Sunshine State's Disclosures Not Exactly Accurate on its Potential Shared Branching Status as a Bank
TALLAHASSEE, Fla. -- There are some inconsistencies in the disclosure documents that the $137 million Sunshine State Credit Union has supplied to members voting on the credit union's proposed charter change.
The CU is making a second attempt to become a mutual bank after withdrawing its 2003 application.
The inconsistencies appear in a paragraph on page A-3 of the credit union's disclosure documents, which discusses whether or not the members of Sunshine State will still be able to enjoy shared branching services should the members vote to change to a bank charter. Sunshine State participates in shared branching through a relationship with Florida CU Shared Services, which in turn is affiliated with Credit Union Service Corporation's shared branch network.
Although the paragraph admits to the very real possibility that shared branching might come to an end if the CU became a bank, whether because of objections from banking regulators or the shared branching provider, it also suggests that the situation with the approvals from the shared branching provider were rosier than they in fact were.
For example, after making it clear that regulatory disapproval will end shared branching, the credit union wrote: "If we receive regulatory approval, but our existing shared branching provider does not permit us to continue our participation, we intend to actively seek participation in other shared branching networks."
Further, in a later sentence, the CU characterized their discussions about participating in shared branching with the other providers as "positive," but with no guarantee of results. But that statement doesn't square with the facts. There are only two other shared branching networks, CO-OP Financial Services and Financial Service Center Cooperative. CO-OP Financial Services has a well-publicized policy of not allowing bank participation in its shared branching or ATM networks once a bank has issued stock. FSCC's policy is only that it will evaluate each situation on a case-by-case basis. As of press time, CO-OP Financial Services had not returned phone calls about whether or not it had talked to Sunshine State. Sarah Canepa Bang, CEO of FSCC, could only confirm that FSCC had spoken to Sunshine, but did not promise them access. "What I told them was that our policy was to look at each case and make a decision," Bang said. "I didn't say anything that would be especially positive."
These negotiations would only be necessary if the banking regulator said yes and if Sunshine's current shared branching firm said no, an eventuality the CU suggested may not happen. "At this time, our existing network provider has advised us that SSCU's participation would not be terminated upon our Charter Change," the CU wrote. "Instead, SSCU's Charter Change would be taken into consideration as part of the network provider's annual review of our contract."
While this is technically accurate--no formal decision on any member CU's participation would take place until its contract is up for renewal--Sunshine did not tell members that it had already been informed that a charter change would mean no more shared branching through FCUSS.
FCUSS had sent a copy of the affiliate's recently passed policy that states it will not extend membership to any bank, according to Joe Melbourne, chairman of the FCUSS board and CEO of the $1 billion Central Florida Educators Federal Credit Union.
In fact, in a sense the CU received two negative replies on shared branching with FCUSS since the organization's policy on not allowing bank participation had come on the heels of a policy from CUSC, which would also not allow it.
This is a significant shift in CUSC's policy. In 2005, when Community Credit Union chose to become a bank, the question of whether or not the CU could continue in shared branching was left up to the state shared branching CUSO--affiliated with the league--and the federal regulators.
"Our board had been talking about it for a while and decided this would be the path we wanted CUSC to take," said Craig Beach, vice president of marketing for the shared branching provider. Beach said the decision took the Sunshine situation into account, but had not been driven by it.
The credit union's only comment about the discrepancy came from Michelle Clarke, the CU's vice president of marketing: "Sunshine State Credit Union stands by its disclosure information given to the regulators and members which we continue to consider as full, accurate and complete." --firstname.lastname@example.org