ARLINGTON, Va. — Credit union conversions to noncredit union,mutual charters continue to make headlines, but interestingly lessthan half of the conversions over the last 11 years have involvedstate-chartered credit unions. But how complicated would it be if astate-chartered credit union wanted to convert to another type offinancial? According to information collected by NASCUS, 14 statesdo not allow state-chartered credit unions to convert to anoncredit union charter. They include Arizona, Illinois,Massachusetts, Minnesota, Mississippi, Missouri, Montana, NewJersey, North Carolina, North Dakota, Oregon, Virginia, WestVirginia and Wisconsin. So any SCCU in these states would firsthave to convert to a federal credit union charter. Of those 14states, Mississippi and West Virginia permit SCCUs to use thestate's “wild card” provision to convert to a noncredit unioncharter by first converting to a federal CU charter. In addition,the law and regulations in Louisiana are silent on the issue ofstate-chartered credit unions converting to other types ofinstitutions, and in four other states–Alabama, Alaska, Coloradoand Kentucky–the issue is not specified in statutory or regulatorylanguage. CU Financial Services' Web site shows that as of June 30,2006 there have been 29 credit union-to-noncredit union charterconversions since 1995. Of those, 11 were former state-charteredCUs. They were Community CU, Texas (2006); OmniAmerican CU, Texas(2006); Washington's CU (2004); Community Schools CU, Mich. (2002);Professional Teachers CU, Tenn. (2001); CU of the Pacific, Wash.(2003); AAL CU, Wis. (2001); Citizens Community CU, Wis. (2001);Allied Pilots CU, Ill. (2001); Rainier Pacific CU, Wash. (2001);and Caney Fork Coop CU, Tenn. (2000). George Latham, deputycommissioner of credit unions in Virginia confirmed there is nostatutory language in the state's credit union code that allows astate-chartered CU to convert to a noncredit union charter or for anoncredit union to convert to a state credit union charter.However, there is statutory language for a SCCU to convert to afederal credit union charter. Latham explained that Virginia'scurrent credit union code was adopted in 1991, so it “pre-datescurrent events” of credit unions converting to noncredit unioncharters. He said there's never been any discussion to update thatsection of the code nor has there been a “groundswell against” thatprovision of the state's credit union code. According to Latham,there have been about three state-chartered credit unions that haveconverted to federal charters. He said he couldn't speculate on whythere have been no statutory changes concerning credit unionsconverting to noncredit union charters, but said it might bebecause no SCCUs have been interested. If a state-chartered CU wasinterested in converting, it would either have to move to get thelaw changed or first convert to a federal credit union. CUFinancial Services' Web site reports one Virginia federal creditunion–@LANTEC Financial FCU–converted to a mutual savings bankcharter in January 2004. The situation is similar in North Carolinawhere the state's credit union act also doesn't allow astate-chartered CU to convert to a noncredit union charter.However, Credit Union Division Administrator Jerrie Lattimore saidthe North Carolina General Statutes allow a credit union charteredunder the laws of North Carolina to convert to a credit unionchartered under the laws of another state, or a federal creditunion, and vice versa. “The statute does not mention converting toany other type of financial institution, so a state-charteredcredit union that wanted to convert to a noncredit union charterwould first have to convert to a federal credit union charter andthen be under federal rule,” she explained. North Carolina's creditunion act does have a parity provision with federal credit unions,but Lattimore said the CU division would have to write a rule toinvoke federal parity, and there is currently only a parity rulepertaining to field of membership. Washington State has faredslightly worse with three former state-chartered CUs convertingoutside the credit union system, but Linda Jekel, director,Washington Division of Credit Unions and chairman of NASCUS saidshe doesn't consider that a large number. While the number ofstate-chartered credit unions in Washington State havedeclined–there are now 79–she said that's mostly due toconsolidations and mergers, rather than conversions. TotalWashington credit union assets are $18.5 billion. When RainierPacific CU converted to a mutual in 2001, Jekel said the state'scredit union act had not yet been modernized and the CU convertedusing the wild card. The act was updated in 2001 after theconversion, and it now allows for a Washington state-charteredcredit union to convert to a federal charter or other type offinancial institution. The act also permits mutual savings banks toconvert to a credit union charter. This has never occurred, andJekel opined, “I doubt mutual savings banks know the process ifthey want to convert and the process could be beneficial to them. Anumber of banks have looked into applying for Subchapter S statusto be tax exempt, so a credit union charter might be a good optionfor them to look at.” What's more, Jekel added, a mutual inWashington State that converted to a credit union could have acommunity charter and be able to keep all its customers as members.“Every credit union should have a choice of whether it wants toconvert to a federal charter or a mutual charter,” said Jekel.“Competition between charters is what keeps them attractive andviable. The main thing is that members are well-informed and makean informed vote. The members should be brought into thecommunication as early in the process as possible, and the decisionwhether to convert should be decided by the members.”