Robert F. Shuford cringed the first time he saw a credit union ad declaring, "Friends don't let friends do their banking with banks."
The president and chief executive officer of Old Point National Bank of Phoebus, like many of his colleagues, is frustrated that banks have been portrayed as villains in the debate over credit union membership.
"The debate is not about eliminating competitors," Mr. Shuford insisted. "It is about providing us with ground rules that make competing fair. The way the rules are written right now, it is not fair."
And unlikely to get any better from the banking industry's point of view.
Congress is on the verge of overturning a Feb. 25 Supreme Court decision requiring credit union members to share a single, common bond.
No wonder bankers like Mr. Shuford are frustrated: In just a few months credit unions have persuaded Congress to reverse a court ruling it took banks eight years to win.
What is worse, the defeat has been nearly complete. Of the 435 House members, 411 voted for the bill allowing credit unions to accept members from any company with fewer than 3,000 employees. The Senate is expected to approve the bill next month, and President Clinton is expected to sign it.
"I wish the Senate would slow down and think about the issue before they vote on it," Mr. Shuford said. "But I doubt they will."
All this confounds Mr. Shuford. He not only wants membership limited but also wants large credit unions to comply with the Community Reinvestment Act and give up their tax exemption.
Mr. Shuford said Congress does not understand the issue. He got a letter from a member of Virginia's congressional delegation explaining why he supports the credit union membership bill.
This lawmaker, whom Mr. Shuford refused to name, said he was worried that "as many as 20 million of the nation's 70 million credit union members could be forced to leave their financial institution."
"That is just not true," Mr. Shuford said. "What that tells me is that they did not understand what they were voting on."
He acknowledged that the onus is on bankers to educate their representatives. The credit union industry's success in urging members to lobby lawmakers was the key to their victory in the House, he said.
"There were 70 million bipartisan reasons to support credit unions," he said. "Bankers never attempted to stir up our customers the way credit unions have.
"To be honest, I think it would have been hard for us to do," he added. "Our customers like the bank, but they don't feel the same attachment."
There are 74 credit unions in Old Point's metropolitan area, a region of 1.6 million people where the Chesapeake Bay empties into the Atlantic Ocean.
And Old Point's primary market area, the Hampton Roads peninsula, is especially saturated. The $380 million-asset bank competes with $553 million-asset Langley Federal Credit Union, $504 million-asset Newport News Shipbuilding Employees Credit Union, and $203 million-asset First Advantage Federal Credit Union.
The bank has few local allies. In 1965, when Mr. Shuford started at Old Point, it was one of 16 banks headquartered on the peninsula. Today, his is the only one still independent.
The credit unions have grown by adding new membership groups. Langley Federal, formed to serve the local Air Force base, now serves 196 separate groups of employees.
Jean Yokum is Langley Federal's president-and an Old Point National customer. "We believe that if an employer does not have a credit union, its employees should have the service of one," she said.
"It isn't our size that matters. What matters is whether or not we are doing our job, serving the people who need us."
Ms. Yokum said Congress understands that expanding membership does not change a credit union's purpose.
"In our charter, Congress instructed us to make loans to the little people who need them," Ms. Yokum said. "We are still doing that, just for more people."
Ms. Yokum said she laughs when she hears banks demand credit unions be subject to the letter of the law that established credit unions, enacted in 1934.
"The bottom line is, the world has changed since then," she said. "If they want a level playing field, why don't we all go back to the regulations of 1934? I doubt they would be too happy with that."
Though the issues separating banks and credit unions are the same in Hampton as they are in Washington, Mr. Shuford and Ms. Yokum said that having a business relationship with their opponents makes the debate more civil.
"I respect Old Point Bank," Ms. Yokum said. Langley Federal refers commercial business to the bank, she said, "because I like the way they operate."
But in addition to membership rules, the two disagree on whether credit unions should be taxed or subject to community reinvestment rules.
By not taxing credit unions, the real losers are not the banks, but the American taxpayer, Mr. Shuford contends. Simply put, the country is missing a great opportunity to boost revenue.
Old Point earned $5.5 million in 1997, and paid $1.4 million in taxes. The bank also paid $1.2 million to shareholders in dividends. Based on an average tax rate of 28%, those shareholders paid about $300,000 in taxes on their dividends.
In addition, the bank paid $130,000 to the state in franchise taxes, he said.
The three big credit unions in his market earned $16 million last year, according to the National Credit Union Administration. Apply the same formulas, and those three institutions combined would have paid more than $5 million in taxes.
But Ms. Yokum said banks are missing the point when they use size as a reason to tax credit unions.
"We are tax-free because we are a cooperative, and that has not changed, no matter how big we get," she said. "We still can't serve anyone off the street like a bank can."
Mr. Shuford would also like to see large credit unions subject to the Community Reinvestment Act.
"They don't need a law to make us do that sort of thing," Ms. Yokum responds. "We are there to help the little guy to begin with."
Mr. Shuford, however, maintains that banks are the only ones with a mandate to help those with the least.
"Banks, through CRA, are the only institutions charged to serve people who do not work," he said. "Credit unions, by their charter, only serve those who are working."
Mr. Shuford agrees with the goals of community reinvestment: "We are a community bank; CRA is our niche," he said. But complying with the rules is expensive, he added. Old Point has one part-time position for tracking lending for CRA reports. The software package to do that cost more than $20,000.
Mr. Shuford and Ms. Yokum did agree the debate should remain civil. Ms. Yokum said she did not approve of the ad run by another local credit union telling friends to keep friends away from banks.
"I don't believe credit unions have to be in the business of bashing the banks," Ms. Yokum said. "I don't know what that accomplishes."
Neither side should burn bridges, Mr. Shuford said, because credit unions and banks will have to coexist regardless of what is decided in Washington.
"The bill in Congress is not the end of community banking," he said. "And if it isn't signed, it is not the end of credit unions. In the end, we will both look at the rules and figure out how to compete."
He harks back to what he called a similar challenge banks faced a decade ago.
"The savings and loans were the credit unions of old," he said. "They were given advantages by their regulator. But eventually, they were subject to the same taxes as banks.
"Over time, I believe the way this nation looks at credit unions will evolve too." u