SALT LAKE CITY -
In late 2007, two members of Beehive Credit Union challenged the CU’s attempt to convert to a federal mutual savings bank in a letter to the OTS.
An attorney for the credit union later filed a response to that comment letter, and the regulator’s decision on the conversion has been pushed back to early next year.
On Sept. 10, Beehive CU filed an application with the Department of the Treasury’s Office of Thrift Supervision to establish a new institution known as Beehive Bank. The application was filed almost exactly six months after the CU told members in attendance at its March 3 annual meeting it was “considering a plan of conversion” to a federal mutual savings bank.
Members’ Response
In October, the website for the OTS said a decision on the application would be due Dec. 9, with a notation the OTS may extend that date if it requires more information from Beehive. The current decision due date is Jan. 23.
The Oct. 8 comment letter, filed by members Lori Christian-Chavez and Terielin Dial, as well as the response from Washington, D.C.-based attorney Richard S. Garabedian, both were obtained by the Credit Union Journal.
The comment letter by the members stated in its opening paragraph:
“…it appears that the statutory requirements contained in the Home Owners’ Loan Act of 1933 (HOLA) and as promulgated in the Office of Thrift Supervision (OTS) Regulations and Regulations [sic] will not be satisfied and, therefore, First Basin’s [sic] application to convert must be denied.”
The comment letter goes on to assert Congress enacted HOLA to charter federal savings and loan associations only where local home-financing institutions were unavailable or inadequate. The two members claim the OTS “has taken a questionable approach to demonstrate that a necessity exists for new federal savings bank charters with respect to conversions of banks and credit unions.” Specifically, the members said, quoting the OTS Applications Handbook: “OTS has assumed that the mere fact that the converting credit union was successful and needed in the community ‘demonstrate[s] that a need exists’ for its conversion to a savings bank.”
The two members state there is no “necessity” for a savings bank in Salt Lake, Utah and Washington Counties, where they allege Beehive will expand if it converts. “Beehive’s region has more than double the banks per capita than the state of Utah or the nation as a whole,” the letter asserts, adding: “Furthermore, new banking institutions in Beehive’s region are already opening faster than the population is growing…in the future, these three counties will probably need a new bank even less than they do now.”
The letter concludes: “Additionally, given the benefits afforded members of a credit union as compared to a savings bank, the conversion of this credit union would likely harm the members of the community who currently do business with or may in the future do business with Beehive. For the reasons stated, the application to convert should be denied.”
Attorney’s Rebuttal
The response letter by Garabedian alleged the members misread HOLA, and disputed the lack of need for a new bank in the three-county region. The attorney argued Beehive has operated as a credit union since 1954, “Therefore, the OTS is not acting arbitrarily in assuming the need for Beehive Bank based upon the successful existence of Beehive, as the comment letter suggests. Rather, the OTS is giving deference to its own policy and to the role that the DFI has played in approving and regulating the successful operations of Beehive for nearly half a century.”
Despite the presence of other financial institutions in the three-county area, Garabedian stated, “Beehive’s existing profitable operations indicate that Beehive Bank will have the management and other resources necessary to ensure that it satisfies the needs of the depositors and borrowers in the respective communities.”
Garabedian’s response letter concludes: “The Board of Directors is convinced that the Charter Change satisfies the ‘necessity’ requirement of the HOLA test, and therefore believes that the assertions made in the Comment Letter are not supported by the standards applicable to Beehive’s application. As a result, the Board of Directors believes that Beehive’s application with the OTS to convert to a federal mutual savings bank should be approved.”
‘Unacceptable Consequences’
In its March press release, Beehive CU’s board of directors said the possible conversion “is prompted by current state law restricting the ability of Beehive to expand membership and branch locations.”
Beehive’s board reportedly told its members during the March 3 annual meeting legislation Utah passed in 1999 has restricted its operations to the point of “unacceptable consequences” for the credit union. Ryan Laws, chairman of the $177-million, 22,000-member CU’s board, said state laws “are preventing us from filling out our product line and providing the convenience of branches our members are calling for. This can only be accomplished through a change in our organization.”
Beehive CU, which is not to be confused with an Idaho-based credit union of the same name, reported net income of $1,062,491 and capital of 9.05% for the quarter ended Sept. 30,
Scott Jorgensen, CEO of Beehive CU, said in the March release: “We believe in the credit union movement. However, until credit unions are given the regulatory relief necessary, we feel our hands are tied in providing our members with the convenience and services they want and deserve. A mutual federal savings bank charter is the best means to allow us to offer new and existing members more locations, larger business loans and more competitive financial services.”
