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SAN FRANCISCO- Patelco Credit Union has received the go ahead from its members and regulators to convert to private deposit insurance. The $2.8 billion San Francisco-based credit union cited increased deposit insurance coverage and “one-size-fits-all” regulation from Washington as the reasons for the conversion to American Share Insurance (ASI) coverage. The credit union is the largest yet to convert from federal to private deposit insurance coverage. While just 38,241 total votes, or 20% of the total membership (over 193,000), were necessary for a decision, 66,755 voted with 40,734 (more than 61%) in favor of the conversion. “This outpouring sends a clear message that the membership agrees with this conversion and recognizes the opportunity for additional security,” Patelco CEO Ed Callahan stated. Voting closed August 20 at midnight and ballots were tallied by ADP of New Jersey. Patelco’s conversion has made headlines not only because of its relatively enormous size, but also for the fact that Callahan is a former chairman of NCUA and a strong proponent of the federal share insurance fund. He has stated that he is not making a statement by leading the credit union through the conversion except for what the membership feels is best. Callahan is scheduled to retire later this year. The conversion’s newsworthiness grows when considering Patelco’s deposits would represent approximately 22% of ASI’s fund. Patelco holds more than $480 million in uninsured shares with coverage from the National Credit Union Share Insurance Fund (NCUSIF), which provides for up to $100,000 per account but is limited in the combinations of types and number of accounts per household. Callahan remarked of the uninsured shares, “If that is not a compelling reason to let the members decide then I don’t know what is.” The CEO added that he was proud of the membership for so many taking an interest in the issue. “More people voted in favor of the proposal than the required number of voters. Quite frankly, we were amazed,” he said. Patelco surpassed the 38,000-vote mark within nine days, according to Callahan. With ASI insurance, every account receives $250,000 worth of coverage for an unlimited number of accounts. Patelco’s conversion was approved by NCUA Region VI Director Bob Blatner last week in consultation with the Office of General Counsel, according to the chairman’s Chief of Staff and Counsel Kirk Cuevas, when NCUA was provided assurances by the credit union that it will comply with all laws and regulations after converting to private deposit insurance. Patelco’s 1% deposit in the NCUSIF will be returned on or about December 1, Cuevas explained. The California regulator gave its “acknowledgement they do not disapprove” the same day, Callahan said. He explained the phrase was a word game designed to protect the regulator from liability. Cuevas explained, “We are not concerned that it’s a trend.” He pointed out that 34 states require federal deposit insurance and, while 16 states permit private insurance, only eight states are active in it. “Will folks look at this? Obviously, but I don’t think you could characterize this as a trend,” he said. Cuevas said NCUA Chairman Dennis Dollar has not been commenting on individual conversions because it is a decision for each credit union’s members to decide what is in their best interest. NCUA Board Member JoAnn Johnson was not available for comment. While NCUA Board Member Deborah Matz acknowledged credit unions’ right to choose their deposit insurance provider in some states, “I don’t know that it could lead to a trend but I would hope not.I hope that credit unions would think long and hard before going down that path.” She voiced concerns about whether the membership understands the full implications of leaving the federal fund for a private insurer. Matz emphasized that ASI and Patelco are both strong institutions, but should Patelco run into problems in the future, she expressed concerns over its assets in relation to ASI’s. If, in an improbable circumstance, this scenario occurred, Matz said she does not think the general public would distinguish between privately and federally insured institutions. Callahan agreed that he does not think there will be a rush to private deposit insurance. “I know why we did this. I don’t believe I’ve ever had a discussion with anyone who saw it the way I do, so I wouldn’t say that,” he explained. Converting from federal to private insurance requires a lot of work, Callahan said, so credit unions are not going to do it unless the membership feels it is necessary for some particular reason. “It’s a lot of work and tension and trauma and having it off my back today feels wonderful,” he said. The credit union expects to have a preliminary conversion plan in place shortly. [email protected]

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