In a historic bid to chart new legal ground on community charters, a Kentucky federal credit union has converted to a state charter, marking the first such switch in the state in 30 years.
In attempting to write new ground rules on NCUA vs. state field of membership policies in Kentucky, the $83 million Autotruck FCU said it hopes to take advantage of more lenient FOM regulations governing designated area development districts within the state.
The federal-to-state conversion by the SEG-based Louisville credit union, made effective three days before Christmas, will give the CU expansion muscle in 17 northern Kentucky counties. As part of the deal, the 13,000-member Autotruck is changing its name to Autotruck Financial CU.
A key part of the transaction, as originally rejected by NCUA examiners as a federal CU, is the ability of Autotruck to expand in Bowling Green, a community 120 miles away from Louisville.
In a formal statement issued Tuesday, Autotruck Financial with 120 SEGs, called its new authority “an important milestone in our 51-year history in providing more products, service and convenience” to members in Bowling Green and other Kentucky communities.
In welcoming the Autotruck conversion, the state’s chief regulator, Charles Vice, commissioner of financial institutions, told Credit Union Times there might be more Kentucky CUs which now might apply to convert.
“We’ve heard from a few looking at the concept now,” he said.
In a press release, Vice also said that Autotruck’s “desire to switch to state regulation is a testament to the strength of the state charter and DFI’s positive role as a regulator.”
The Kentucky Department of Financial Institutions, Vice said, “believes that a state charter provides significant value due to the local decision-making process and our knowledge of local economic conditions.”
AFCU’s board had voted in June to begin the conversion process officially completed on Nov. 8 with the charter delivered on Dec. 22.
Huston Reinle, the CU’s president/CEO and also chairman of the Kentucky Credit Union League, said he was particularly heartened the state’s new FOM authority allowed his CU, with ties linked to Ford and General Motors plants, to reach beyond SEG barriers at a time “when it has been pretty rough for credit unions like ours the last couple of years.”
Autotruck Financial’s branch in Bowling Green has been serving employees at the Corvette assembly plant and Holley Performance Products.
Reinle said his conversion decision is “the first of this kind by a federal credit union” in line with a 2010 Kentucky Supreme Court ruling. That ruling upheld the commissioner’s community charter power in dealing with state charters but had been challenged by the Kentucky Bankers Association.
The court ruling for years had barred half a dozen CUs, defendants in the suit, from pursuing community charters over NCUA’s well-defined common bond definitions. A number of these CUs have since expanded branching capabilities ore reactivated community charters.