Michigan League Preps Conversion Rules as Adams Labels Callahan Comments `Unfair'

PLYMOUTH, Mich. – Taking precautions against conversion problems down the road, the Michigan Credit Union League is now working with the state regulator on drawing up bank charter conversion disclosure rules for CU members and boards. “We don’t have any credit unions chomping at the bit now, but our Government Affairs Committee agreed that we should pursue communications on rulemaking procedures,” explained David Adams, president/CEO of the League who made his comments following remarks on CU to bank conversions by Linda Waters. Referring to last December’s rejection of a mutual savings bank conversion by Lake Michigan CU of Grand Rapids, Waters mentioned her willingness to work with the League on disclosure rules in remarks to the GAC during the League’s annual conference in Grand Rapids May 19. “She told the committee she would be happy to provide feedback on rules the League proposes,” said a spokesman for Waters whose office was pressured last December to help thwart any Lake Michigan CU conversion. Separately, Adams of the League defended CUNA Chairman Dick Ensweiler against complaints he has been less than aggressive in stopping conversions in his own state and on the national level. “I think the criticism is unfair,” said Adams referring to remarks by former NCUA Chairman Ed Callahan lambasting Ensweiler, who also is president/CEO of the Texas League, for failing to be a strong “fighter” in challenging the planned conversion of two large Dallas/Fort Worth CUs. “There’s an awful lot of armchair quarterbacking going on,” said Adams contending Callahan was out of line criticizing Ensweiler in remarks the Washington consultant made in a May 9 luncheon speech at NACUSO’s annual conference in Las Vegas. The fact is, said Adams, the Texas League has been a beacon of assistance and guidance to other Leagues in providing background material in meeting the conversion problem. “Every situation is unique,” said Adams a fact that Ensweiler has recognized and handled with skill. State leagues are in a difficult position trying to accede to the needs and demands of their membership and thus trade groups cannot be all “politics driven.” Callahan in his NACUSO speech warned that Texas remains the pivotal center of the conversion battle but unless the move is halted there, “it’ll be Katy bar the door.” Callahan also suggested that one way to stop the trend is for members “to sue the board of directors personally” since greed remains the motivating factor. In her comments to the Michigan League GAC meeting focusing on industry conditions, Waters said CUs continue to suffer from a less than robust economy in the state and that 25 CUs had delinquency ratios over 3%. “Twelve Michigan state chartered credit unions reported net loan charge off ratios over 1.5% while the aggregate average is .6%,” said Waters. In addition, earnings performance in Michigan “also remains relatively weak” with the average 2004 ROA at .75% with 50 reporting ROA below .20%. Regarding conversions and communication with Waters, Adams said the regulator is willing “to hear our views” though “there is no pressing timeline now.” Since there are now no conversion bids underway in Michigan, “we don’t feel urgency” and yet the League wants to be prepared. [email protected]