Two More CUs File For Federal Thrift Charter; May Be First Among Next Group To Jump Charters

ARLINGTON, Va. – Two more credit unions have filed applications with the Office of Thrift Supervision to become federally chartered mutual thrifts. Share Plus, a $161 million federal credit union with 20,000 members is headquartered in Plano, Texas, and filed on December 1. Sunshine State Credit Union, a $150 million state chartered credit union with 18,000 members is headquartered in Tallahassee, Florida, and filed on November 21. That brings the total number of credit unions which have either become thrifts or who have merged with banks or who have filed to become thrifts to 29. Neither credit union’s members have learned, formally, about their institutions filing to convert. Both institutions are waiting for NCUA to approve the disclosure notifications they will send to their members. When asked whether they plan to convert to a stock issuing institution, Craig Barnes, CEO of Share Plus, said his institution had no plans to do so. But Mark LeCain, CEO of Sunshine State, wouldn’t close the door on that option. “I think that will be one of the options open once we become a mutual thrift,” he said. Each credit union cited some of the same restrictions in their charters that, they said, led them to believe changing to a mutual bank would be useful. Barnes said that increasing numbers of his members had been asking about member business loans in recent years and said the inability to make these loans into the future had been one of the reasons for the change. He also said his institution looked forward to making more and longer term mortgage loans than it could under the current charter. But he also acknowledged that Share Plus had not made any member business loans as a credit union. NCUA’s records confirm this, and show as well that the credit union has almost $86 million in outstanding real estate loans, in both fixed and adjustable rate, and made 573 real estate loans in 2003, as of September 30. Fifty-six of those were fixed rate first mortgage loans. Barnes reported that the move to change charters had been the result of a two-year planning process that had focused on what moves the credit union would have to make in the future to better serve its members. He also made it clear that Share Plus would not have moved forward with the idea without first getting the backing of the group’s major sponsors all of whom, he said, encouraged the credit union to make the move. Share Plus began in 1958 as Dallas-based Frito Employees Federal Credit Union and grew as its sponsor merged and grew with other firms. Now the credit union’s field of membership includes employees of Frito-Lay, Inc., YUM! Brands, Inc., A&W Restaurants, Inc., KFC Corporation, Long John Silvers, Inc., Pizza Hut, Inc., Taco Bell Corp., and various parts of PepsiCo, in addition to roughly 50 Dallas area SEGs. In contrast LeCain said that the topic of changing charters had been a possibility for his institution since the late 1990′s. “I can remember planning sessions from years ago when the question `would we still be a credit union five years from now’ would be on top of the list of possibilities,” he explained. Sunshine State, like Share Plus, would like to make more member business loans and more 30-year mortgages, according to LeCain. But, like Share Plus, Sunshine State only has one MBL on the books as of September 30, for $111,182 and did not book that loan this year. NCUA data also shows that the credit union has $49 million in real estate loans and that it booked 221 loans as of September 30. Of those, 65 were fixed rate first mortgages. LeCain explained that the credit union’s history and the fact that it has pretty close to a state-wide charter already precluded the credit union solving some of its problems with a community charter. Currently Sunshine State has a field of membership that includes current and retired city, county, state or federal government employees in the state of Florida; employees of commercial or industrial firms that do not have a sponsored credit union, and members of “associational groups.” Tony Ward Smith, a noted credit union consultant and opponent of credit unions converting to thrifts estimated that the two newest credit unions might represent the leading edge of a wave of conversions, spurred in part by the work of consultants convincing credit union boards to make the changes and by the fear that political pressure may be building to stop the practice. “We may see 30 or 40 more of these coming soon,” he said, “as more credit union boards of directors are told that they can do this and fear not being able to in the future.” But Alan Theriault, whose firm CU Financial Services has helped most of the credit unions that have made the jump to thrifts, forecasts no more than a dozen credit unions converting in 2004, and that the end number may be as few as five. “I would be happy if we saw five next year,” Theriault said, adding that he has been puzzled that more institutions haven’t made the change before it might become more difficult to do so. “There are lot of people who just haven’t made up their mind yet.” -