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Why Thrivent decided to apply for CU charter
MINNEAPOLIS and APPLETON, Wis. (1/19/12)--What are the major reasons prompting Thrivent Financial Bank--a profit-making subsidiary of Thrivent Financial for Lutherans, the fourth largest privately held company in Minnesota--to announce it will become the second bank in U.S. history to convert to a credit union charter?

New regulations and regulators for bank holding companies were the driving factor, as well as benefits of the not-for-profit member-ownership structure and cost, according to CEO Todd Sipe, in an interview with The Nonprofit Quarterly ( Jan. 18).

Thrivent announced last week it would convert its bank subsidiary to a credit union, pending approval of its charter from the National Credit Union Administration and other regulators (News Now Jan. 17).

The driving factor for the charter switch is the Dodd-Frank Act, which introduced new regulators to organizations like Thrivent, Sipe told the publication. In the past the bank was regulated by the Office of Thrift Services (OTS), which was absorbed into the Office of the Comptroller of the Currency (OCC).  At the holding company level, its regulators changed from OTS to the Federal Reserve. "There are additional costs and a burden associated with dealing with two regulators," he told the publication. The cost burden of having multiple regulators was a key driver, he said.

Thrivent Financial also looked at ownership structure to balance an "appropriate level of regulatory oversight but not have undue increase in cost or burden."  It researched the needs and preferences of its members and decided the credit union model was "the best model to serve members of Thrivent Financial Lutheran going forward," he said.

Credit unions are not strangers to Thrivent Financial for Lutherans, which was the result of a merger in 2001-2002 of the Aid Association for Lutherans and Lutheran Brotherhood. The two organizations had a trust bank, three credit unions and a community bank in the Twin Cities. At that time it picked the thrift charter, which provided flexibility to continue to offer all the products and services of all the banks and credit unions.

This time, members preferred to become a member-owned not-for-profit organization where profits are returned in the form of better rates and fees, he said.  As of Jan. 17, Sipe said he had not received one concern or complaint about moving to a credit union, a fact he called "remarkable."

Taxation was not a key consideration or a driving concern in the decision, he said.  The total tax liability would be well below a million dollars a year, while the regulatory burden was going to be significantly higher than any tax break.

Consumers are looking for an entity they can trust and moving from banks to credit unions. Thrivent already has members' trust because it's a faith-based organization, so the charter move is not an attempt of a bank to regain trust, he said.  "The credit union model is a great model in today's environment…clearly credit unions do enjoy a trusted relationship, so it reinforces the relationship we already have with our clients."

If approved, the new credit union will serve about 40,000 members, with a potential 2.3 million to 2.5 million people eligible for membership. It will have about $530 million in assets, which would mean it would be in the top 10% of the credit union industry by assets, said Sipe.

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