The $209 million Monterey Credit Union aims to convert to a stock issuingcommercial bank.

The Monterey Herald reported Thursday the currentcharter change effort is merely the first step in a two-stepprocess to obtain a commercial bank charter.

In the first step, the Monterey Calif.-based credit union wouldadopt a mutual bank charter and then, after a regulatory mandatedperiod of time, move to a commercial bank charter. At both thecredit union to mutual bank step and the step from mutual bank tocommercial bank, member approval would be required.

Monterey Board Chairman David C. Laredo did not mention an endgame to convert to acommercial charter when he spoke with CU Times earlierthis week. The credit union did not return calls requesting furthercomment.

The credit union sent ballots to its roughly 20,000 membersasking them to approve the charter change without applying to any relevant regulators to start the charter changeprocess. Ballots must be returned to the credit union today.

This in contrast to the conversion process for federally insuredcredit unions, which mandate a converting credit union seek theapproval of members about a possible charter change at an earlystage of the process, but generally sees the credit union applywith regulators before asking members to vote.

A California Department of Business Oversight source said, onbackground, the department knew Monterey wanted to convert to abank but did not know which charter it would seek.

The Herald repeated the credit union's claim that itneeded to convert it charter in order to offer more business loans.However, as a privately insured, California state chartered creditunion, Monterey does not have a cap on its business lending.

Monterey CU executives also said in the story they were seekinga conversion because of the marketing hurdles credit unions face inexplaining their cooperative status to members, and also said abank charter would make it easier to raise additional capital.

The Herald also reported that, as a bank, theinstitution would pay its board members.