GRAND RAPIDS, Mich. – Even though 60% of the members voting in Lake Michigan's attempt to change its charter to that of a mutual bank favored the idea, the proposed move still went down to defeat. Under Michigan law, a state chartered credit union seeking to change its charter must win the approval of 66% of the members voting. The conversion proponents fell short of that mark by 2,400 of the 35,322 ballots that the members cast on the matter, the credit union reported. "We are delighted that so many people weighed in on this vote and that the majority gave a nod for approval," said Sandy Jelinski, CEO of the $1.1 billion credit union. "In any other election we would be celebrating a landslide victory." She added that the credit union has gotten the message. "The members have spoken and we are listening. As a credit union, we will look at ways to stay competitive in our existing business model. Member needs and the highest level of first rate customer service will continue to be our priorities," Jelinski added. Calls to the credit union requesting comment on the vote or an interview with Jelinski were left unreturned. Reactions to the vote remained mostly muted. Neither CUNA nor NAFCU issued a formal statement about the election, which could have seen the largest credit union yet change its charter to that of a mutual bank, and David Adams, the CEO of the Michigan Credit Union League, signaled that his organization intended to use the Lake Michigan experience as a spur toward future activity. "The MCUL continues to have significant concerns with the process that was allowed for this conversion attempt," Adams said in a written statement reacting to the failed charter change attempt. "We will aggressively seek regulatory rulemaking that will hopefully address many of these concerns," he added. The MCUL has been on record in the past questioning the credit union using prizes like new car leases to drive voter turnout in a charter conversion vote. The MCUL also started a Web site, http://www.memberinform.org/ that it advertised in the Grand Rapids Press, a local newspaper. The Web site took issue with what the league suggested were confusing or incomplete parts of Lake Michigan's conversion disclosure documents. Throughout the process Adams stressed that the MCUL did not take a position on whether Lake Michigan's members voted to change charters or not, but only desired to make sure that members had full access to all the information they required. The MCUL also took issue with the prize offerings that were part of the vote. Lake Michigan is not a member of MCUL and has not been a member for some years and Jelinski has been quoted in press accounts as saying the credit union had left the league after not finding membership beneficial. While Michigan's credit union law addresses charter conversions, the MCUL reported that the state does not yet have regulations implementing that law. Adams also said that the MCUL would continue working with credit unions to ease the underlying capital and growth challenges that the league believes leads to conversions. "There are many remedies in state and federal legislative and regulatory efforts which can address these challenges for the benefit of credit unions and their members," he added. Alan Theriault, president of CU Financial Services, a consultant to credit unions seeking to change charters, including Lake Michigan, spun the results positively. "I think it's a good sign that 60% of the membership that voted favored this progressive approach to credit unions' meeting their capital needs," Theriault said. "I also think the number of credit union members who voted is a very good sign," Theriault added. "The two-thirds requirement is just a big thing to overcome. It means that you have to have two yes votes to every no." Theriault would not engage in much criticism of Lake Michigan's effort, noting it was difficult to second guess what the credit union, in his view, had done correctly. He acknowledged the possibility that Lake Michigan's communications strategy around the vote might have failed to take into account the area's basically conservative fiscal nature and the impact of previous bank mergers, which had been extremely unpopular, might have had. Lake Michigan members who both supported and opposed the conversion measure mentioned each item as being important to their evaluation of the issue. Had it passed, Lake Michigan would have been the largest credit union to date to change its charter to that of a mutual bank. The voting failure marks the second credit union of over $500 million to try to change its charter and fail. NCUA disqualified the $660 million Columbia Credit Union's vote, citing voting irregularities, earlier this year. -

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