Showing posts with label Charter Choice. Show all posts
Showing posts with label Charter Choice. Show all posts

Tuesday, July 22, 2014

Monterey CU Seeking a Mutual Bank Charter

Credit Union Times is reporting that privately-insured Monterey Credit Union is in the process of switching to a mutual savings bank charter.

The credit union cited limitations in making business loans as a reason for the charter conversion.

The credit union has applied to the California Department of Business Oversight for a mutual savings bank charter and to the FDIC for federal deposit insurance.

Ballots and information on the charter conversion were mailed to members on May 31 with ballots due by July 25.

Read the story.

Tuesday, April 8, 2014

NCUA Can Immediately Take Action on Charter Choice and Disclosure

ABA submitted a Statement for the Record for an April 8, 2014 hearing before the House Financial Services Committee.

While the majority of ABA's Statement for the Record addresses a number of regulatory issues ranging from bank examinations to the new mortgage rules, it also focused on two issues that the National Credit Union Administration could immediately address -- charter choice and disclosure.

On the issue of charter choice, ABA wrote:

Many credit unions today have determined to mirror everything a bank does and the National Credit Union Administration (NCUA) seems anxious to accommodate those desires rather than protecting the expansion of the credit union subsidy paid by taxpayers and ensuring it is appropriately directed. If credit unions want to act like banks, there should be a simple, fair and workable path to convert to a mutual bank charter—a process that NCUA has thwarted at every turn. The process must be straightforward and predictable, without NCUA’s patronizing proposition that credit union members do not understand their ownership rights and interests in a conversion—and if they did, would never vote for a conversion. This is NCUA protecting its turf and not protecting taxpayers.

With regard to transparency, ABA wrote:

Most tax-exempt organizations, including universities and hospitals, must disclose the compensation of senior officials to the Internal Revenue Service in the Form 990—a form that has become an important tool for determining the transparency and accountability of tax-exempt organizations. By publicly disclosing this information, the Form 990 fosters good corporate governance as it attempts to ensure that the tax expenditure is being appropriately employed.

Federal credit unions should be required to file Form 990 information return or its equivalent just like state-chartered credit unions and most other tax-exempt institutions. These are actions that can and should be done by NCUA today. Expanding the public’s opportunities to review executive salaries would promote improved corporate governance and greater credit union accountability. It would inform Congress, taxpayers, and credit union members about whether this valuable tax subsidy is going towards the credit union mission or is subsidizing credit union management.

Read the full Statement for the Record.

Thursday, March 13, 2014

Bank Switching to CU: Extrememly Difficult, If Not Impossible

In a letter to House Ways and Means Committee Chairman Dave Camp, the National Association of Federal Credit Unions (NAFCU) wrote that the "[n]ext time a banker complains to you about credit unions, we would urge you to ask them if they have looked at converting to one."

However, this disingenuous and unscrupulous statement cannot go unchallenged.

While I believe in charter choice, there are many issues that make converting from a bank to a credit union extremely difficult, if not impossible.

One complication deals with common bond or field of membership. Banks are open to the public, while credit unions have a defined field of membership.

While a small bank in a limited geographic area may be able to meet the field of membership requirement, a larger bank would have difficulties.

Another common bond operational issue -- would the converting bank have divest part of its customer base to comply with the field of membership requirements?

I guess there are ways around the field of membership issue. The converting bank could form an association or become a partner of the American Consumer Council so as to qualify all its customers as members. But this just makes a mockery out of the field of membership requirements.

In addition, most people with any financial acumen would note the relative difficulty of this transaction for a stock entity.

A stock organization converting to a credit union would have to first compensate its shareholders for their ownership interests. This would effectively wipe out the capital of the entity that is converting to a credit union.

On top of that, bank balance sheets are fundamentally different from credit unions. Many banks are commercial lenders, while most credit unions are consumer lenders. A bank converting to a credit union would most likely exceed the aggregate member business loan cap and would need to shrink its business loan portfolio most likely by shedding these loans (probably at a loss) to comply with the law.

Furthermore, banks hold assets that credit unions are not allowed to hold. Once again, a requirement to divest these assets could mean that the bank is selling these assets in an unfavorable environment at fire sale prices.

I think most people would agree that an entity that has no capital and is divesting assets at a possible loss would pose a significant threat to the National Credit Union Share Insurance Fund.

Do you think the National Credit Union Administration is going to charter such an entity?

The last point I would like to make is proposing that a taxpaying bank switch to a tax-exempt credit union could put the credit union tax exemption at risk.

