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By CU Financial Services
Getting a favorable vote for switching to a mutual bank charter
is one part of the conversion process. Success requires a cost-effective combination
of disclosure, public relations, and member solicitation. A sound business case
for conversion and the right conversion team provide the tools for motivating
members, addressing opposition, and setting the stage for solid post-conversion
The disclosure statement and supplemental Q & A address most
questions members have about conversion, and a favorable vote should be assumed,
if the member takes the time to vote. So, part of the solicitation process involves
motivating complacent members to vote. Less than 20% of the members typically
vote in these campaigns and so a large pool of members can be contacted using
various methods. Because opposition is usually concentrated in the hands of
a vocal minority, attracting a higher percentage of membership helps secure
a favorable outcome.
The public relations (PR) plan is closely aligned with the
member solicitation plan. “The PR plan must outline the objectives, target audiences,
key messages, and tactics for getting the membership out to vote and managing
the opposition,” said George Scott, principal and public relations specialist
with Toronto, Canada-based, Level Five Strategic Partners, Inc. “Front line
employees play a key role in reaching members, and successful campaigns are
both inclusive and fun. Care should be taken to ensure the management team sends
the correct messages to employees.”
Community leaders and the local press are quick to embrace
the entry of a new bank into the market, and can often be counted on to voice
public support for the conversion and help with the public relations, according
to Scott. In addition to the tax revenues and CRA obligations assumed, these
leaders recognize that community banks traditionally play a major role in funding
the local infrastructure. History illustrates that new banks are quick to make
the tough loan decisions and to execute fresh business plans that are critical
to a community’s growth, survival, and / or regeneration. For many community
leaders, the purpose of a credit union is sometimes fuzzy or misunderstood,
and most credit unions are seen as serving the needs of an exclusive segment,
not the community’s broader interest. Thus, a bank conversion sends a strong
and proactive message that the institution wants to become a more important
Conversion specialists agree a few critics should be anticipated.
The ones that contact the conversion information line or speak with management
personnel can often become supporters. Some, though, will never be convinced.
Not only will they be motivated to vote no, they will try to lead others
down that path. A few of these critics are well known to management since they
weigh in against almost every management agenda. Other vocal critics
could include employees of competing credit unions, disgruntled former employees,
jilted job applicants, denied loan applicants, CU trade association representatives,
and consumer activists looking for a cause.
In addition, the NCUA and credit union trade associations
are taking steps to make conversion more complex and expensive. You may discover
they are working under the radar to attack your messages and obscure the issues
in an effort to influence a no vote. In what looks more like an effort
to intimidate directors looking at the process, a few CU trade associations
have vowed to interfere both directly and indirectly in upcoming conversions.
So far, members of 27 credit unions have successfully obtained
the vote. In two instances, despite the fact members voted in favor, a politically
motivated regulator intervened and issued rulings that required a re-vote, which
turned out favorable. Voting participation varies, as does the final count.
Most credit unions should expect that 15% to 20% of the members will vote as
a result of the three statutory notices mailed first class to eligible members.
Current federal rules require 50%, plus 1, of those voting to approve
the deal. Some states require a higher percentage. By way of a scorecard, the
approval ratio for a couple of conversions, for unique reasons, was just over
the 50% range, while the rest exceeded a 60% or even an 80% vote in favor.
The most costly part of the conversion process involves the
printing and mailing of notices to members. Mailing just one notice and disclosure
under the onerous pre HR-1151 conversion rules could cost over $2, and reminders
were costly as well. Recently, we’ve budgeted around $2.50 per member for three
notices and solicitation. For the future, as a result of proposed NCUA disclosure
rules, proposed legislative quorum requirements, and the threat of more organized
opposition we plan to increase the solicitation budget. As a result of its involvement
with the majority of the conversions, CU Financial Services has identified various
indicators for determining the correct allocation of financial resources for
getting a successful vote. Like many business outcomes, the greater the investment,
the more predicable the result.
