FORT WORTH, Texas. – A second Texas credit union with assets ofmore than one billion dollars has filed to become a mutual bank inless than two months. The $1.2 billion OmniAmerican Credit Union,based in Fort Worth applied to make the charter change on February18, according to the Office of Thrift Supervision which hasacknowledged receiving the application. The credit union wasfounded in 1956 as the Carswell Federal Credit Union to serve thearmed forces personnel working at the nearby Carswell Air ForceBase. When it began the 247,000 member credit union had sevenfounders who had a combined savings of $35. OmniAmerican is thethird CU of over a billion dollars to have applied for charterchange nationwide and the 32nd CU overall to have applied since thelate 1990s, according to CU Financial Services, the advisory firmwhich advises credit unions seeking to make the charter change.This figure includes both credit unions that applied for charterchange and failed at the attempt and credit unions which mergedwith mutual banks and did not initiate charter changesindependently. The $1.4 billion Community Credit Union,headquartered in Plano, Texas, announced its application quietly,over New Year's weekend. The first billion dollar credit union totry to make the charter change, the $1.2 billion Lake MichiganCredit Union, applied on April 26, 2004 but the application failedwhen the credit union couldn't convince two-thirds of its memberswho voted in a special ballot to support it. OmniAmerican is theeighth largest credit union in Texas in terms of assets and itsattempt to move to a mutual bank charter, so soon after Community,suggests there might be a domino effect at work – at least amongcredit unions in the Dallas area. “I won't predict how many creditunions might make the jump, but I am not surprised that Omni isseeking to do it,” said Richard Howdeshell, CEO of the Fort WorthCommunity Credit Union, a $611 million credit union alsoheadquartered in Fort Worth. “This is a tough, very competitivemarket and not just for credit unions. We have a lot of the majorbank players down here in the Metroplex as well,” Howdeshell said,referring to the Dallas- Fort Worth metropolitan area. “They havebeen getting more involved in commercial lending and I think theyjust wanted to go a lot more in that direction.” While stressingthat he did not speak for the credit union Alan, Theriault, aconsultant with CU Financial Services, said that the credit union'sbalance sheet could provide some clues about the pressures Omnifaced that would make conversion attractive. He also confirmedthat, should the members approve the conversion, the credit unionwould seek to adopt a mutual holding company structure that wouldallow the former credit union to issue a minority portion of itsstock to raise capital and retain depositor control. Omni CEO LarryDuckworth and other credit union staff failed to return repeatedphone calls from Credit Union Times and so there is still no wordfrom the CU on why they decided to seek the charter change.According to NCUA's records, Omni's net worth ratio lags its peersby 2.48% and hit 7.33% in December of 2002. But the key ratio hasalso been rising steadily and sits at 8.00% as of the end of 2004.The credit union also has a return on assets that only lags itspeers by 0.03%. Omni has certainly been a relatively activebusiness lender. According to NCUA's records, the credit union had110 business loans outstanding as of the end of 2004, worth about$72 million, 42 of which, worth $41 million, it originated in thelast year. These numbers, advocates of charter change suggested,would be the sorts of things that would make a charter changetempting for a credit union, particularly one in a very competitivemarket. But Randy Smith, CEO of the $2.2 billion Randolph-BrooksFCU, headquartered in the San Antonio area, pointed out that thechange is still not a done deal. “The members still have to vote onthis thing and I would not want to start calling it a done dealuntil I hear how they have voted,” Smith said. “But I hope theydecide to stay. I think it's a bad thing for credit unions in Texasto see talented men like these two [Gary Base, CEO of Community andLarry Duckworth, CEO of Omni] leave.” According to Harold Feeney,Commissioner of the state's Credit Union Department, under Texaslaw, a state chartered credit union which seeks to change itscharter to that of a mutual bank must only obtain the agreement ofa majority of members attending a meeting called to vote on theproposed change and must obtain the permission of the state orfederal regulator which will regulate the institution. Under NCUArules the credit union must use a mailed ballot to conduct itsvote, but if, say, 8% of credit union members vote in the election,as few as 10,000 members could decide to change the charter of a$1.2 billion credit union. “I think they could make it,” Howdeshellsaid. “People are apathetic. We see it in the election turnouts forother decisions down here and it's not clear to me that othercredit union members really understand what is at stake in thedecision.” Smith agreed. “Down here we had a bond issue for theschools that we really needed to pass because the schools down herereally need the money. Only 3% of voters turned out to vote on itand it failed, so I know all about how a very little tail can wag abig dog.” In the wake of the Omni announcement, much of theattention has turned to the Texas Credit Union League to see whatits reaction might be. When Lake Michigan tried to convert theMichigan Credit Union League took out advertisements in the localpress that pointed credit union members to a Web site which, theLeague believed, made clear some of the things it said the credithad neglected to include in its pre-balloting disclosures. Now manywonder if the Texas Credit Union League will do something similar.Maybe, or maybe not, said Dick Ensweiler, CEO of the Texas Leagueand chairman of CUNA. Ensweiler maintained his stance ofdisappointment at Omni's decision even as he professed indecisionabout what the League should do about it, if anything. Ensweilersaid the League will wait until its board meeting of March 11 toformulate a response to the two credit union applications, and heurged patience on the part of many who were anxious for swiftaction. “It's very easy to get emotional about this topic and saysomeone should do something, but it's harder to figure out whosejob that is and what they would do,” Ensweiler said. “Is it theLeague's job to oppose a credit union's leadership on a businessdecision?” Ensweiler stressed that his personal feeling wereagainst the move, saying that changing to a bank charterrepresented the antithesis of what credit unions are about asinstitutions, but he noted that feelings do not represent a courseof action. “We are evaluating all options,” he said, “We justhaven't made a decision yet.” Ensweiler noted that the Texas Leaguefaced a different set of circumstances than faced the MichiganLeague. First, the two Texas credit unions will have to issuedisclosures to their members according to NCUA's new disclosureregulations. These regulations were not in place when Lake Michiganapplied and they will have a black box that contains information inclear language that the previous disclosures did not, Ensweilerpointed out. This may make an action from the League unnecessary,he said. Second, there are the challenges of the Metroplex region,where advertising is very expensive and members' connections totheir institutions can be very tenuous indeed. “How many membershave connections with their credit union that are predominantlythrough their auto loans,” Ensweiler asked. “How many of thosefolks are going to understand the issues we would raise inbillboard or on the Internet? How many are even going to know whothe Texas Credit Union League is?” -

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