NCUA Rejects Ballots, Disclosures In Bid By Lafayette To Convert
NCUA has denied approval of member ballots and disclosures in the conversion to mutual savings bank of Lafayette FCU, one of three credit union conversions in the works.
In a letter to Richard Garabedian, the Washington lawyer representing the $380-million credit union, NCUA cited numerous shortcomings in the disclosures said the information submitted on the conversion falls short of the regulatory requirements in a variety of ways.
John McKechnie, spokesperson for NCUA, said the ruling on the Lafayette disclosures is not a final one and the agency expects the credit union, based in the Washington suburb of Kensington, Md., to address the issues raised and resubmit the materials.
The letter from NCUA's Region II Director Edward Dupcak noted that the credit union proposes to allow members to vote by proxy, which is prohibited by the Federal Credit Union Act; that the packet does not include a plan of conversion or identify a way to obtain one; that it does not support the credit union's claims for a need to expand its customer base; that the disclosures suggest the credit union's claims for a need to expand its customer base; that the disclosures suggest that once Lafayette gets a refund of its 1% NCUSF deposit it will invest it, when more likely it will need those funds to obtain deposit insurance from the FDIC; that, despite its claims to the contrary, at 9%, Lafayette is not in danger of falling below regulatory capital requirements. In addition, Lafayette makes claims that deposit and savings rates won't change, which is impossible to project.
"We know Lafayette shares our objective that its proposed charter conversion be decided on the basis of a fair conversion vote by an informed membership, and we would be happy to review revised materials after Lafayette has had an opportunity to consider and address our concerns," Dupcak said.
Specifically, NCUA cited several statements that appeared to be erroneous:
* Lafayette claims "in many respects we have been restricting our branching, products and services to maintain our capital level at the required credit union well-capitalized level," but NCUA notes the credit union currently maintains about 9% capital. That is 2%-or about $6 million-above what it needs to be considered well-capitalized;
* The materials claim a need for the credit union to expand its market, but Lafayette has a field of membership greater than one million and was one of the first credit unions to be authorized to serve all of Washington;
* Lafayette says a mutual savings bank charter will allow it to expand its products and services but does not indicate which products and services it may add as a savings bank;
* Lafayette indicates a savings bank charter will enable it to become a Small Business Administration-certified lender, but does not indicate why it cannot be an SBA lender as a credit union;
* The materials do not adequately explain the affect on the credit union elimination of its federal tax exemption.
Two other credit unions are also in the process of converting mutual savings banks, Sunshine State FCU in Tallahassee, Fla. and Marcy FCU, in Marcy, N.Y.