WASHINGTON — A Utah chartered credit union that told its members in March that it was contemplating moving to a bank charter has filed an application for the move with the Office of Thrift Supervision.
Executives with the $185 million Beehive Credit Union, headquartered in Salt Lake City, told members at the credit union's annual meeting in March that the CU was considering the move, in part to address a field of membership problem they have under Utah law.
Sources familiar with the credit union's situation said in March that under Utah law Beehive is able to have a geographically based field of membership located in Utah and Salt Lake counties and is allowed to have SEGs as well, many of which are located in a third county, Washington County.
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Orla Beth Peck, Utah's supervisor of credit unions, explained Beehive's field of membership conundrum in a bit more detail. According to Peck, Beehive had placed a branch in St. George, Utah, about 300 miles away from its primary area in and around Salt Lake City when under then existing state law credit unions were allowed to have field of membership drawn statewide.
Peck speculated that the credit union chose St. George and Washington County, despite the great distance, because many of its members at the time where state employees and they tended to retire from the Salt Lake City area to Washington County where the weather is warmer. The CU also sought out SEGs in the county to help support its branch in St. George.
The problem arose when the Utah legislature changed state law to prevent credit unions from having members in more than one county. The CU was only allowed to keep its branches and members in Utah and Washington counties because it had participated in a supervisory merger that effectively put them in more than one county and the legislature more or less carved out an exemption for them and another credit union in a similar situation.
But the exemption carried restrictions as well. The CU could have membership in those counties but could not add any more branches there, the new law said. In addition, if the CU wanted to build a bigger branch there they could only build it within three miles of the existing branch.
"They were essentially put in a pretty rough spot," explained Peck. She added as well that moving to a federal charter, as some Utah credit unions have done, would not have helped since federal rules do not allow credit unions to have both community areas and SEGs as their fields of membership. Further, because of the great distance between St. George it was highly unlikely the CU would be able to keep its members in Washington County.
"There is no way that Washington County is contiguous with either of the other two," Peck said. "St. George is 300 miles away from Salt Lake."
The credit union, as with other conversion candidates, has declined to speak to the media about its conversion attempt.
Scott Simpson, CEO of the Utah Credit Union League, said the league has adopted a policy on conversion that seeks as others have done to both uphold the rights of credit union members to convert their credit unions to banks and to emphasize that currently the league believes there are no credible arguments for doing so.
"In other words, we cannot conceive of any circumstance under current law and regulation that members [emphasis in the original] would be better off after a conversion to either form of bank charter," the League says its policy. "Although there may be operational advantages to the management of a credit union to have a bank charter, because the credit union exists for the benefit of the members, it is the responsibility of credit union leadership to preserve that benefit for the members."
"I don't believe there is anything particularly new in what we have done but we wanted to make sure we had a policy that addressed the question," Simpson said, adding that the league has started a Web site that contains the policy as well as other reasons credit union members considering a conversion might want to keep their CU charter, including lower fees and better service as documented in surveys and research. The League also highlighted the differences in ownership, control and philosophy between nonprofit credit unions and for profit banks.
"Credit unions were founded on the philosophy of 'People Helping People.' The first credit union was formed in Germany in 1849," the League's site says. "When widespread famine threatened to wipe out an entire village, people pooled their resources to help themselves and each other. This same 'People Helping People' philosophy exists today and it's what compels credit unions and their staff to get involved in charitable and community building efforts. Many credit unions are involved in the United Way, March of Dimes, Habitat for Humanity and dozens of other organizations and movements that give people a hand up, not a hand out."
The league's membership information Web site, membershipcounts.com, isn't easy to find. The league does not link to it from its own Web site and if the members do not already know the name it can take a long time to find even with a strong search engine such as Google.
The league countered that Beehive announced it was going to convert in April of this year and that it put the site up the membershipcounts.org site in order to have something to offer in response to inquiries. Since then there has not been as much going on. But now that interest in the topic may be rising again, the league plans to make the site more prominent and link to it from the league's home page.
The Office Of Thrift Supervision said it will have a decision on Beehive's application to become a bank by Dec. 9, 2007.
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