October 5, 2011 • By David Morrison
If the $1.5 billion Technology Credit Union decides to move forward in its effort to convert to a mutual bank, it is sure to break new ground for California state regulators.
A spokesman for the Department of Financial Institutions confirmed that a California state-chartered credit union has never attempted to convert to a bank before and that the state's credit union regulations are silent on the topic.
California's financial code explicitly provides for state chartered credit unions to convert to federally chartered credit unions and regulations are provided for that process. Likewise, it provides for federally chartered CUs to adopt the state charter. But it is silent on state-chartered credit union conversions to mutual banks.
Technology CU, in its letter to members introducing the idea, listed a desire to make more commercial loans as a reason for the conversion. Credit unions are under a legislatively mandated cap of 12.25% of assets on member business loans. According to the most recent report to NCUA, the CU has booked 144 member business loans worth just over $81.3 million, representing just over 5% of the credit union's assets. To reach the cap at their current asset level, the credit union would have book over $184 million in member business loans.
According to CU Financial Services, a Portland, Maine consultancy that helps credit unions change to bank charters, if Technology Credit Union succeeds in moving to a bank it will become the 37th credit union to change charters since 1995.