PITTSBURGH -- Fed up with their regulator, some statechartered credit unions in Pennsylvania have jumped to federal charters.

Chief among the gripes: high fees and a policy by the state banking department treating credit unions the same as banks.

"The biggest complaint I had with the state regulator was micromanagement of our credit union by less-than-totally credible people," said Dennis Flickinger, president of First Capital Federal Credit Union in York, Pa. "They didn't appreciate the differences between credit unions and banks. I haven't looked back."

The $20 million-asset credit union switched charters in November 1993.

According the the Pennsylvania banking department, eight credit unions converted to federal charters and two merged with federal credit unions in 1993.

At least half of those converted to federal charters because they were dissatisfied with the state regulator.

As of December 1993, there were 110 state-chartered credit unions in Pennsylvania with $2.4 billion in assets.

'Genetic' Supervisory Style

In 1991 the banking department moved toward a "generic" style of supervision. Examiners were cross-trained so they could examine different institutions, rather than focus on a particular kind. All institutions use a version of the Federal Deposit Insurance Corp. examination form.

By sending "seasoned bank examiners" into credit unions, the department "held credit unions to the same standards as banks and S&Ls, and some credit unions didn't like that and they complained about it, and we've had some conversions because they don't like being held to the same standards," said Sally Hargrove, secretary of the state banking department.

Paula Speicher, director of Lee Hospital Credit Union in Johnstown, said the department has it wrong.

Irrelevant Paperwork Seen

"We use FDIC forms and fill out pages that do not apply to credit unions, such as questions about how we compensate our directors," she said.

Ms. Speicher said some small credit unions switched charters because being supervised by the National Credit Union Administration would be cheaper.

Although she could not provide hard figures, Ms. Hargrove said they were probably right.

"On average, for smaller credit unions with up to $25 million in assets, it costs more to be chartered in Pennsylvania than to be federally chartered," she said.

Pennsylvania's state-chartered credit unions pay an examination fee and overhead costs for the banking department.

Credit unions regulated by the National Credit Union Administration pay a single operating fee based on their asset size.

Costs Cited in Switch

Judy Berryman, manager of $2.7 million-asset Altoona Veeder-Root Federal Credit Union, said saving costs was a major reason the institution switched charters.

She declined to disclose a dollar amount, but said the credit union's exam costs under a federal charter are a third of what they were under a state charter.

The agency might start using a condensed examination form for small credit unions, which should cut down examination costs, Ms. Hargrove said. The department would choose what credit unions could use the abbreviated form on a case-by-case basis.

"Clearly a $45,000 credit union doesn't need a full-scale FDIC report," she said.

Ms. Speicher said some credit unions are considering jumping charters. She said she has been considering making the leap, but is waiting to see who will win the gubernatorial race in November and whether Ms. Hargrove will be reappointed as banking secretary.

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