Analyst Offers Prediction On CU Conversions

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While a veritable wave of credit union conversions to bank charters likely isn't on the horizon, one conversion expert suggested where to look for the next big conversions to come.

"I don't think [the conversions of Community CU and OmniAmerican CU] is going to touch off a wave of conversions, as some have suggested," said Alan Theriault, CEO of CU Financial Services, who has consulted in the majority of conversions that have already occurred. "But you are going to see them in extremely competitive markets."

The best predictor of where the next conversion will be: where the banks are.

"You've got these highly competitive markets where the big national banks are coming in and they're building a bunch of branches, and credit unions in those markets are going to find their marketshare diminished unless they have access to capital," he told The Credit Union Journal. "The Dallas market is a perfect example. I don't expect more than [CCU and OmniAmerican], but the Dallas market serves as a model. There's significant job growth, significant market growth, and Washington Mutual is opening 200 branches in that market. Those are the characteristics to look for."

Other markets with similar situations: certain regions of California, Chicago, and the East Coast corridor from Norfolk, Va., to Baltimore.

"This isn't going to effect every credit union, and not every credit union that looks at converting is going to decide to do it, but in these tough markets, credit unions are going to have to take a hard look at it," Theriault suggested. "It's not going to be every credit union, but the problem is, it's the big ones, it's big time. It's the credit unions that have strong leadership in place with forward-thinking boards, the infrastructure in place to be making more loans and offer more services, but they're held back because their growth is outstripping their capital."

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