In its press statement the credit union said it needed to convert in order to be able to build needed branches and cited as an example the inability to open another branch in Utah County because of a restriction placed in a 1999 Utah state law. The statement also said that converting instead to a federal credit union charter would "seriously limit" its current operations in one of its counties, Washington, but did not provide any details.

The credit union did not respond to numerous calls and e-mails before press time.

Sources familiar with the credit union's situation said that under Utah law Beehive is able to have a geographically based field of membership located in Utah and Salt Lake Counties and is allowed to have SEGs as well, many of which are located in a third county, Washington County.

If the CU did as other state chartered credit unions have done and move to a federal charter, it would have to give up the relationship with its SEGs in Washington County and may not be able to later add Washington County. Washington County is not contiguous with the other two counties and is not in the same metropolitan statistical area as the other two.

The credit union's Web site only listed Utah State employees as a SEG, but the credit union has been able to add other smaller SEGs in Washington County.

The CU only came to have a presence in Utah County after it took part in a directed merger with a troubled credit union there, sources have explained. This put the CU in something of a Catch-22 situation since it now had members and one branch in the large county, but was forbidden under state law from adding more branches to that county.

Theriault argued that it was unreasonable to expect that the credit union would easily choose to sacrifice its SEGs in favor of the members in the other two counties under a federal charter. "Under that scenario some of the credit union's members would have to be disenfranchised and Beehive would not be able to grow any more in that area," he pointed out.

In addition, Jorgensen raised a question about member business lending. An article in the Deseret Morning News quoted Jorgenson noting the ability to offer more member business loans as reasons to convert. "[A bank charter] gives us business lending limits four times greater than a federal credit union's business lending limits," he was quoted as saying.

But the federal cap on member business lending would allow Beehive to carry over $21.5 million in member business loans and, not surprisingly since Utah law forbids the credit union from making a member business loan of over $250,000, Beehive's most recent 5300 report lists only four member business loans outstanding on its books, worth just over $683,000. The CU also lists 12 Small Business Administration Loans worth just over $281,000. The League's Response

Reaction to the news has been relatively slow to develop. Few credit unions in Salt Lake chose to comment for the record about Beehive's move and the Utah Credit Union League board only met on March 6 to decide on a policy on attempted conversions.

Beehive has been a league member in the past, but had not paid its dues for this year as of the Feb. 1 deadline, an event that was not unprecedented the league said.

In a newly drafted policy, the league focused on asking whether the conversions would be good for members and declaring that it firmly believed that, currently, they could not be.

"[W]e cannot conceive of any circumstance under current law and regulation that members would be better off after a conversion to either form of bank charter," the league said. Although there may be operational advantages to the management of a credit union to have a bank charter, because the credit union exists for the benefit of the members, it is the responsibility of credit union leadership to preserve that benefit for the members.

"We believe that credit union members have the full right to decide the future of their credit union," the league added. "We believe this right is properly exercised by a membership that is fully informed about all aspects of a potential conversion, including but not limited to the potential for the enrichment of credit union leadership, loss of meaningful member control of the organization, and the potential shift in interest rates and fees."

Scott Simpson, CEO of the league, said that the policy has directed the league to conduct education efforts and to build a repository of information on the credit union charter and why it is best for members. Simpson said that the league has not yet decided what educational approach it would take.

Sources familiar with the charter conversion issue said they expected Beehive's attempt, should it decide to move forward, to garner a lot of attention since it will be the first attempt under NCUA's most recent revision of the conversion regulation.

Under those regulations Beehive will have to publish a legal notice in newspapers or otherwise notify members that it is contemplating the change; hold a 30-day comment period for members; vote on whether to adopt the conversion plan; write and submit disclosure statements to federal regulators; send three separate disclosures to members in 30-day intervals with the ballot in only the last disclosure and hold a meeting where members vote on conversion.

Whether or not it succeeds, Theriault said he did not expect it would be the last. He said the leadership of two other credit unions had notified their members that they were considering applying for charter change, but he did not recall whether they had done it through letters to members or advertisements in the local media. He declined to identify the credit unions whose leadership had taken this step saying that he had not been authorized to do so.

Under the NCUA's new conversion regulation, credit unions considering seeking charter change have to notify their members earlier that they are doing so. Theriault said one effect of the new rule would be to make credit union leaders who consider charter change to speak up more quickly. He also noted that simply telling members that they are considering the move is not the same thing as committing to make the application. [email protected]