SAN JOSE, Calif. (9/24/12)--Technology CU will continue to operate as a credit union. Members of the San Jose, Calif.-based credit union voted last week against converting the $1.5 billion asset credit union into a mutual savings bank.
"Our members have voted and overwhelmingly indicated their preference to remain a credit union," said Barbara Kamm, president/CEO of Tech CU. "We respect this decision and appreciate that so many of our members weighed in on this important vote. Providing the highest level of service for members will continue to be our top priority--and we will do so under our credit union charter."
The credit union has 69,000 members. Roughly 25% of eligible members cast votes, with nearly 77% of the votes against the conversion.
Tech CU Board Chairman Mical Brenzel noted that the responsibility of its board and management "is to consider all strategic alternatives that may be in the best interest of Tech CU and our membership as a whole." He said the proposal to convert came out of a study of trends in the industry regarding the "tremendous increase in share insurance assessments" by regulators and the "continued reluctance of Congress to expand credit union lending powers." He said the board concluded that it would receive lower assessments from the banks' regulator, the Federal Deposit Insurance Corp.
"Members at the special meeting voiced frustration, saying we did not make a compelling case for charter change," said Kamm. She said the credit union was unable to communicate its view effectively because of rules that govern how credit unions can communicate about charter change with their members.
The National Credit Union Administration's (NCUA) rules outline disclosure and voting procedures, plus procedures to facilitate communications among members and for members to provide their comments to directors before the credit union board votes on a conversion plan.
NCUA updated its rules in 2006 to require directors adopting a conversion proposal to determine that the conversion is in the best interest of members and that directors sign a document certifying that they have fulfilled their fiduciary duty to members in pursuing a conversion (News Now
Dec. 14, 2006).
The rule also requires that boxed disclosures regarding the conversion be included in all related mailings distributed 30, 60, and 90 days before a membership vote. Boxed disclosures must include:
- What a "yes" or "no" vote means in terms of the wording on the ballots; and
- The effect of a conversion on the credit union member in terms of the loss of beneficial savings and loan rates and charges for services when average credit union products and services are compared with those of other financial institutions.
Both NCUA and the Credit Union National Association (CUNA) have maintained that bank charters won't benefit members (News Now
May 9, 2012, and Oct. 4, 2011). CUNA also has said that ultimately the decision to convert to a bank must be made by members of the credit union who own the institution based on all the facts provided with complete transparency. Check CUNA's Principles on Credit Union to Bank Conversions by using the link.
Technology CU has served the high tech work force in Silicon Valley for 50 years.
"We recognize our members' strong commitment to the credit union industry, and we dedicate ourselves to working within the credit union charter to ensure that Tech CU continues to perform safely, securely, and successfully in the future," said Brenzel. "Our members have spoken, and we look forward to the future as we remain a very successful credit union."