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MOUNTLAKE TERRACE, Wash. – A former credit union whose conversion to a mutual savings bank received scant attention when it took place, has passed its first anniversary as a bank but also suggested that every credit union that changes charters doesn’t necessarily do well. The 1st Security Bank of Washington, a $260 million state chartered bank which began life in 1936 as Washington’s Credit Union, opened for business as a bank on April 1, 2004. The credit union to bank switch received little attention at the time largely because it was overshadowed by the fight over another Washington State CU’s bid to become a bank, the then $600 million Columbia Community Credit Union, headquartered in Vancouver, Washington. Credit Union Times admittedly missed the boat on this conversion with no coverage until this article. The bank did not return phone calls as of press time. “I believe the issues for them centered around indirect lending and field of membership expansion,” explained Linda Jekel, director of credit unions for the State of Washington. The credit union had an extensive history of indirect lending, not just in cars but also in appliances and other things, Jekel explained, but they wanted to expand over state lines. The Washington State charter would not allow them to make the expansion they wanted and moving to a federal charter would have constricted their indirect lending, she said. Press accounts from the time offered a few more details. According to a June 2004 story in the Snohomish County Business Journal, the credit union’s indirect lending had been through home improvement contractors who provided loans to homeowners seeking home improvement work. The service became so popular that it led to inquiries from out of state which helped lead to the then credit union’s charter bind, the story said. It also reported that 75% of the members voting in the election approved of the charter change. NCUA records tend to back up Jekel’s observations. According to the credit union’s March 2004 5300 report, the institution, which then had $297 million in assets, had $18 million in indirect loans, though the records do not list what types of loans they were. Interestingly, the $297 million in assets back then is more than the $260 million in assets the bank has now, according to the FDIC. The NCUA’s records also show that the credit union went into being a bank with a strong net worth ratio (10.22) but also had a return on investments that lagged 40% behind its peers (.87 for the peers, .47 for the CU) as well as significantly higher delinquency and charge-off ratios (ratio of delinquent loans to total loans) with .77 for the peers and 1.28 for the CU. Net charge-offs were .56 for the peers at the time and .92 for the CU). Since its conversion, the former credit union turned bank has fired the CEO which led it through the conversion but still retains the “people helping people since 1936″ which echoes a standard credit union theme. -

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