WASHINGTON -
Coming on the heels of the previous year’s Texas-sized conversions of $1.4-billion Community CU and $1.2-billion OmniAmerican CU, the now-completed deal alarmed many in the credit union movement who see the increasing size and number of credit union conversions to banks as an erosion of the credit union charter.
But the most interesting news concerning conversions came when authorities brought civil and/or criminal charges against as many as a dozen investors who sidestepped the laws on purchasing initial public offering shares in mutual savings banks–including eight ex-CUs.
The individuals were charged with hiring straw investors to buy shares for them so they could exceed the legal limit set on buying IPO stock and illegally gaining depositor status at some of the mutual savings banks.
The charges only served to confirm what many in credit unions had long suspected, that some credit union-to-bank conversions were being illegally accessed by speculators for illegal profits–at the expense of long-time members or bank depositors.
The year also started with the board of Lafayette FCU, in suburban Washington, withdrawing their bid to convert to a bank after NCUA uncovered improprieties in the balloting. The embittered directors of the $320-million credit union, however, won’t go quietly, and have filed suit against the parties they claim are responsible for the ugly fight over the switch, including the retired CEO.
The huge $1.4-billion Think deal joined other credit union charter switches that were noteworthy more because of their innovation.
That included completion of the first all-cash acquisition of a credit union, Nationwide FCU. To acquire the $540-million NFCU, Nationwide Insurance, its corporate sponsor, paid members $29 million for their shares, then the insurer folded NFCU into a de novo thrift it had started up just months before.
The deal was seen as a ground-breaker because it was the first time a mutual savings bank had acquired a credit union by paying its member/owners. The payment appeared to eliminate any opposition by credit union executives, many of whom had opposed other conversions in recent years.
The year also saw Beacon Federal Bank, a one-time credit union, acquiring tiny Marcy FCU, one of four small credit unions folded into the Syracuse, N.Y., bank. Officials of the $600-million ex-credit union insisted they planned to retain the mutual structure of their five credit union constituents, but by year-end the former credit union had begun the process of selling itself to the public in an initial public offering.
Closing out the year, NCUA was negotiating with officials of a Massachusetts credit union, Northwest Community CU, and Haverhill Bank, on the terms of an unusual merger, combining a credit union with a mutual savings bank. Officials with the neighboring institutions hope to be able to simplify the local deal without having to go through the comprehensive disclosures NCUA requires of conversions to mutual savings banks.
Four more CUs are waiting to convert to banks. They are Priority One CU (formerly Postal Community), in Boston, Community CU of Lynn, Mass., Beehive CU, in Salt Lake City, and First Basin FCU, in Odessa, Texas.
If those four are added to the list, it will make a total of 37 credit unions converting to mutual savings banks, 26 of them since 2000.
