Credit Union To Bank Conversions

credit union to bank conversions

There have been many credit unions over the last few years which have decided to convert into a mutual savings bank in order to address the many challenges which credit unions are facing in today’s highly competitive financial marketplace.

While the greatest number of credit unions went through the conversion process a few years ago, there are still a few who are expressing interest in making the change. This is because there are a number of benefits which being a mutual savings bank provides that allow credit unions to become more competitive and more profitable overall.

Why Are Credit Unions Converting To Bank Charters?

There are a number of issues facing credit unions today. Issues with capital, limits on products and poor awareness amongst consumers are all pain points facing thee organisations, however, converting to a bank removes marketing impediments while avoiding all of the political risks and public relations issued associated with being a credit union. Here are just some of the reasons that credit unions are making the switch:

  • Credit unions face limits on loans to business customers and with narrowed operating margins credit unions now need to grow to generate sufficient revenue.
  • Unlike credit unions, banks can increase their regulatory capital through a number of avenues and they can expand their services to the wider community, offering a broad spectrum of products.
  • Banks, unlike credit unions, can offer business and real estate lending without any portfolio restrictions.

Which Credit Unions Became Banks?

Since 1995 there have been more than 30 credit unions which have become banks. Between 2004-2007, conversions from credit unions into banks were through a surge although during the 2008 financial crisis the number of conversions tailed off. However, in the last decade there have been several more conversions including HarborOne and Coastway Credit Union which became known as Coastway Community Bank.

A Case Example

One example of a credit union that converted into a bank is California’s Monterey Credit Union. This credit union which had over $200 million in assets, changed its name to the Community Savings Bank of Monterey after concluding that becoming a bank would give them better flexibility in their operations while also allowing them to get better access to working capital and to lend money to increasing numbers of business clients.

How Do The Members Feel?

Although some credit union members naturally feel quite apprehensive about the idea of their credit union converting into a bank, evidence from existing examples has shown that very few members leave in search of other financial institutions. This is because the credit unions in question become community banks rather than large-scale global institutions, and this means that they can still enjoy the same excellent level of service that they have always enjoyed and can rest assured that their banking organisation will still have the needs of its local community at heart. Not only that, but they will also be able to benefit from a wider range of products and services giving them even more choice.