Industry participants aren’t sure whether HarborOne Credit Union’s possible conversion signals a growing trend or is just an aberration.
The $1.8 billion Brockton, Mass., credit union’s announcement, and withdrawal from CUNA and the state league, joins similar moves by the $1.5 billion Technology CU in California and the $187 million HAR-CO Maryland FCU.
Tech CU is still considering conversion while HAR-CO Maryland plans to complete the process this month.
Former NCUA Chairman Dennis Dollar said there have been about two credit union-to-mutual savings bank conversions a year since 1995, about 35 altogether.
“That is hardly an avalanche,” said Dollar, now a Birmingham, Ala., consultant. "Unless the tax exemption is lost, I don't believe the recent conversion announcements, while newsworthy, are the beginning of a major sustained trend that will signal the end of the credit union industry as we know it.”
Meanwhile, Peter Duffy, managing director of New York investment bankers Sandler O’Neill, said his firm has had discussions with more than 50 CUs which have conducted some portion or all of due diligence.
Duffy stressed that his comments should in no way be construed to say that many are ready to convert, just that more believe it is important to be prepared.
Duffy, Dollar and a sampling of New England CEOs do find agreement in the argument that the credit union charter overall needs fixing and that policymakers at the NCUA and Congress should be looking hard at why the CU charter is now less competitive with the MSB charter.
Massachusetts CEOs queried by Credit Union Times over the past week said that while they were closely following the HarborOne story they remained steadfast supporters of their charter even amidst the challenges of NCUA assessments, capital frustrations and uneven exam procedures.
“We can understand how HarborOne finds capital limitations but for us we’re proud credit unions who believe that the credit union charter provides service and value to members,” said Kenneth Dyer, president/CEO of the $644 million Liberty Bay CU in Braintree.
In its online disclosure notice of a possible conversion, HarborOne blamed constraints in building capital as well as major FOM impediments as reasons for switching, points refuted by at least one leading Washington lawyer, Steve Bisker, a former senior NCUA attorney, who said his examination of the HarborOne filings found the credit union to be well within its member business lending cap.
Still, there were other industry-watchers who find CUs in New England and elsewhere more worried than ever about where to build sustainable growth in the current climate.
"It’s pretty clear from our discussions with the larger credit unions that more of them are recognizing that the easy growth is over for most and in order to be prepared for the battle for market share, they need access to capital and rules more like those the community banks have,” said Duffy, the New York investment banker.
And Thomas Glatt Jr., a Wilmington, N.C., consultant said every CU board ought to consider the conversion option “or at least think about it.”
Credit union managers “used to get offended if you even brought up the idea. Now they don't,” Glatt said. He said that could suggest a possible increase in conversions coming in the next five to 10 years.