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Banks Look to Make Converts Of Credit Unions
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One executive who saw her credit union through a conversion said personal gain was not a factor in the decision.
"I got stock, but I've got to work for that stock," which vests over seven years, said Hoveland, of Kaiser. And she no longer gets a cash bonus, she added.
Hoveland said her institution opted to convert to a bank only after exploring other alternatives.
It considered becoming a community credit union but found that impractical. Merging with another credit union might have worked, but it would have cost Kaiser CU's employees their jobs, she added.
The board decided that the best option was to become a mutual savings bank. It did that and is now a mutual holding company with a stock bank subsidiary. Capital has increased from $199 million to about $800 million; there are now five branches instead of two, "and more on the way."
The stock, originally sold at $10 a share, rose quickly to $14 but now trades at about $12, Hoveland said.
In some recent cases, the NCUA has challenged management's presentation of the issues to members in a proposed conversion. In one of the recent Texas cases -- 53-year-old Community Credit Union, now ViewPoint Bank, of Plano -- the agency argued that important information was not prominently enough displayed in voting materials sent to the credit union's 220,000 members. However, a court found for the management.
But NCUA Chairman JoAnn Johnson said recently, "Unequivocally, I believe that members have the choice of charter." But she added, "It should be equally clear that consumers need to have accurate information, and it can't be misleading."
It's particularly important today "when you have credit unions that have upwards of $200 million in capital on the table" and "a minority can vote to change that," she added.
One issue the NCUA and others are debating is the use of incentives, such as raffles and cash awards, to get credit union members to vote. A concern is whether they can be used to encourage early votes, perhaps before opposition could mobilize. Another is whether they lead members to think that voting with management could increase their chances of winning some sort of prize.
The NCUA last month effectively rejected the methodology of DFCU Financial of Dearborn, Mich., which, according to the Michigan Credit Union League, used a number of $5,000 cash prizes to encourage voting.
