The brewing internal strife within the credit union movement again broke into public last week when this state's credit union community turned out to try to defeat a bid by Sikorsky FCU to convert to a state charter encompassing all of the Nutmeg State's 3.3 million residents.
At a hearing held by the Connecticut Department of Banking, the state's credit union community expressed unanimous opposition to the proposal, in testimony by the CEOs of several major credit unions and in written comments submitted by another 15 credit unions.
The proposal, for what would be the first statewide charter for a credit union anywhere, would significantly increase the already-simmering tensions within the credit union movement, according to testimony by Raymond Dowling, president of Stamford Municipal Employees CU. If approved, "other credit unions will seek statewide charters and chaos will be the rule of the day," he suggested.
The proposed field of membership (FOM), which would overlap all but 11 of the state's 216 credit unions, would be far too broad, testified John Keet, Jr., president of Personal Care FCU, Trumbull, Conn., "I believe this is a dangerous precedent to set no limitations (on FOM) at all," he said.
Daniel Daigle, president of Connecticut State Employees CU, went further and suggested the breadth of the FOM would accelerate the blurring of the traditional common-bond concept and invite reconsideration of the credit union tax exemption. "What happens when we are no longer considered unique in our structure?" he asked. "The approval of a statewide field of membership will ultimately call into question our unique status."
J. Patrick Kelley, president of Northeast Schools CU, worried that the granting of a statewide charter will invite new legal challenges from the banks. "We will be dragged at the state level into the same problems as we had at the federal level," said Kelley, referring to the numerous lawsuits filed by banking groups challenging FOM rules.
In explaining their motives for the application, Sikorsky FCU officials cited many of the same problems plaguing the credit union movement and other financial service providers, including the need to expand markets, an aging deposit base and burgeoning competition from non-CU competitors.
Frank Russo, VP-marketing for the $313-million Stratford-based CU, said the credit union's main sponsor, the Sikorsky Aircraft subsidiary of United Technologies, has shrunk its employee base by 50% to just 6,500 over the past decade. Moreover, he added, the credit union's 200 select employee groups (SEG) are expensive to maintain, with many SEG members uninterested in loan products.
The credit union, like other depository institutions, is also losing a lot of its loan market to new competitors, argued Russo. He said its high capital ratio of 15% and its CAMEL 1 rating from NCUA illustrates the institution will be capable of managing the vast expansion.
Russo insisted Sikorsky is not interested in encroaching on other credit unions' membership bases.
"We honestly believe there won't be any adverse impact (on other credit unions)," he said. "We are asking that we be put in a position where we can actively compete in today's marketplace."
If Sikorsky is approved for a statewide charter, at least one other credit union in Connecticut, Dutch Point CU in Weathersfield, has indicated it will also request a statewide charter.
The Sikorsky application, while encompassing the entire state, would carve out FOM exclusions for 11 small credit unions with a $1.5 million or less in assets.
John Burke, banking commissioner, said he does not know when he will rule on the application.