Friday, December 6, 2013

Suncoast Converts to a State Charter; Will Expand Field of Membership

Suncoast Schools Federal Credit Union will convert to a state chartered credit union and expand its field of membership.

A preliminary vote total shows 77 percent of the voting members of the $5.4 billion credit union approved a proposal to convert from a federal charter to a state charter.

In justifying the change from a federal to state charter, the credit union stated that the state's fields of membership rules are more flexible than the federal rule allowing individuals who live within the 15 counties that Suncoast currently serves to be eligible to join the credit union. In addition, Suncoast will is add Sarasota and Highlands Counties to its footprint.

The credit union also noted that the straightforward eligibility criteria provided by the state charter will provide the credit union with greater clarity and consistency in its marketing message.

The credit union noted that it will incur a one time expense associated with the conversion of almost $1 million.

The conversion to a state charter should take place within 90 days and the credit union will be called Suncoast Credit Union.

Read the story.

Monday, July 1, 2013

HarborOne Transitions to a Co-operative Bank Charter

HarborOne Credit Union's conversion to a Massachusetts co-operative bank is officially complete.

The credit union will operate under the name HarborOne Bank starting today.

The institution recently received regulatory approval for FDIC insurance and in April the National Credit Union Administration notified HarborOne that it complied with the requirements of the NCUA's conversion regulations.

HarborOne will be with largest co-operative bank in New England, with $1.9 billion in assets.

Monday, April 22, 2013

HarborOne CU Conversion Update

HarborOne Credit Union today announced that the NCUA Office of Consumer Protection has notified HarborOne that it complied with the procedural requirements of the NCUA’s conversion regulations. HarborOne also received notification from the Massachusetts Division of Banks that it finds no reason to disapprove of the methods by which the membership vote was taken and that the vote is approved. Additionally, HarborOne received notification from the FDIC that its application was officially accepted for processing. HarborOne must wait for approval for FDIC insurance before completing its conversion to a Massachusetts co-operative bank.

Tuesday, March 19, 2013

Outrageous Cost of Charter Choice

It is estimated that HarborOne Credit Union spent $2.4 million to switch to a mutual bank charter. According to an American Banker story, this included $750,000 for legal fees, $520,000 for printing and postage, $260,000 for public relations and $235,000 for signage and stationary, among other things.

But why should a change from a credit union to a mutual bank charter cost so much?

The answer is simple -- NCUA's onerous regulatory burden, which runs up the cost of such charter changes.

Monday, March 18, 2013

HarborOne Members Vote to Become a Mutual Bank

HarborOne Credit Union members voted by a large margin to approve a charter change that will allow the credit union to become a mutual cooperative bank.

HarborOne President and CEO James Blake told The Enterprise on Monday that 62 percent of the 22,433 votes cast were in favor of approving the change to a bank.

Read the story.

Tuesday, February 26, 2013

Hearing Video on Paying Directors

Legislation has been introduced in Tennessee and Washington that would permit state chartered credit unions to pay their directors.

Paying directors is a controversial issue within the credit union industry. Some within the credit union industry argue that credit unions are becoming increasingly complex and need to be able to compensate directors to attract qualified people to serve on the board. However, others argue that a volunteer board sets credit unions apart from banks.

Below is the February 19th video of a hearing in the Tennessee Senate Commerce and Labor Committee (about 31 minutes in length).

The hearing had several witnesses including the former president of Southeast Financial Credit Union, who spoke in favor of the bill. When asked why not become a bank if he wanted to pay his directors, he spoke about the onerous burden that NCUA imposes on credit unions seeking to convert to a bank charter.

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Thursday, February 21, 2013

Newspaper Endorses HarborOne's Conversion to Mutual Bank Charter

The Enterprise News has endorsed Brockton-based HarborOne Credit Union's conversion to a mutual cooperative bank.

In its endorsement, the paper writes:
"It will be good for the economy. It would allow for more commercial lending, more branches and more jobs. It would let HarborOne expand its lending far beyond what is now possible. It also will raise millions of dollars in taxes because banks pay taxes, while credit unions don’t." (emphasis added)

Read the paper's editorial endorsing the conversion.

Sunday, February 10, 2013

Interview with HarborOne's CEO on Conversion

The Enterprise recently interviewed James Blake, president and chief executive officer of Brockton-based HarborOne Credit Union, on the credit union's attempt to switch its charter to a bank.

Read the interview.

