Giant Texas CU Seeking To Convert To Savings Bank
In what would be the biggest conversion of a credit union yet, Community CU said last week it has applied to state and federal regulators to switch charters to a mutual savings bank.
Plans call for the $1.7-billion credit union-four times as large as the biggest conversion yet completed-to convert to a federally chartered thrift, then to sell stock to the public through a mutual holding company.
Gary Base, president and CEO of the 53-year-old credit union and a leading figure in the credit union community, said management and the board are convinced the thrift charter will provide it with more flexibility to enable growth. "We just think the option will present us better opportunities for where we're going as an institution. As you know, we're very active in the mortgage area and the business lending area; and to stay competitive you have to stay on your toes," said Base.
The conversion process, which will be guided by CU Financial Services of Portland, Maine, and the Washington-based law firm of Silver, Freedman & Taff, which have guided more than a dozen credit union conversions, is expected to take months, according to Base. "It's a slow process," he said. A member ballot, which will require a majority of voting members, is targeted for mid-year, he said.
Community CU has submitted applications to the Office of Thrift Supervision for a federal thrift charter; to the FDIC for federal deposit insurance; to NCUA to exit the federal deposit insurance system for credit unions (NCUSIF); and to the Texas CU Department to exit its state credit union charter, said Base.
Base said they have submitted the proposed member disclosures to NCUA for its required approval. Those disclosures must be sent to members 90 days, 60 days and 30 days in advance of the vote.
Harold Feeney, Texas CU Commissioner, confirmed that he received the Community CU application, which, he said, is "about 12 inches thick," and will tale some time to review it. "This is all new to us, so we're learning as we go along," said Feeney of his department's first application to convert to a mutual savings bank. Two other Texas credit unions have made the switch, Affiliated FCU and Share Plus FCU, but both were federally chartered.
The conversion by Base, who has chaired the Texas CU Commission since for the past seven years and has been a leading spokesman for credit unions on the national level, is expected to be a controversial one, especially considering the size of his credit union. Despite the conversion, Base said he remains a strong credit union supporter. "I'll always be a great credit union advocate. It's been a great charter for 52 years," he said.
Community CU was founded in 1951 to serve employees of Collins Radio Corp., and now serves 57 communities surrounding Dallas and has one of the broadest community fields of membership in the country, covering the population of Texas.
At least 25 credit unions have made the conversion to mutual savings bank, but the last two attempting the switch failed. Lake Michigan CU, in Grand Rapids, Mich., obtained a majority vote by the members late last year but failed to get the two-thirds vote required under state law. And Columbia CU, in Vancouver, Wash., obtained the required approval by members but the vote was overturned by NCUA which found voting irregularities and the board of the $600-million credit union abandoned the conversion attempt.