Beehive CU Is Exploring A Conversion To Bank Charter

SALT LAKE CITY - The $177-million Beehive Credit Union has told members it is "considering a plan of conversion" to a federal mutual savings bank.

Members were informed of the plan during a recent annual meeting, and a vote of the membership will be scheduled for "later this year," the credit union said.

At press time, according to a spokesperson for the Utah Department of Financial Institutions told the Credit Union Journal the DFI had not yet received any formal application for conversion from the credit union.

Telephone calls seeking comment from Beehive CU's management were not returned. The credit union did issue a press release stating that its board of directors was considering the conversion to a bank as a result of being "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 annual meeting that legislation enacted in 1999 affecting Utah's state charters has restricted its operations to the point of "unacceptable consequences" for the credit union. Ryan Laws, chairman of 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," he said.

In a released statement, Scott Jorgensen, CEO of Beehive Credit Union, said, "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."

The credit union did not say whether it had explored a federal charter, and at press time also had no statement on its website related to the conversion plan.

BCU's most recent 5300 report shows the credit union does not have a large portfolio of business loans, with four member business loans outstanding for a total of $683,219; six MBLs granted or purchased year-to-date for $231,813, and 12 Small Business Administration Loans outstanding for $281,384.

The View From The Utah League

Scott Simpson, president of the Utah League of Credit Unions, issued a statement saying "The Utah League of Credit Unions' primary concern here is education. Our policy states clearly that the credit union charter, either state or federal, is the charter of choice for consumers. What makes this process unique, however, is that ultimately credit union members are the ones that will decide their own fate. It is our ongoing hope that credit union members will understand fully the many consequences of a conversion vote." The league, which has for years been responding to aggressive attacks from the state's bankers, also issued a separate statement in which it said is position on conversions is that it " strongly believes that the member-owned, not-for-profit credit union charter is the charter of choice for providing the public with consumer-friendly financial products and services."

The statement also noted:

We also strongly believe that the issue of credit union charter conversions should be approached from the point of view of the MEMBERS of the credit union, since they are the owners of the institution.

"We understand that under current laws and regulations, credit unions face more restrictions on their operations than do mutual savings banks or commercial banks. ... However, research has confirmed that even with these greater restrictions, the credit union charter provides by far the best deal for credit union members. The primary driver of this greater benefit is the not-for-profit cooperative structure upon which is based the credit union tax exemption. Credit unions are able to offer a far better economic return to their members than would be possible for a stock owned bank or a mutual thrift.

"In other words, we cannot conceive of any circumstance under current law and regulation that members would be better off after a conversion to either form of bank charter.

"Although there may be operational advantages to the management of a credit union to have a bank charter, because the credit union exists for the benefit of the members, it is the responsibility of credit union leadership to preserve that benefit for the members."

FOR MORE RESOURCES

Read more about conversions at cujournal.com and searching the following bolded terms in the archive:

Utah Conversion Statement, for the full text of the Utah League's stance on conversions.

Conversion, for a variety of stories on credit union conversions to bank charter.

Democracy, bylaws, for a number of stories on membership voting rights.