Friday, February 8, 2013

It's None of Your Business!

That was the response of the Oregon credit union regulator to a 1994 interim final rule issued by NCUA on credit union conversions to non-credit union status.

The regulator was incensed by NCUA's arrogance and pointed out that if the members democratically voted to change charters, so be it.

I think there are credit union managers and regulators that today share that same sentiment with Oregon's CU regulator and would love to tell NCUA to mind its own business.

Read the letter below.

Tuesday, January 29, 2013

FOIA Appeal Denied

The National Credit Union Administration (NCUA) denied a Freedom of Information Act (FOIA) Appeal for all communications (for example, letters, e-mails, faxes, telephone logs) associated with the following individuals -- Carlos Rodriguez, Robert (Bob) Marinace, Paul Davis, and Paul Popescu -- regarding Technology Credit Union’s conversion to a mutual savings bank charter. These individuals were actively opposed to Technology's conversion.

However, NCUA cited exemptions 5, 7(C), and 8 of the FOIA to support its withholding this information. The agency does not confirm or deny the existence of this material.

In denying the FOIA Appeal, NCUA, for example, stated that there is "no public interest in the release of the requested material." NCUA wrote that there was no allegation of wrongdoing with regard to any official actions taken by the agency.

Furthermore, the agency stated that given the narrow scope of the FOIA, a partial redaction would not protect the personal privacy interests of these individuals.

In addition, the agency stated that Exemption 8 allows it to withhold information "contained in or related to examinations, operating or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions." The agency notes that the "receipt and disposition of communications ... falls within the scope of exemption 8."

It seems to me that the agency has taken an overly broad interpretation of the FOIA exemptions to suppress the disclosure of information that might be embarrassing to the agency, if made public.

This failure to disclose its communications with these individuals who actively opposed Technology's conversion adds further credibility to suspicions that this agency is inherently biased against credit unions exercising their rights to charter choice.

Read the January 15, 2013 denial letter (click on images to enlarge).

Wednesday, December 12, 2012

NCUA's Denial of FOIA

On October 1, I filed a Freedom of Information Act (FOIA) request with NCUA regarding all communications the agency had with certain individuals that opposed Technology Credit Union's conversion to a mutual savings bank charter.

Almost two months later, NCUA denied my request. NCUA stated that the disclosure of these communications "would constitute an unwarranted invasion of personal privacy."

Below is NCUA's November 29 letter (click on the letter to enlarge).

Monday, November 26, 2012

Thrivent Financial Bank Becomes a Credit Union

The National Credit Union Administration (NCUA) has chartered Thrivent Federal Credit Union (FCU), which has acquired certain assets and liabilities formerly held by Thrivent Financial Bank.

The new credit union is sponsored by Thrivent Financial for Lutherans, a fraternal benefits society. Thrivent FCU will have approximately $500 million in assets. Thrivent Financial Bank’s 47,000 clients will become member-owners of Thrivent FCU upon the transfer of their accounts. The credit union will have a potential membership of 2.5 million members nationwide.

In addition to NCUA, the conversion was approved by the Federal Deposit Insurance Corporation, the Federal Reserve and the Office of the Comptroller of the Currency.

Read the press release.

Wednesday, October 17, 2012

Wirz: NCUA Charter Conversion Rules An Exercise in Government Abuse

Earlier this week, I wrote that NCUA's conversion rules needed to be re-examined.

Adding fuel to the fire is Henry Wirz's scathing commentary on NCUA's role regarding credit union conversions in the October 15th edition of Credit Union Journal (paid subscription).

Henry Wirz, the CEO of SAFE CU in North Highlands, CA, wrote that NCUA's rules governing the charter conversion process are "an exercise in government control." He denounces NCUA for "government overreach and abuse of authority."

Wirz derides NCUA for making "it possible for vigilante justice to rule" the conversion process.

Wirz states that NCUA has made a mockery of the credit union principle of democratic governance.

Monday, October 15, 2012

NCUA's Role in Conversion Process Needs Scrutiny

On December 13, 2005, Representative Jeb Hensarling (R -TX) requested that the Government Accountability Office (GAO) investigate how the National Credit Union Association (NCUA) addresses the conversion of federally insured credit unions to mutual savings banks.

Representative Hensarling requested this review after two Texas credit unions requested redress from a federal court in order to complete their conversions.

For those individuals not familiar with the issue, NCUA had invalidated the conversion votes of the two Texas credit unions over how a single two-sided sheet of paper was folded as part of the mailing to the credit unions' memberships.

