TALLAHASSEE, Fla. – If everything goes according to plan, one evening in October the $161 million Sunshine State Credit Union will close its doors as a credit union and re-open them the next day as Sunshine State Bank. "I think that is the time frame I have in the back of my mind," said CEO Mark LeCain. "We expect to have the approvals in hand by the fall." Should everything happen as LeCain expects, Sunshine State will be the 21st credit union in the country to change its charter independently (as opposed to through merger) with a mutual bank. According to CU Financial Services, the leading consulting firm for credit unions changing charters to banks, three more credit unions have pending charter changes, including the $173 million Share Plus FCU, headquartered in Plano, Texas, the $131 million Postal Community CU, and the $1 billion Lake Michigan Credit Union, headquartered in Grand Rapids, Michigan. Share Plus has had its applications approved by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation and will hold a special meeting to finalize its voting on the charter change on July 23. Lake Michigan has applications pending with the two Federal agencies as well as with its state regulator. Six credit unions have changed to bank charters through merging with mutual banks. LeCain estimated that roughly 150 members attended the special meeting on June 30 which completed the voting process. About 12 individual members spoke, LeCain reported, about 2-1 against the change, mostly speaking out of fear that the credit union would alter its services because of the change. About 3,600 members, or 18% of the credit union's 20,000 members, voted in the election, LeCain reported. Of the members who voted, 62% voted yes and 38% voted no, he added. That works out in terms of total membership to roughly 7% of the 20,000 members voting no and 11% yes, he added. LeCain characterized the move as an effort to obtain access to the capital markets and said that if Sunshine State had been able to do that it would have remained a credit union. He said that Sunshine State keeps many of its services free to its members and that additional capital would serve to help keep those services free. As of March 31, according to NCUA data, Sunshine State's capital position lagged its peers. The agency lists the peer average at 10.69 and Sunshine State's at 8.48, which is lower than the 8.80 which the credit union posted in March 2003. The credit union's capital ratio fell steadily throughout 2003 to hit 8.33 in December. Sunshine State was chartered in 1952 to serve primarily state employees. The field of membership now includes individuals and their families if they're employed by or retired from city, county, state or federal government in Florida; or are with commercial or industrial firms that don't have a credit union. LeCain said that three of the credit union's former directors spoke at the meeting and that other long-standing members had approached the credit union with concerns, but that the concerns had primarily addressed their accounts and what the change might mean. Some of the members had expressed concerns about the credit union becoming a bank, LeCain reported, since they said they purposefully joined a credit union and not a bank and were "dismayed" to find out about the change. Mickey Moore, a Sunshine State member, told the Tallahassee Democrat that he had opposed the charter change because of fears that, as a bank, how the institution did business would have to change. "Credit unions were founded based on people helping people," Moore told the Democrat. "My experience is that we would loan people money who had worked at the state for 20 years, who may have had questionable credit scores. But we would give them $1,000 and $5,000 because we knew they would pay us back. In a credit union we could do that. But now, it's the shareholders' money and there you have to follow guidelines and procedures." LeCain said that once it became a bank, the credit would pursue an initial public offering of stock under a mutual holding company structure that allows the institution to keep its mutual status and still allows it to obtain capital. Mark Ivester, spokesman for the Florida Credit Union League said the League had been disappointed by Sunshine State's decision but didn't think it had any place coming between members and their credit union. He also said that the League considered the new CU Regulatory Improvements Act (CURIA) to contain the sorts of improvements to credit unions' capital regulations that credit unions under capital pressures need. The NCUA must still certify the vote within 10 days from the 30th and the OTS and FDIC also have to approve the charter change. -

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