Magazine article American Banker

Two Calif. Credit Unions Seek Conversion to Federal Thrifts

Magazine article American Banker

Two Calif. Credit Unions Seek Conversion to Federal Thrifts

Article excerpt


Credit unions won a hard-fought victory last summer when Congress made it easier to expand their membership. But for two Southern California institutions, the new law is not enough.

Pacific Trust Federal Credit Union in Chula Vista and Kaiser Permanente Federal Credit Union in Pasadena are seeking to shed their credit union charters and become federal mutual savings banks.

In applications submitted Dec. 31 to the Office of Thrift Supervision, both credit unions cited a desire to increase mortgage lending as a chief reason for converting.

Though a new law lifts a major limit on credit union growth, it does not "provide the tools to ensure a successful future," according to the applications.

Federal credit unions have no limitation on the number of residential loans they may make, but terms of the loans are restricted.

In addition, credit unions may not charge penalties on loan prepayments, said Alan D. Theriault, president of CU Financial Services, a Portland, Maine, consulting firm. This hurts their chances of getting a higher premium when the loans are sold to investors in the secondary market, he noted.

Kay M. Loveland, president of $180 million-asset Kaiser Permanente Federal, said the biggest challenge for credit unions is remaining attractive to customers. "Today's members are seeking the best value for their financial interests rather than relying on historical relationships alone," she said.

Hans R. Ganz, president of Pacific Trust, declined to discuss his credit union's application until it is released to members.

"If you have the profile of a thrift, why not be one? …

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