Representative Hensarling in his letter posed 3 issues that he wanted the GAO to examine:
  • Whether the NCUA’s actions conform with, or exceed, the powers granted by the 1998 Credit Union Membership Authorization Act (CUMAA) which grants the NCUA the authority to oversee the methods and procedures of a conversion vote.
  • Whether the NCUA’s rules and guidelines for conducting a conversion are “no more or less restrictive than that applicable to charter conversion by other financial institutions,” as required by law.
  • Whether the behavior of the NCUA in overseeing conversions acts as an undue hindrance on the ability of credit unions to convert.
Regrettably, the GAO did not act on his request.

Over the last 7 years, NCUA obstructionism has only become worse, making it very difficult, if not impossible, for a credit union to exercise its right to change charters.

It seems the time is right to examine NCUA's tyrannical role in the conversion process.

Friday, September 21, 2012

Technology CU to Remain a Credit Union

An overwhelming majority of Technology Credit Union’s members who voted opposed the credit union’s plan to switch to a mutual savings institution charter.

According to the credit union's press release, approximately 25 percent of eligible members voted, with nearly 77 percent of those voting against becoming a mutual savings institution.

Technology Credit Union expressed frustration with the regulatory process and rules governing how a credit union can communicate with its members during the conversion process.

Barbara Kamm, President and CEO of Technology Credit Union stated:

“Members at the special meeting voiced frustration, saying we did not make a compelling case for charter change. We, too, are frustrated that we were unable to communicate our views effectively and in the open manner we would have preferred because of the regulatory process and the related rules that govern how credit unions can communicate about charter change with their members.”

Read the press statement from Technology Credit Union.

Monday, July 23, 2012

Not a Credible Threat

Vermont State Employees Credit Union (VSECU) is considering whether to switch from a state to federal charter, if the state regulator denies its appeal of a cease and desist order over the use of the term "bank" in its advertisements.

But I think VSECU is bluffing.

VSECU, as best as I can tell, has a hybrid charter. Its field of membership includes individuals who live and work in the state of Vermont, but also includes other select groups.

However, the Federal Credit Union Act does not permit such hybrid charters. A federal credit unions must have one of the following common bonds -- single common bond, multiple common bond, or community common bond.

In addition, the Federal Credit Union Act requires a community charter to be local and well-defined. NCUA's chartering manual explicitly states that although state boundaries are well-defined, a state does not meet the local requirement.

In other words, VSECU could not keep the state of Vermont as a community charter, if it switched charters.

Therefore, switching to a federal charter would require VSECU to make substantive changes to its field of membership.

It is doubtful that the benefits associated with using the term "bank" in its advertisement would outweigh the cost associated with changing to a federal charter.

VSECU is hoping that the state regulator will believe its threat; but I believe the state regulator should call VSECU's bluff, as it is not credible.

Wednesday, July 18, 2012

Opposition to Technology Credit Union's Conversion

Credit Union Times is reporting that Carlos Rodriguez has launched a Facebook page in opposition to Technology CU’s conversion to a mutual bank charter.

In addition, Rodriguez has notified the credit union that he is asserting his right under the NCUA's charter conversion procedures to have the credit union email his objections to the proposed conversion to other members.

The article states that Rodriguez joined Technology CU in April and identifies Rodriguez, as an entrepreneur and former credit union employee. The article notes that Rodriguez joined Technology CU because he wanted to do business with a credit union in San Jose, where he was starting a new firm. But he did not open a business account at the credit union, when informed that Technology CU was switching to a mutual savings bank charter.

So, who is Carlos Rodriguez?

Although the Facebook page that he created did not provide any info about him and he hid his image with a broken heart, when I googled "Carlos Rodriguez and San Jose and Credit Union," I came across a Linked In page for a Carlos Rodriguez, who describes himself as a credit union advocate.

His Linked In page says that he worked for four credit unions -- Santa Cruz Community Credit Union, Camino Federal Credit Union, Eagle Community Credit Union, and Water and Power Community Credit Union -- in various marketing positions.

Rodriguez's Linked In page also says he is the publisher of CU Planet.

Interestingly, the CU Planet website says that he lives in Southern California, not the Bay Area. However, he previously lived in Santa Cruz County, which allowed him to join Technology CU.

So, we have a credit union advocate joining a credit union in April that was in the middle of process of converting to a mutual savings bank.

Something does not smell right about the timing of his joining of Technology Credit Union.

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