PEORIA, Ill. - Citizens Equity Federal Credit Union has become the thirteenth federal credit union to convert to state-charter status so far this year, according to NCUA.
It is also one of many federal-to-state-charter CU converts that has chosen to take advantage of a NAFCU "once a member, always a member" bylaw clause that allows federally insured state-chartered CUs that were once NAFCU members to remain members.
The members of CEFCU voted in favor of the conversion on Sept. 1. CEFCU President/CEO Eldon Arnold described the outcome of the election as proof of their "members' overwhelming support for their credit union's conversion to a state charter." With more than $1.9 billion in assets and serving over 212,000 members, that makes CEFCU the largest federal credit union to convert to a state-charter so far this year.
CEFCU will continue to do business under the name "CEFCU." However its legal name will change from "Citizens Equity Federal Credit Union" to "Citizens Equity First Credit Union," so no changes will be necessary to the CU's signage or stationary. CEFCU is not just converting to operating as a state-charter credit union, it's more accurately returning to being a SCCU.
From 1937 to 1984, CEFCU operated as Caterpiller Employees CU. It converted in 1984 to a federal charter in order to be able to serve Caterpiller members in the company's Davenport, Iowa and Mentor, Ohio facilities. According to a "charter conversion fact sheet" distributed by the credit union, the reason CEFCU is converting back to federal charter status is that, "current opportunities existing under a State charter provide a more favorable business climate for CEFCU's future growth and diversification."
Those opportunities, Arnold elaborated include the greater flexibility under state law concerning who a credit union can include in its field-of-membership and where a credit union can conduct business. Illinois law, for example, provides reciprocity and allows an Illinois credit union to do business in another state, as long as that state's CUs are allowed to do business in Illinois.
In addition, Arnold commented, "Under Illinois credit union law, there is no limit to the number of counties a state-chartered credit union can include in its field-of-membership, as long as the credit union demonstrates it is capable of serving those counties."
CEFCU counts about 600 select employee groups throughout the U.S. in its field-of-membership. In addition to these SEGs,
CEFCU also includes nine counties around the Peoria area in its FOM which the credit union gained through "emergency mergers" with Mid-States CU and Logan County CU. The nine counties are: Fulton, Logan, Marshall, Mason, Peoria, Putnam, Stark, Tazewell and Woodford.
Arnold did not say for certain that CEFCU has already set its sites on some additional counties it would like to add to its field-of-membership, but he did not rule out that this was a possibility in the future.
At press time, Arnold said the credit union still had some administrative tasks to complete such as amending CEFCU's articles of incorporation and its bylaws.
He hoped the charter conversion will be completed by the end of September or early October. For NAFCU President Fred Becker, CEFCU's conversion to a state-charter is just the latest in what has been a lengthening string of defections of federal credit unions to state charters.
In 1999, NCUA figures indicated that 32 federal credit unions converted to state charters. Over the past three years, there have been nearly 150 such conversions.
"We have been dealing with this issue for awhile, and fortunately NCUA has begun to address some of the issues we've brought to their attention like field-of-membership and member business lending restrictions that federal credit unions have cited as reasons for converting to state charters. "We are continuing to work with NCUA and Congress and encouraging them to make changes that are within their power to loosen up the restrictions on federal credit union," he added.
Becker noted that despite the high number of federal-to-state-charter conversions, the majority have remained members of NAFCU.
"Remaining a member of NAFCU was never an issue for us," said Arnold. "In fact, remaining federally insured and a member of NAFCU was a key piece of the conversion. Our members count on our NAFCU membership."
NAFCU revised its membership eligibility criteria in 1997, said NAFCU Public Relations Manager John Zimmerman. The issue was first brought up for discussion during the association's 1995 annual meeting.
At that time, the association briefed attendees on the results of a survey it conducted "to gauge the effectiveness of NAFCU products and services currently offered to members and non-members, and to determine the products and services needs of credit unions in the future," the briefing sheet read.
According to NAFCU, each survey recipient was asked about the issue of allowing state-chartered credit unions to become affiliated with NAFCU. Specifically, they were asked if they would support extending associate membership to include federally insured, state-chartered credit unions.
State-chartered, federally insured credit unions were asked if they would associate with NAFCU if such an arrangement were made available. Results indicated, NAFCU reported, that six out of 10 NAFCU-member CUs supported state credit union association, and five out of 10 state-chartered credit unions would associate with NAFCU, if they were offered the opportunity.
Of the federal credit unions that have converted to state-charters so far this year, Zimmerman said "only three or four" have dropped their membership with NAFCU. NASCUS has a similar policy, said Brian Knight, director of state regulatory relations, "although we don't refer to it as a `once a member, always a member' policy."
He added that, "NASCUS knows that a strong dual chartering system requires there to be strong federal and state-chartered credit unions. For those state-chartered credit unions that convert to federal charters and want to be members of both NASCUS and NAFCU, that's their choice. We wouldn't try to influence their decision." However, a state-chartered credit union that's a member of the NASCUS Council and converts to a federal charter, could no longer be a member of the council. Instead it would be encourage to participate in NASCUS' Foundation for the Preservation of the Dual-Chartering System. -