Two Large CUs Seek to Defect from Federal Charter

Two billion-dollar plus credit unions are in the process of defecting from the federal charter to state charters.

$1.9 billion Central Florida Educators Federal Credit Union (Lake Mary, FL) and $1.1 billion Potlatch No. 1 Federal Credit Union (Lewiston, ID) are in the process of converting to state charters.

Both credit unions stated that switching to a state charter will give them a greater ability to expand.

The Orlando Business Journal is reporting the Central Florida Educators wrote its members that by switching to a state charter would allow it to expand beyond central Florida. The credit union will also change its name to Addition Financial on May 1.

Potlatch No. 1 Federal Credit Union in its conversion notice stated that "a state charter will allow us to serve persons in geographic areas we desire, which are not currently permissible as a federal charter."

Potlatch No. 1 FCU estimates after switching from a federal charter to a state charter it will save almost $100,000 on regulatory fees. However, the credit union would be subject to state income taxes.

Potlatch No.1 FCU has already received preliminary approval from the Idaho Department of Finance. Members of Potlatch No. 1 FCU voted on the conversion at the end of January, but the results of the vote have not been disclosed. The National Credit Union Administration (NCUA) also needs to approve the charter change.

These defections are likely to set off alarm bells at NCUA.

Read the Orlando Business Journal.

Read The Lewiston Tribune.