SAN JOSE, Calif.-Technology Credit Union has instituted a full-court press on its members in hopes of getting approval for its proposed charter conversion to a mutual savings bank later this year.
The $1.6-billion CU recently sent a packet of conversion materials to its members, a copy of which was obtained by Credit Union Journal. Included is a notice of a special meeting of members to be held here on Sept. 12.
Members are informed the charter change "may not be completed until approved by a majority of those members who vote."
As regulations require, Technology said it would send the notice three times-90, 60 and 30 days prior to the special meeting. Only the final notice will contain a ballot for voting.
The credit union's explanation for why it says it needs to convert to a mutual savings bank fills nine pages. In the introduction it states, "We believe we are once again at a point where thoughtful action is required to secure a bright future for our members and our organization," the statement continues, "which is why your Board of Directors approved the Charter Change proposal and is now asking members to do the same."
What The 'Due Diligence' Has Found
The statement to members says the board conducted "extensive due diligence regarding the Charter Change," and cites the following reasons for needing to make the charter change:
* Expansion of business banking operations. The packet states that "the member-owned mutual savings bank charter will provide us with greater flexibility than our existing credit union charter for serving the needs of our current and future business community members." The document goes on to cite the different limits for CUs and MSBs on business lending, quoting NCUA Chairman Debbie Matz's June 16, 2011, testimony before a Senate Committee, urging lifting of MBL cap.
* Elimination of field of membership restrictions. The packet notes that Tech CU's current FOM consists of six counties. "The Board of Directors and management believe that outside the credit union industry, very few people understand what a credit union is, but the basic idea of a bank is understood universally."
* Increasing access to capital. The packet states that Tech CU may require additional capital in the future for a "host of reasons." The "primary way" to access capital is "to sell stock," the statement reads. "The Charter Change to a member-owned mutual savings bank puts us in a position to convert to stock form if and when the Board of Directors and management believe that is the proper course of action." Later in the same paragraph it states, "having the ability to convert to a stock charter in order to raise capital in the future is a significant advantage..."
FDIC Vs. NCUSIF
* Changing to FDIC insurance. The packet states that "a well-managed and well-capitalized credit union, such as Tech CU, is penalized under the NCUSIF system where it pays assessments at the same rate as a poorly managed, undercapitalized credit union."
* Preservation of member service philosophy. The materials distributed to members state that a "conversion to a MSB will mean, "better control over the maintenance of our superior member-service culture, since we believe the member-owned mutual savings bank charter provides well for our continued growth and profitability."