If Community Credit Union in Plano, Tex., expects to convert to a mutual savings bank, it will apparently have to hold a second member vote - or take the National Credit Union Administration to court.
On Friday, The Credit Union Journal reported that the NCUA would refuse to certify the members' original, favorable vote. It cited an unnamed "top source."
On Monday, the credit union received a letter from the NCUA spelling out its decision, according to Nicholas N. Owens, the agency's director of external affairs. Mr. Owens refused to disclose the decision, but rejection was expected. Gary Base, Community's chief executive, did not return telephone calls Monday.
The NCUA had informed the $1.4 billion-asset state-chartered credit union in May that the vote would be invalidated because of the way a double-sided disclosure document was folded.
The 53-year-old credit union went ahead with the balloting anyway. It reported at a special June 21 meeting that about 36,000 of its members had voted - mostly by mail - and that 71% had endorsed its plan to become a mutual savings bank. Community presented the results to the NCUA for certification this month.
Neither Mr. Base nor lawyers at Silver, Freedman & Taff LLP, the Washington law firm representing Community, have said definitively that Community would sue to make the NCUA accept the conversion vote - but there have been hints.
In June, Mr. Base told American Banker that the credit union would "explore other options" if the vote was invalidated.
One industry source said a second conversion vote would require Community to send several additional mailings to its nearly 223,000 members and would cost hundreds of thousands of dollars.
The NCUA's objection to Community's first vote was that members had to unfold a two-sided disclosure document and then turn it over to read an agency-mandated disclosure statement.
The side that members saw immediately after unfolding it contained Community's response to the disclosure statement.
Both the Office of Thrift Supervision and the Texas Credit Union Department approved the conversion application.
