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VIRGINIA BEACH – Climaxing in a meeting that was characterized as quiet, businesslike and straightforward, the members of @lantec Financial FCU voted on December 2 to allow the institution to leave its federal credit union charter for that of a federally chartered mutual bank. The charter conversion will be effective as of mid-January 2004. Out of the 14,255 members, the credit union reported that 2,026, or 14%, voted on the issue. Among the members who voted, 1,454 voted for the charter change and 572 voted against, giving the members in agreement with the change a margin of victory of 72%. Michael LoCash, CFO with the credit union, characterized the meeting which finalized the charter vote as businesslike and quiet and estimated that it took between 30 and 40 minutes to complete. A number of the roughly 45 members attending rose to speak about the pending change, but few had any statements to make. Most had questions about things like how their accounts would change and whether becoming a bank meant higher fees. “Many of our members associated being a bank with higher fees and we had to address those concerns,” LoCash said. In contrast to previously published accounts of the charter change which had offered a declining membership as reason for the credit union seeking the switch, LoCash explained the situation was more complicated than the mere loss of accounts. He attributed the apparent decline in accounts to the credit union cleaning up its books and winnowing out inactive accounts as part of an effort to save money and streamline its operations. But he blamed underlying membership pressures for the credit union changing charters. “It’s no great secret that the whole Norfolk area is pretty heavy with credit unions,” LoCash said, estimating that there were 50 credit unions in the greater Norfolk and Virginia Beach area. Between the urban areas of Virginia Beach, Hampton and Norfolk, NCUA lists 35 credit unions, 21 in Norfolk, and seven each in Hampton and Norfolk. LoCash said that the many overlapping credit union territories had made it difficult for @lantec to find and keep its identity, a fact which was highlighted by the credit unions’ six name changes in its 53-year history. He blamed the U.S. Navy’s habit of reorganizing on a frequent basis for much of the problem, pointing out that the shifting places and categories of employment often made it challenging for the credit union to find a foothold. “In the end it became a question of survival as an independent institution,” he remarked, speculating that the alternative would likely have been a merger with another credit union. NCUA data appeared to bear this out, showing @lantec’s market share growth falling from 14.13% in September 2003 to 9.10% in September 2003. LoCash also openly scoffed at the notion that @lantec had made the change in order to become a stock issuing bank. “The primary reason for doing that is to raise capital, and capital really hasn’t been an issue for us,” he said. He also pointed out that mutual thrifts exist primarily to offer their members mortgages, which is and has been an @lantec strength. He pointed out that the OTS usually gives up to three years to pass a key test of their mortgage lending. @lantec already passes the test, he said. In a press release after the vote Susan Ralston, @lantec CEO noted, “We are looking forward to being able to offer a new array of retail and commercial services with the same friendly staff that our members are so fond of. And we will have the same dedicated Board of Directors. From our members’ standpoint, there are no changes – we will simply be a bank versus a credit union.” -

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