credit Union does business in eight states. It started its Florida operations as the em-ployee credit union for St. Petersburg-based Certegy, a credit and debit process-ing firm now owned by Jacksonville's Fidelity National Financial.

To say that Florida's banking industry is unhappy about all that growth is an understatement. "These are tax-exempt banks masquerading as credit unions," rages the FBA's Sanchez. He adds that he isn't against all credit unions, just the "billion-dollar, tax-exempt" ones. The taxation issue is a rallying point for bank-ers statewide and nationally. An initia-tive by the American Bankers Associa-tion produced a congressional oversight hearing on credit unions' tax status a year ago, but so far no legislation has been in-troduced on the tax issue.

Meanwhile, credit unions push ahead with the "anybody can join" marketing message. "There's still some education there," says Achieva communications spe-cialist Christina Gonzales. "I think that is going to be an ongoing challenge for us."

Merger Mania:
Consolidation trends aren't confined to the banking sector, with numerous mergers among credit unions in recent years. Eastern Financial merged last year with Dade Transit Federal Credit Union, which had $5 million in assets. This summer, Pembroke Pines-based Power 1 Credit Union announced plans to merge with Homestead-based Pan Am Horizons Federal Credit Union, a 60-year-old credit union once tied to Pan American World Airways and National Airlines. The Power 1- Pan Am combination will create a $525-million institution, one of the largest in south Florida.