But soon after the conversion plan was announced Feb. 16 and approved by HarborOne's board on March 21, it sparked an industry-wide debate and criticism from some credit union leaders.

A former NCUA attorney, Steve Bisker in Washington, D.C., disputed HarborOne's reasons for mulling the move, saying HarborOne was at only 20% of its member business lending cap, based on his examination of HarborOne's preliminary online notice filed with regulators.

“The stated 'consequences of conversion' are inaccurate or misleading at best,” Bisker told Credit Union Times in March, pointing to what he said are inconsistencies on HarborOne's stated need for more capital to lend and its prospects for increased membership under a mutual charter.

Although HarborOne has increased its total loan portfolio from $1.3 billion in 2008 to $1.5 billion in 2011, its loan income has decreased from $73 million to $67 million in the same time frame, according to the credit union's NCUA financial reports.

Its investment income also has fallen significantly from $9.6 million in 2008 to $4.1 million in 2011. What's more, its net income has dropped by 50% from $14.8 million in 2009 to $7 million in 2011, according to HarborOne's financial statements filed with the NCUA.

Industry analysts argued credit union frustration over NCUA assessments coupled with the inability to raise capital and expand business lending to compete with banks apparently helped spur HarborOne CU's proposal to convert to a bank.

“Margins have been pretty thin for awhile now and credit unions see no way to build capital and they don't like paying those assessments while seeing so much uncertainty ahead,” Alan Theriault of Portland, Maine, a conversion specialist, told the Credit Union Times in February. He also said that at least one billion-dollar CU was ready to make the switch and so were a handful of $200-$400 million CUs.

Richard S. Garabedian, a partner at the Luse Gorman Pomerenk & Schick law firm in Washington, D.C., said, “I'd say the corporate crisis and the sense of many credit unions feeling boxed in” by the onslaught of new regulations and tighter NCUA exam restrictions triggers moves like HarborOne.

Except for the $1.4 billion Technology CU of San Jose, Calif. and a few smaller CUs with conversion plans, there has been a lull in activity, but the trend may be about to change, Garabedian said in a Credit Union Times article in February. Nevertheless, members of Technology CU overwhelming rejected to convert their institution to a mutual bank in September. Of the total 18,000 votes cast, 14,000 voted no to the conversion and 4,000 voted in favor of it.

Blake recently told the Boston Business Journal that he is getting “very positive feedback” from members about the conversion proposal.

HarborOne CU had said it hoped the conversion would have been completed by end of this year. However, the Boston publication quoted bankers and industry groups that criticized the NCUA for deliberately slowing down the conversion process.

NCUA responded by saying the entire process usually takes about a year to ensure that the credit union's conversion complies with all regulations.

.