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KANSAS CITY – While credit unions in several Midwestern states are seeing growth in business lending, they’re still not a competitive threat to community banks, according to the Federal Reserve Bank of Kansas City. The Tenth District office of the Fed covers Colorado, Kansas, Nebraska, Oklahoma, Wyoming, portions of western Missouri and northern New Mexico. In its summer 2006 publication, TEN, the Fed notes that “while most credit unions are small, they still provide significant competitive pressure for Tenth District banks, which also tend to be small.” Almost half of the banks surveyed in a 2004 poll said they expect “very intense” or “intense” competition from CUs in business lending over the next five years. Even though the percentage of business loans from CUs tripled during the last four years, roughly 81% of federal and state-chartered CUs reported no business lending at the end of 2004, said Eric Robbins, policy economist at the Kansas City Fed. Community banks in the district account for about 37% of all business lending and the loans are about 19% of banks’ assets. Russ Dalke, vice president of finance at Mazuma CU in Kansas City, Mo., told the publication even though “it’s a shift in the way we do business,” member demand for business lending began to increase. “We’ve been hearing that for a few years,” Dalke said. “We thought, `Hey, we need to get on this.’ ” Robbins said banks may be concerned because credit unions are entering a segment of the lending market in which they were not previously involved. “ In addition, business lending by credit unions is increasing, and the small business loans provided by credit unions likely would have been obtained from a bank in the absence of credit union competition,” Robbins said. Indeed, Rob Gilbert, president of F&M Bank in Tulsa, Okla. and a member of the board of directors Federal Reserve Bank of Kansas City’s Oklahoma branch, echoed what many community bankers have been saying about credit unions: “an uneven playing field.” “I truly believe we should all be on the same page,” Gilbert told the publication. Dalke offered a different perspective. “You would hope they [banks] would look at this as competition-that what’s capitalism is,” he said. “I want them to view it as a challenge.” Kip Unruh, owner of a storage facility in Missouri, was looking to refinance and in his search found that a credit union offered the best deal, he told the publication. Unruh said he didn’t realize a credit union would be an option until he read about it in trade publication. [email protected]

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