LANCASTER, Penn. – NCUA told officials of Everence FCU, a credit union operated by the Brotherhood of Mennonite Churches, that the $124 million credit union’s close coordination with a mutual savings bank owned by the group violates the agency’s management officials interlock rules.
“We believe the rule prohibits management interlocks between the [credit union’s] management officials and any common management officials involved with the holding companies and thrift within the enterprise,” NCUA told the credit union’s CEO in a recent legal opinion. “Furthermore, we are concerned the FCU’s board is improperly controlled by Everence Financial, particularly with regard to Everence Financial’s selection of the FCU’s slate of candidates for its board of directors.
Everence Financial (formerly Mennonite Mutual Aid Association) is the holding company for a variety of companies that provide insurance and financial products for church members and their families. Everence Association, a fraternal benefit society, holds a controlling interest in many of the companies and shares common ownership and control with the Mennonite Foundation, a charitable foundation.
Everence Association also controls Everence Holdings, an insurance and financial services holding company that solely owns the following: Everence Securities; Everence Insurance Company; MMA Distributions; Everence Capital Management; and, Everence Trust Company, a federally-chartered thrift with less than $5 million in assets. The depository holding companies (Everence Financial and Everence Holdings) and thrift (Everence Trust) are located in Goshen, Ind.
Kent Hertzler, president of the credit union, on Monday said the various entities are designed to provide a full range of financial services to members of the Mennonite churches. While Everence Trust is chartered as a thrift, it does not offer depository products or any services in competition with the credit union. “We’re obviously going to have more dialogue with NCUA on this,” he told Credit Union Journal yesterday. Among the possibilities are for the group to obtain an exemption from NCUA to continue the shared management/board structure, he noted. “We want to make sure that NCUA’s concerns are addressed.”
In citing its concerns, NCUA said the Depository Institution Management Interlocks Act allows management official interlocks between affiliates, but establishes certain prohibitions against the same individual simultaneously serving as a management official of two, unaffiliated depository institutions, as in the Everence case. The purpose of the Interlocks Act, said NCUA, “is to foster competition by generally prohibiting a management official from serving two nonaffiliated depository organizations in situations where the management interlock likely would have an anticompetitive effect.”
“We are concerned the FCU’s board is improperly controlled by Everence,” said NCUA. “You stated that Everence’s board of directors approves the slate of candidates presented to the FCU’s membership for election to serve on the FCU’s board of directors. The fundamental nature of a credit union is based in the ownership and control of the institution by its membership, as opposed to external influences such as holding companies or investors.”
The Federal CU Act, said NCUA, states that an FCU’s board shall “be elected annually by and from the members as the bylaws provide.”
Hertzler acknowledged the potential conflict but asserted that both financial institutions operated by the group are independently run and are not adversely influenced by the other.