Visionary management teams have always faced resistance when
introducing change; consider checking accounts, government securities investments,
mortgage lending, business lending, investment services, mergers, and debit
cards. A few critics always surface. Change is difficult and requires investment
and effort, but the consequences of maintaining the status quo can be much more
costly, even leading to irrelevance. The conversion to a bank charter is both
visionary and strategic. Although converting to a bank is not appropriate for
every credit union, those who have made the move have harnessed powerful marketplace
and economic forces, and their growth and success since conversion have validated
the wisdom of the decision.
Across the credit union system today, there is an abundance
of news and comment about conversions past, present and future. Unfortunately,
there is much misinformation, some of it politically motivated. For any credit
union contemplating a conversion to mutual savings bank status, which I believe
is one of the most revolutionary and exciting opportunities ever made available
to CUs for achieving successful growth, it pays to deal with experienced professional
advisors. Call CU Financial Services at 800-649-2741
to get the facts about this strategic option.
This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.
If you are interested in contributing an article on CreditUnions.com, please contact our Callahan Media team at firstname.lastname@example.org or 1-800-446-7453.
December 8, 2003
7/26/2012 03:57 PM
In response to the guy with the hair up. Credit unions are cooperatives and members have the right to determine their future. CU members are not organized for promoting a socialistic agenda like rescuing those using a payday lender, addressing national financial literary rates, perpetuating NCUA or a trade association. Why should my net worth be wasted on some social agenda. You are misinformed about who a cooperative is formed to serve and what credit union cooperatives stand for. Your philosophy would never work if you were trying to organize a credit union today. Regarding pay day lending and banks - this is America and these companies are filling a need, their market share is the best indicator of their value. People ultimately vote with their money. In conclusion, the article is fine, it's your comment that causes me great concern about what I am a part of.
Did anyone else out there have the hairs on their neck stand at attention when reading this article? I am glad to see that Callahan provides a forum for all points of view, but this article hits at my core. Credit Unions do not have the same financial motivations and dividend pressures as Banks. As such, they offer something to members that banks will never truly approach – a focus on what’s best for the member rather than what provides the best spread to them. With financial literacy in our country in need of desperate repair, and with the “vultures” providing Payday loans experiencing the fastest growing loan market in the country, we need to rally against the notion that moving to a bank charter is REALLY good for the consumers we serve. We need to remember what the CU movement is all about! We need remember, reinforce and preserve the differences between banks and credit unions. The financial well being of millions is dependent on it!
From someone that believes in the movement and what it stands for!
Thanks for selling out Callahan. Then again, you've been rehashing and selling government info back to CUs for twenty years so what should we expect.
I beleive the decision to convert is up to the each CU. If they can't compete, it's a good option. They are very restricted as to the type of loans they can make. The notion that CU's give back the profits to their members in the form of better rates is a joke. There are many banks across the country that offer better rates then CU's. The CU's will die over time unless they stay competitive and grow. You can only go in two directions...Forward or Backwards. They need to move forward and not be limited in their practices. The CU's that have converted to stock have raised considerable funds in their IPO's. They will shine above many. They have $$$ to grow.
States are moving in at a rapid pace to decrease - or at least make it more difficult to convert - to a mutual savings bank or other form of structure. OUCH!
Give me a break. Acceptance by the market does not indicate that they are providing value as much as it shows that they are taking advantage of an unfortunate demand ...akin to a drug dealer providing a fix. And yes, credit unions do have a responsibility to people! If done correctly, a credit union can enrich the lives of people in their communities and provide the best possible value to their members. You should be concerned about what you are part of…because the attitudes you express are more synonymous with that of a banker than those that are part of the credit union movement! Everything does not come down to personal gain.
I enjoy reading a radically different perspective. It motivates me even more to be vigilant and active in opposing those who try to pervert and undercut the credit union message for personal gain. This game has been played out over the last 30 years and we know what the end game is. Lets keep the scorecard and spotlight on those who have converted so that we continue to document who really gains in these conversions. If you ask an employee of a mutual savings bank (opps you will have much more luck finding former employees) they can tell you that it surely will not be the former members.
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