MIRAMAR, Fla. – Bucking the trend of federal credit unions that have converted to state charters for increased regulatory flexibility, Eastern Financial FCU, one of the largest CUs in the U.S. and the third largest in Florida, has applied with the Florida Division of Banking because of competition with other state-chartered credit unions with broader field-of-membership expansion capabilities. As of 1980, Florida state-chartered credit unions are not required to have common bond requirements. Instead, credit unions have "limited fields of membership" and they can define their FOM to be a geographic area, SEG group or association, or any combination, as defined in the CU's bylaws. "With other large state-chartered credit unions in our area that have limited fields-of-membership, we're losing our ability to add select employee groups," said Kent Herbert, CEO of Eastern Financial. "If people move into our markets, they can simply join any one of these other credit unions without having to belong to a SEG." Chartered in 1937, Eastern Financial FCU's sole sponsor continued to be Eastern Airlines until 1991 when the company went belly-up. The $1.2 billion credit union has Arthur DeRusso, a former CEO, to thank for encouraging Eastern Financial to begin taking in SEGs prior to the airlines' demise. "If it wasn't for DeRusso's efforts, Eastern Financial would have found itself in a really tight spot when Eastern Airlines closed up shop because we've depended on SEGs to increase our membership," said Herbert. Eastern Financial currently has an occupational charter and counts among its more than 153,000 members about 750 SEGs. In 1996, when the District of Columbia Appeals Court ruled against NCUA and AT&T Family FCU and slapped a field-of-membership expansion injunction on federal credit unions, Eastern Financial like many federal credit unions was left with the uncertainty over its ability to grow its membership in the future. After assessing the situation, the credit union's board of directors determined the CU's best course of action was to convert to a state charter. It applied for and was approved for a charter conversion. Then H.R. 1151 was passed. "We thought we were out of the woods," said Herbert, so Eastern Financial rescinded its conversion plan. Now, Eastern Financial FCU says it's facing another problem – competition with former federal credit unions/now state-chartered CUs such as Tropical Financial CU (formerly Tropical FCU), Miami, and Power1 CU (formerly FPL FCU), Hialeah -that have limited fields-of-memberships and are cutting into Eastern Financial's SEG market. "We're getting diminishing returns from our SEGs," said Herbert. Prior to Eastern Financial's application, the largest federal-to-state charter conversion in the state was for Fairwinds CU (previously known as Fairwinds FCU) in Orlando. The $566 million credit union converted in Oct. 1999. Nationwide, Eastern Financial is the third billion-dollar credit union to convert to a state charter in the last 12 months. Since 1997, there have been 12 federal-to-state charter conversions in Florida, according to Sharon Whiddon, financial administrator for the division of banking. Eastern Financial's application is the first the division has received this year. At press time, notice of Eastern Financial's application was scheduled to run in the Aug. 1 edition of the "Florida Administrative Weekly." The division will continue to process the credit union's application in the meantime, and Whiddon said her office will make its decision within 90 days. If Eastern Financial's plans go as expected, the conversion will give Florida 110 state-chartered credit unions. Herbert said Eastern Financial was still undecided what the new name for the credit union will be. Other federal credit unions that have converted to state-charters have added the word "financial" to use their name so they can continue to use the same acronym. Eastern Financial FCU's name already includes this word, but Herbert said the credit union would probably still want to retain the same acronym, "so anything's possible," he said. – [email protected]