An analysis conducted by CUNA Chief Economist Bill Hampel indicates that the 73,000 member, $1.5 billion Technology Credit Union will face higher costs of deposit insurance if it converts to a bank charter than if it remains a credit union, even with the CU's share of the NCUA's corporate credit union stabilization plan included.
Technology CU posted a notice to its members about a potential charter change earlier in October and has scheduled a board vote on Nov. 2 to formally consider making an application.
In order for the San Jose, Calif., credit union to change charters, a majority of members voting would have to approve it. Technology has not returned calls for comment on the potential charter change.
Hampel's analysis showed that Technology faces $6.5 million in payments to the stabilization plan over the next five years that it would avoid if it converted to a bank charter.
But the economic analysis also indicated that, as a bank, Technology members will face a total of $10.8 million in deposits to the FDIC that it would not face as a CU.
The reasons for the discrepancy, Hampel stated, rests in the fact that the National Credit Union Share Insurance Fund is fully funded and “likely over reserved” and in additional payments planned by the FDIC.
Hampel pointed out the bank insurer has committed to raising its insurance fund ratio to 2% of insured deposits meaning that Technology, as a bank, would face $5.5 million in deposits to the FDIC over the next five years and an additional $5.3 million to the insurer over the following five years.