While Delta Air Lines was having its ups and downs, so was a big credit union that catered to its employees.

But these days, Delta Community Credit Union — the largest of about 170 such institutions in Georgia — has been flying high by looking outside Delta, building branches and adding customers across much of metro Atlanta.

LOUIE FAVORITE/AJC (ENLARGE)

Delta Credit Union, whose distinctive buildings look vaguely like airline hangars, has been opening branches and adding members.

LOUIE FAVORITE/AJC (ENLARGE)

Teller Trisha Linton (right) assists Taylor Gibson (center) and his mom, Carla Gibson, making a deposit in the Delta Community Credit Union branch office west of Marietta.

Courtesy of Delta Community Cred/Special (ENLARGE)

Delta Community Credit Union CEO Rick Foley said the airline's 'heavy financial issues' got the credit union to branch out into the community.

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And it's not alone. Like Delta Community, several large credit unions in the state have been adding to their product offerings and taking advantage of so-called "community charters" to expand beyond their original customer bases. Historically, the nonprofit financial cooperatives were often formed by workers at a single large employer or other organization. Members who deposit money theoretically own and run the credit union, which in turn makes loans to members and returns profits to them in the form of dividends and interest payments.

But changes in federal rules in the 1990s and a new state law in 2005 eased the way for credit unions to switch from employer-focused operations to community-based models, and more of these nonprofits began moving into suburbs and neighborhoods to recruit new members — often right next to small banks.

Growth trend sparks battle

With roughly $2.1 billion in deposits, Delta Community would rank among the top 10 financial institutions in the Atlanta market if the Federal Deposit Insurance Corp. included credit unions in its annual ranking of banks by share of local deposits. (Credit unions' deposits are guaranteed by a separate agency, the National Credit Union Administration.)

Similarly, Georgia's Own Credit Union, which started in 1934 as a credit union for telephone employees, now offers membership to employees of more than 300 companies as well as residents of seven Atlanta-area and Savannah counties. The Atlanta-based credit union is now the state's third-largest credit union, with more than $1 billion in assets at the end of 2007.

Both are tiny compared to banking giants in the Atlanta market such as SunTrust and Wachovia, with more than $29 billion and $21 billion, respectively, in local deposits last year.

Still, the credit unions' growth is a trend that is likely to intensify a long-running turf battle between the nonprofit institutions and Georgia's hundreds of small banks.

Despite stalled membership growth in recent years among Georgia's credit unions, Mike Mercer, chief executive of the nonprofit industry's state trade group, said he expects "rapid growth" over the next few years. Mercer, with Georgia Credit Union Affiliates in Duluth, expects growth to resume as Georgia's credit unions ramp up investments in new branches, as many of their counterparts in other states did several years earlier after switching to community charters.

There's a lot of room to grow, he contends. Only about 18 percent of Georgia's residents are credit union customers, compared to an average of 29 percent nationwide and around 40 percent or more in several states, according to the Credit Union National Association, a Washington-based trade group.

That's a scenario that makes some bankers see red.

They argue that credit unions, which are nonprofits and therefore don't pay federal or state income taxes, are operating with a huge financial advantage as they invade the same neighborhoods that many community banks target.

"The community charter is the one that drives banks nuts," said Joe Brannen, president of the Georgia Bankers Association. "When you've got a legislated financial advantage of as much as 40 percent, you can't discount them," he said in reference to the tax rate paid by banks but not credit unions.

Credit union officials counter that their institutions have had to diversify to survive, and are simply trying to improve service for their members by opening branches in their neighborhoods.

Indeed, Delta Community Credit Union's transformation began in the midst of Delta's protracted series of job and pay cuts and other restructuring moves from 2001 to 2007 that included a nearly two-year trip through bankruptcy.

The 68-year-old credit union changed its name from "Delta Employee" to "Delta Community" in 2005. After gaining permission from state regulators to offer its services to all residents of 10 metro-Atlanta counties, Delta Community started spending tens of millions of dollars building distinctive branches that look vaguely like airplane hangars. The credit union also doubled its marketing budget and added money market accounts, business loans and other services to its product lineup.

Last month in Marietta, the credit union opened its 16th branch, right between the offices of two community banks, Alpha Bank & Trust and Flagstar Bank. Delta Community expects to have 20 locations overall by the end of the year, vs. eight in late 2004.

"We're not growing for growth's sake," said Rick Foley, president and chief executive of Delta Community. "When Delta started having their heavy financial issues ... we knew we needed to branch out into the community."

Lost ground made up

The credit union's officials said they are focusing on communities such as Peachtree City, Vinings, Newnan, Sandy Springs, Lawrenceville and Duluth that are fast-growing but also have enough current members to support a branch.

The strategy is apparently working. After losing more than 15,000 members between 2003 and 2005, Delta Community's customer base has regained most of that ground, topping 172,600 members in April. The credit union attributes much of the earlier decline not only to job turmoil at Delta but also moves to close dormant accounts. Since then, however, most of the growth has come from outside Delta; three-quarters of its new members have no connection with Delta, the credit union said.

Despite its new focus, the institution said it won't lose its Delta roots. "There's a lot of brand awareness with Delta," said Matthew Shepherd, Delta Community's senior vice president of marketing and sales. "That's a big part of Atlanta's history. We like the name."

The credit union's financial measures have been on the upswing, even as many banks locally and nationwide are struggling with the fallout from declining home values and delinquencies in mortgage and homebuilder loans. Delta Community said its total loans grew almost 17 percent last year and had reached $1.68 billion by the end of April, including $868 million in mortgage loans.

Its reserves and other capital equal 15.5 percent of total assets — compared to an average of 10.2 percent at banks and other FDIC-insured institutions.

"They've got a ton of capital over there," said Mercer, with Georgia Credit Union Affiliates. "It's not a financial risk at all for them to put out these branches."