News stories about credit unions seeking to convert to a bank charter were once just a sometimes thing in Credit Union Times. No longer. Now almost every weekly issue contains at least one timely news story on the subject. The reason for the stepped up coverage is simple. There is a lot going on involving credit unions that have converted, are planning to convert, are in the process of converting, or that have failed in an attempt to convert to a bank charter. And from the sidelines, a growing number of interested parties have weighed in with pointed comments, some specific opinions, some rather surprising actions, and some beating around the bush. Although the number of bank wannabes is still less than 30, in recent months it may appear to a casual observer that a trend is developing. What makes it seem like a runaway train is the increasing size of those taking the plunge. A handful of billion dollar club members represent a large number of members, assets, and lost revenue such as dues and fees paid to CU trade groups, CUSOs, and regulators. For anyone keeping score, on the failed attempts side of the ledger are Columbia Credit Union ($687 million) and Lake Michigan Credit Union ($1.1 billion). It now appears Sunshine State Credit Union ($170 million) will be added to that list. Although that credit union's members had already given the OK to convert, it now appears it won't happen for at least three reasons. The CEO has been fired. The board chairman has resigned. The NCUA has tightened up the conversion process. There already is lots of speculation floating around regarding the abrupt departures so I won't add to it, although obviously I have my suspicions. It is almost certain that Sunshine State CU will need to start its conversion attempt all over again. No regulator, on either side of the conversion process is going to approve such a big move with no one in the driver's seat. And what guarantee is there that the board can find a competent CEO who will be approved by regulators and who wants to jump into a position surrounded by uncertainty? Will any CEO candidate have to commit to leading the charge towards a charter conversion as a condition of being hired? Or vice versa since the current board appears to be having second thoughts despite what a staffer and the conversion consultants are saying to the press. All of this plus vibes from NCUA that the credit union may need to reapply will keep Sunshine State CU in the headlines for the foreseeable future. Meanwhile, one of the banking groups has decided to switch tactics in its ongoing anti-credit union efforts. Although America's Community Bankers (ACB) would like nothing more than to see credit unions, especially the big guys, stripped of their tax-exemption, they decided recently to focus their big guns on another target. ACB is now going after NCUA saying the CU federal regulator needs to get out of the way for credit unions that expect and want clear sailing on the way to becoming a bank. It's a new twist on the old clich, "If you can't beat them join them." If the conversion process becomes easier, reasons ACB officials, more and more credit unions will want to become tax-paying banks. So much for the hated CU tax-exemption at that point. Not surprising, however, ACB again shows its ignorance about what makes a credit union a credit union. Listen to this recent quote: "The NCUA should not be permitted to artificially maintain jurisdiction over institutions seeking a legitimate charter choice to pursue alternative, fully disclosed business strategies that serve the best interests of the communities in which they operate." (For more of the same, see Credit Union Times, Opinion, page 16, March 16, 2005 issue.) There is a lot wrong with that statement, but the part that makes no sense is that ACB apparently thinks credit unions' first obligation is to serve communities in which they operate. Wrong. CUs' number one obligation is to serve the changing financial needs of the members who own it. Of course the community will also be served as a by-product. To answer the question posed in ACB's recent newspaper ad promoting credit union conversions to bank charters, "Why can't credit unions have choices, too?" They can and they will make them for the benefit of their members, but only if those choices are based on full disclosure. By the way, ACB hasn't really given up on attacking the long-standing credit union tax-exemption. Just days after announcing its new focus on charter conversions, ACB submitted stronger-than-ever anti-credit union comments to the President's Advisory Panel on Federal Tax Reform. As charter conversion news stories continue to unfold, it is interesting to note who has jumped into the fray with both feet and who prefers to whisper encouragement from the sidelines. Unlike the Michigan League, which played a pivotal role (whether they admit it or not) in the failed charter conversion attempt by the Lake Michigan Credit Union, the Texas League has decided to be content with issuing policy statements. That's all well and good as far as it goes, but the horses are already out of the barn. The time to create task forces, beef up Web sites, and issue politically correct news releases has long since passed. Taking a chapter from the aggressive stance undertaken in Michigan, the Texas League needs to be a much stronger voice, especially with two (so far) of its billion dollar member credit unions attempting to get out of its corral. Maybe the trend fear is Texas based? The Texas League shouldn't come out against conversions. Neither did the Michigan League. But they definitely should pull out all the stops in making sure all credit union members in the state know what is at stake and impress upon them the need to be fully informed before they take such a big step as switching from being a member to being a customer. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected].

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