Patelco, the $2.8 billion-in-asset San Francisco-based CU became the first of its size to offer members the choice of converting to private share insurance in order to cover a bigger portion of deposits. "We're not doing this to be a trendsetter," said Anita Macias, Patelco's SVP of Marketing. "We're not doing it to be a leader in the industry. We're doing it because we feel it's in the best interest of the members to give them a choice."
"We have some $480 million in deposits that are uninsured," said Macias,. "If the members approve this conversion, they would have coverage for up to $250,000 per account with American Share Insurance (ASI) rather than $100,000 per member, as they do with the National Credit Union Share Insurance Fund (NCUSIF)."
"The board of Patelco felt compelled to bring this issue to a vote. It's been member-driven from the start, and it's the members who will decide this one way or the other. How much more credit-unionish can you get?" Macias asked. She denied the existence of any subtext for the switch, but noted that credit union folk may look for one, although the search would be in vain.
Still, awareness that Patelco's CEO, Ed Callahan is a former NCUA regulator and one of the founders of the NCUSIF-and the fact that he has been, at times, a strong critic of the agency's operational budget and insurance fund procedures- gave some thoughtful pause to management, Macias admitted. "We did discuss that, yes. But this is not about Ed or the NCUA. We've always been happy with NCUSIF coverage. But in today's economic environment, you have to look for that cutting edge, and our members have been concerned with these uninsured monies."
The net result will be growth, said Macias, if the conversion wins approval, and would mean no added cost to Patelco. "It's the same 1% deposit," she said. (In fact, the NCUSIF 1% deposit was modeled on ASI's structure.) Any members favoring federal insurance who withdraw money would be more than offset by those members seeking increased protection transferring money from other institutions, she said.
Patelco started researching the idea three years ago, but it took on steam recently as the stock market tanked and corporate scandals fueled insecurity about life savings. Last April, at a planning session, the board finally approved a member vote. Fifty percent of members voting must approve the switch to go forward (38,000 members); 20% of eligible voters must take part in the process. An independent third party, ADP of New York is tallying the vote, which extends to August 20th. After that, a 90-day waiting period kicks in.
Macias will not disclose how the vote is going (it wouldn't be fair to those who have not yet voted) but said that the effort to educate the membership about the pros and cons began right after the board voted to pursue the option. "In our newsletters, in our email marketing and in our e-statement messages, we prepared the membership for this vote. We used all electronic and print channels to give them the best, most unbiased information. Now, it's up to them."