Monterey Eyes Commercial Bank Charter
The $209 million Monterey Credit Union aims to convert to a stock issuing commercial bank.
The Monterey Herald reported Thursday the current charter change effort is merely the first step in a two-step process to obtain a commercial bank charter.
In the first step, the Monterey Calif.-based credit union would adopt a mutual bank charter and then, after a regulatory mandated period of time, move to a commercial bank charter. At both the credit union to mutual bank step and the step from mutual bank to commercial bank, member approval would be required.
Monterey Board Chairman David C. Laredo did not mention an endgame to convert to a commercial charter when he spoke with CU Times earlier this week. The credit union did not return calls requesting further comment.
The credit union sent ballots to its roughly 20,000 members asking them to approve the charter change without applying to any relevant regulators to start the charter change process. Ballots must be returned to the credit union today.
This in contrast to the conversion process for federally insured credit unions, which mandate a converting credit union seek the approval of members about a possible charter change at an early stage of the process, but generally sees the credit union apply with regulators before asking members to vote.
A California Department of Business Oversight source said, on background, the department knew Monterey wanted to convert to a bank but did not know which charter it would seek.
The Herald repeated the credit union’s claim that it needed to convert it charter in order to offer more business loans. However, as a privately insured, California state chartered credit union, Monterey does not have a cap on its business lending.
Monterey CU executives also said in the story they were seeking a conversion because of the marketing hurdles credit unions face in explaining their cooperative status to members, and also said a bank charter would make it easier to raise additional capital.
The Herald also reported that, as a bank, the institution would pay its board members.