Are credit union organizations of value to credit unions? In an article praising two recent credit union to bank converts in the Dallas area, the ABA Banking Journal recently praised the former credit unions for avoiding entangling relationships with credit union organizations, particularly those surcharge-free ATM and shared branching networks that CO-OP represents, but also leagues, corporates and other credit union organizations. A key issue in another conversion attempt was ongoing participation in shared branching. Do the fundamental issues of charter and capital structure supersede the value of participation in the credit union system?

Before I answer, I need to disclose that I am more than a bit biased. This is my 38th year in the credit union movement and I lead an organization that serves nearly 2,000 credit unions. There are hundreds of credit union-owned organizations serving the needs of credit unions ranging from the leagues and corporates to those organizations providing services in the areas of indirect lending, investments, training, shared branching and payments processing. Each of these organizations provides valuable services to its member/owners. Considerable capital and value has been amassed in these organizations. The board of CO-OP Network took a leadership stand on ownership and participation. Our bylaws are clear, ownership is restricted to credit unions. Credit unions converting to mutual banks may continue to participate, but must relinquish their ownership. A mutual bank converting to a stock bank must cease participation. I applaud our board for taking a firm and reasoned position and I applaud the other credit union organizations that have taken similar positions. So do we really provide value? I'll speak for the organization I know best. In 2005, CO-OP Network processed 1.13 billion transactions and generated $23.6 million in earnings with $10.4 million in cash patronage. We recently added 5,500 7-Eleven ATMs and our members now have surcharge-free access to 25,000 ATMs, nearly 6,000 of which accept deposits. We are a cost competitive processor of ATM, PIN POS, and Signature POS transactions and we believe we are the only processor to have invested in true dual site continuous processing. In October, we processed an industry leading end-to-end ATM image deposit in cooperation with California Center Credit Union, WesCorp, eFunds and NCR. We have worked with CUNA Mutual to lead the charge in credit union adoption of fraud prevention tools. Many of our member credit unions do not realize they are an owner of a cooperative with 10 consecutive years of increasing cash patronage, ten price decreases and a market value that might approach $500 million. And we are certainly not alone. Many of our peers in the lending, investments, training, processing and other service spaces have similar success stories. We have conclusively proven that through collaboration and cooperation we can effectively and efficiently meet the needs of the credit union system.

This brings me to three concerns. * There are inefficiencies in our system. Necessary consolidation has been slowed by the parochial views of boards and management teams. If we are to continue to compete effectively we need to put narrow views aside and grasp opportunities that benefit our members and shareholders. The good news is we are, but just not fast enough. * Many credit unions continue to do extensive business with banks. Given the current environment, this utterly amazes me. Banks do serve a necessary role in our financial system, but when there is an effective credit union alternative, it should be embraced by credit unions. * My last concern takes us back to the original question. Conversion from a credit union to a bank is more than just a change of charter and capital structure. The essence of the credit union system is cooperation. Independent banks are exactly that, independent. That is a philosophical sea change that involves disassociation with organizations that deliver immense member value. Any board considering conversion must fully take this value into account.