Over the past decade bank trade groups have responded to a consolidating membership base by raising dues, beefing up educational programs, endorsing products, merging, and more recently by letting other kinds of financial companies join up.

But the New York Bankers Association, whose membership has been cut in half in the past 25 years, is taking a more radical approach. It is giving members the option of making a one-time investment to a capital fund instead of paying dues, which account for 70% of its operating budget.

The idea is that such contributions, which for banks would probably be based on assets, would ensure income through interest or dividends.

"We are a business," said Michael P. Smith, who has been the trade group's president since 1989. "One way a business secures itself financially is by having capital, and that's what we're trying to do."

Mr. Smith declined to reveal further details about how the fund would operate except to say that it would be "no different from any other investment fund held by a nonprofit or an educational organization."

An investment committee made up of the association's members would oversee the fund, which could be created as early as next month.

Some banks may hesitate to make large up-front contribution when there is a chance they might not be around in a few years. But bank and trade group officials interviewed for this article spoke well of the idea.

Sanford Belden, the president and chief executive officer of $2 billion-asset Community Bank System in DeWitt, N.Y., sees two advantages to the new payment method, which would be voluntary.

"From a bank standpoint, it fixes the cost because you won't be paying annual dues." Also, said Mr. Belden, who is on the trade group's board of directors, "it clearly supports the association in positive and permanent ways."

Sterling Bancorp, a $1.3 billion-asset company in New York, has not decided whether to participate. But chairman and CEO Louis J. Cappelli said the flexibility of the option "is very positive."

The New York group's attempt to overhaul the traditional funding model will be watched closely by groups in other states - and even in other industries. Many trade groups are looking for alternatives to dues. Many are also under pressure to justify their existence, since independent lobbyists and private-sector companies increasingly offer advocacy as well as many of the same educational and networking opportunities.

"There is only so much people want to pay out in dues, so you have to have a good value proposition," said Diane M. Casey, president and CEO of America's Community Bankers. Though advocacy is the primary reason banks join the group, she said, it must show members that the education, products and services, and networking it provides are unique.

But despite new offerings and the growth of banking assets, consolidation has taken its toll. "The big dues-payers aren't paying any more, and all these guys depending on dues are scurrying around trying to get membership because they need the income," said Frank A. Pinto, president and CEO of the Pennsylvania Association of Community Bankers.

In 1986 his group was about 85% dues-funded, Mr. Pinto said. Today dues cover only 20% of its budget; the rest comes from conferences, educational seminars, sponsorships, and fees from recommendations of products and services.

Trade groups that base dues on a company's assets or deposits stand to lose tens of thousands of dollars - and thus a significant chunk of their budget - when they lose big members, Mr. Pinto noted. To avoid this his group uses an unusual one-size-fits-all system; each member pays just under $2,000 a year.

One group that has been burned by the usual approach is the New Jersey Bankers Association. It bases dues on deposits (it used to use assets), but large banks, with proportionally much higher deposits, pay less per deposit dollar than smaller ones do.

As a result, said Alfred H. Griffith, the group's president, it took a hit of about $7,000 a year last month when FleetBoston Financial Corp.'s bought $39.6 billion-asset Summit Bancorp of Princeton, N.J. Fleet remains a member, but its size lets it pay less dues on the old Summit deposits than Summit did, he said.

In 1992, member dues funded 43% of the New Jersey group's budget. Since then the group has developed more services and seminars and created a for-profit subsidiary; only 27% of its income now comes from dues.

Nevertheless, the possibility that other members will be picked off by out-of-state nonmembers looms large, so finding other ways to generate income remains a concern, Mr. Griffith said.

"We need to think strategically about how to deal with reduced membership, with changing membership," he said. "Up until three years ago we were losing 10 banks a year from consolidation."

Two waves of de novo banking - the first was in the late 1980s and the second began in 1997 - helped shore up the New Jersey group's membership. In fact, small banks make up an increasing percentage of its 83 members: 75% have less than $250 million of assets.

To compensate for voids created by the loss of large banks and the lower dues generated by smaller banks, trade groups are opening up membership to include other kinds of financial companies. Both the New York and New Jersey associations recently amended their bylaws to let trust, insurance, securities, and other financial services firms join.

Declining membership has also forced banking groups to make friends of former rivals. In the past several years bank trade groups have merged in Florida, Connecticut, Tennessee, North Carolina, Virginia, and Indiana.

Last year the New Jersey Bankers Association made another attempt to merge with the New Jersey League of Community and Savings Bankers, but the same cultural and governance matters that had derailed talks in the past proved insurmountable again, Mr. Griffith said. A combination may come in the not-so-distant future, though, when "a lot of those issues will probably become less significant" because both sides will be financially challenged, he said.

Increasingly diverse membership means that program offerings and lobbying efforts are designed for consensus, Mr. Griffith said. "It makes it more challenging for us when we begin to get significant differences," he said. No major issues have split the group in the past few years, he said, but "the potential is always there."

Similarly, the New York association's move to court nonbank financial companies promises to create a mixed membership with somewhat divergent interests.

"This is something we see as the future," Mr. Smith said. But "however we see ourselves," he added quickly, "the New York Bankers Association's core membership is the banking industry and probably will remain so."

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