Why would this longstanding credit union located in Salt Lake City, Utah decide to switch gears and become a member-owned mutual savings bank instead?
The conversion is needed partly because of the increasing expense involved with new services. Limitations placed on credit unions are also a major factor contributing to the need for the change, Chief Executive Officer Scott Jorgensen observes. He further notes that there are strict boundaries on branch locations. There are also tight constraints as to who may be accepted as members. As a bank, the institution would be able to offer services to a much broader range of people.
Therefore, in December 2007, after more than 50 years as a credit union, Beehive’s Board of Trustees began the charter transformation process. The members were informed that they could vote on whether or not to convert the $187 million institution to a bank. Approximately 36 percent of the credit union’s 22,000 members voted over a period of one month. 53 percent of the voters were in favor of converting to a bank while 47 percent were not.
The transition is happening at the same time as the new state-chartered credit union bill is being passed. This bill increases the amount a credit union can provide in a personal loan to a member. It also allows new members to qualify for business loans immediately. However, it would not solve Beehive’s issue of limited membership and branch constraints.
As a bank, Beehive could initiate new branches in other locations besides Salt Lake County. As a credit union, a member must either be a resident of Salt Lake County or Utah County, a Utah State Employee, or a close relative of an already established member.
“We just know there are a lot of people that like us and like the way we treat them and take care of them,” stated Jorgensen. We’ll do whatever we can to take advantage of our new rules and continue to serve our members.”
The total transition could take several months to complete but there are no roadblocks anticipated, according to Jorgensen. The changeover must be sanctioned by the National Credit Union Administration (NCUA), the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation (FDIC).
Before casting their vote, members received information via postal mail. They were also exposed to signs and T-shirts worn by tellers. Members not only received communications from the credit union’s leadership, but from those members opposed to the conversion as well.
NCUA’s rules, the credit union must allow members who are against the conversion the opportunity to persuade other members to vote against the measure. The members who were opposed to the transition formed a group called “Beehive Members Protecting Member Interests” and began a website in an effort to encourage other members to agree with them.
Protestors expressed concerns that the voting influence of the institution’s members would be too strictly limited; banks typically center voting rights on the amount of money deposited. Those opposed also felt strongly that Beehive needed to increase marketing efforts to the million plus prospects within its chartered area rather than make the transition to a bank.
The opposition letter was turned into the credit union. NCUA and Beehive agreed that all members should receive copies of the letter by postal mail. The cost involved in this process was mainly the responsibility of the opposing members. These members covered some of the mailing expenses with the assistance of the National Center for Member Trust.
In answer to the opposition, Scott Jorgensen submitted a 30-page letter outlining several objections. Even though the NCUA denied some of the objections, the conversion is expected to take place.
One opposing member, Teri Dial, said that she does not understand how the 14th largest credit union in Utah will be able to serve members better as one of the smallest banks. She stated that she plans to take her accounts elsewhere once the conversion occurs, and noted that there are others who intend on doing the same. However, Jorgensen said he does not expect a decline in overall business for the institution with the changeover.
Ms. Dial also remarked that she was impressed with the loyalty of the credit union’s employees who demonstrated their support for the conversion by their large presence at a special meeting regarding the changeover. However, she believes that many of the employees may not be aware of the long history of Beehive and how the community has come to know the institution over the past 50 years. She is hopeful that their loyalty will be appreciated as the process takes them into a new form of operation.
Throughout its tenure, Beehive has invested significantly in giving back to the community. The institution has been an active participant in such programs as Adopt-A-School and the United Way campaign, as well as a huge supporter of the American Heart Association as a bronze sponsor. It would be ideal if the institution can continue this trend despite its new charter.
