LINCOLN, Neb. -- Dual chartering has surfaced once again as a hot topic in Nebraska following the state-to-federal conversion last month of the $60 million 1st Choice CU of Lincoln becoming Peoples Choice FCU.
Management of the Lincoln CU said it decided on the switch to a federal charter based on various cost factors and "seeing there could be a savings for us," explained Dale Springer, president/CEO of Peoples.
Peoples became the second Nebraska CU since May to make the state-to-federal change leaving only 20 CUs under state regulation through the Nebraska Department of Banking and Finance, the supervising agency also for banks, mortgage firms, payday lenders and various other institutions.
The Nebraska Credit Union League said the Peoples Choice move reflects a growing worry among the remaining state CUs over the financial burden of a state sales and deposit tax as they apply to both CUs and banks.
"Nebraska is one of only six states that impose the deposits tax on their state chartered credit unions and it simply is less expensive to be a federally chartered credit union in Nebraska than it is to be a state chartered credit union," said the league adding, however, that the trade group "believes strongly in the dual chartering system."
At the same time "if we do not address the reasons for why our state chartered credit unions are converting to a federal charter, we are concerned that this trend will continue to grow," said the league.
Springer said the switch to a federal charter and the adoption of a new name, made necessary because of a conflict with an out-of-state CU with a similar name has been under study for months and is the result of a strategic move to help ensure future CU growth.
"We believe it will be good to deal with an agency whose sole interest is credit unions," said Springer noting the myriad interests of the state banking department.
John Munn, the director of the department and a former banker, acknowledged also that a lurking issue in Nebraska has been taxing of financial institutions with the banking lobby a strong force in ensuring that CUs fall under tax purview.
"I'm sure the bankers would not remain silent," if there was a change in how CUs were taxed in Nebraska, Munn predicted stressing he would remain neutral on any bank/CU clash.
In a statement, the league noted that over the last several years there have been several that have converted finding the federal charter "to be more advantageous than the state charter with the primary reason being the State of Nebraska levies taxes, including the state sales tax and deposits tax, on state chartered credit unions that they otherwise would not pay if they were federally chartered."
Ken Bradshaw, president of the $123 million Liberty First CU also of Lincoln and vice chairman of the league, said his CU has no plans to follow the lead of Peoples Choice since "we believe the state examiner has been responsive to our business."