The NCUA Board last week began the process of rescuing state-chartered credit unions in Missouri from a field of membership trap set by the state's bankers.
The federal regulators approved an application from Aerospace CU, one of the 10 largest state-charters in the "Show Me" state left in limbo by a court order striking down community chartering rules, to convert to a federal charter encompassing almost two-million people surrounding its St. Charles base, which also includes the city of St. Louis.
The conversion to federal charter will enable the $150-million credit union to escape the uncertainty surrounding it and the other state charters by the recent court decision, which is being appealed to a higher court. "The credit union is held back somewhat in its marketing efforts due to the (legal challenegs)," said NCUA's southwest Region Five Director Keither Morton, before the board vote.
The flight from the bankers' challenge is reminiscent of a similar wave of conversions from state charters in Utah in 2003 that enabled those credit unions to escape the bankers' efforts to impose a state tax on state charters.
In converting to a federal charter, Aerospace CU was required to give up one of the four counties it currently serves, rural Lincoln County.
Other Board Actions
The NCUA Board also approved a request from American Eagle FCU, in East Hartford, Conn., to convert from a multiple group credit union serving more than 300 select groups, to a community charter serving 1.3 million residents in Hartford, Middlesex and Tolland counties.
The $900-million credit union has a rich history. It was the founded in 1935 as the 80th federal charter as East Hartford FCU to serve employees of United Technologies, which was then the parent of Boeing, Pratt & Whitney Aircraft and United Airlines. When antitrust regulators forced a break-up of the corporation, three credit unions were formed from it; East Hartford FCU, Sikorsky FCU and Hamilton Sundstrand FCU.
The NCUA Board also proposed a new investment option for credit unions, mortgage note repurchase agreements. The new rule will allow federal credit unions to invest in short-term repurchase agreements, collateralized by mortgage notes, even those of non-members. The maximum term of the mortgage notes will be 30 days.
The board also renewed the interest rate ceiling for FCUs at 18%.
