CU Bank Vote Deadline Approaches

November 24, 2004
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GRAND RAPIDS — The day of reckoning is fast approaching.

All the votes from members of Lake Michigan Credit Union on whether the entity should convert to a federal mutual savings bank must be in by the middle of next week.

A vote for converting to Lake Michigan Mutual would uphold the recommendation made by the credit union's management and board of directors. A vote against a conversion would leave LMCU as the state's largest credit union.

The ballot deadline is Dec. 8 and a special membership meeting will be held that evening. The result of the vote could be known as early as Dec. 15, but certainly by Christmas.

LMCU filed a "new institution" application with the Office of Thrift Supervision (OTS), a division of the U.S. Treasury Department, in April. Should a majority of the credit union's members agree to the change, the earliest that OTS could approve the transformation would be Jan. 26.

Normally it takes OTS 30 days to review an application. If the bureau asks for more information, then another 45 days are added to the review process.

But first OTS and the National Credit Union Administration must approve the methods and procedures LMCU used in the membership vote. LMCU officials said they followed the voting standards set by the Michigan Credit Union Act.

Credit union officials also filed applications in April with the Federal Deposit Insurance Corp. and the Michigan Office of Financial and Insurance Services (OFIS). OFIS has already given Lake Michigan preliminary approval for its conversion plan.

The credit union, however, still needs final approval from OFIS.

Regulators have asked LMCU management to keep a low profile during the application process, so there hasn't been any comment coming from them about the process or what happens after the vote is known. Credit union officials, though, made their reasons known for favoring the charter change long before they filed the necessary applications.

In short, they feel LMCU has grown too large to remain a credit union. In 2003, Lake Michigan was tops in earnings nationwide in a field of 9,500 credit unions and LMCU is roughly 40 times larger than the median-sized credit union. Since Sandra Jelinski became president in 2001, assets have grown by 300 percent and now top $1 billion.

"Because of our success, we are at a point where regulations on credit union capital will require us to stop growing, turn away new members, lower deposit rates, raise borrowing rates and reduce services," said Jelinski earlier this year.

"This means we need more regulatory capital to continue our growth, a common problem for many successful credit unions."

Prior to filing the applications, Jelinski said changing the charter would give members competitive rates on deposits and loans, fewer fees, more branch and ATM locations, and more product and service options.

Jelinski added that the community would benefit from a change, too. Lake Michigan Mutual, the name LMCU filed with OTS, would fall under the Community Reinvestment Act, which requires banks to serve the needs of low- and moderate-income individuals.

A bank charter would allow Lake Michigan to make loans to whoever qualifies, offer membership to any individual or business, have branch offices throughout the state and nation and offer compensation to its board of directors.

A holding company will be formed if members approve the change and 49 percent of the new company's stock will be made available for purchase — first to members, then the public. The Lake Michigan Mutual holding company would retain 51 percent of the shares.

Should members support the conversion, Lake Michigan would lose its tax-exempt status.    

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