SOURCE: Pentagon Federal Credit Union

June 10, 2008 13:22 ET

Pentagon Federal Credit Union Institutes Members' Bill of Rights

ALEXANDRIA, VA--(Marketwire - June 10, 2008) - At its annual meeting held on May 13, 2008, Pentagon Federal Credit Union became the first credit union to formally commit to remaining an institution dedicated to its members. The Pentagon Federal Credit Union Members' Bill of Rights assures members that the credit union will not make any organizational change that is not grounded in their best interests.

Thirty-three credit unions restructured and converted to mutual savings banks or thrifts in the period from 1995 to June 2007, according to an Economic Letter issued by the Federal Reserve Bank of San Francisco. Many of these new institutions subsequently become commercial banks. These changes have not always been in the best interests of credit union members.

"The board and executive team at Pentagon Federal is committed to serving our members with the lowest loan rates and the highest share rates possible," said CEO and President Frank Pollack. "As member-owned institutions, credit unions are able to pursue these goals without pressures from outside investors or stockholders. We serve the interests of our members and no one else."

The text of the Federal Credit Union Members' Bill of Rights is included below and can also be found in the 2007 Annual Report available at www.penfed.org/annualreport.

Pentagon Federal Credit Union Members' Bill of Rights

RESOLVED, That Article 1, Section 2 of Pentagon Federal Credit Union's Bylaws is hereby supplemented by the following resolutions to reflect, for the record, the position of the Board of Directors on certain future actions it may take regarding charter conversion in all its iterations:

The Board of Directors recognizes the importance and value to its membership of Pentagon Federal Credit Union's mutual form of ownership as a federal credit union. The board remains committed to maintaining the institution as a credit union in particular recognition and protection of the many members of the credit union who face the demands in the defense of our country.

The Board of Directors will consider a change in the institution's organizational form only under circumstances that would materially and negatively impact the benefits accruing to the membership from its current organizational form, and only when another organizational form would provide greater benefits. It is anticipated that these circumstances would only arise from extraordinary external events such as taxation, a risk to the safety and soundness of the industry or the share insurance fund, or a material change in business powers.

In light of the benefits that accrue from the mutual form of ownership and consistent with current rules, any charter conversion from a credit union form would be to a mutual savings bank, but no such conversion would be recommended by the Board or Directors, except after full, fair, and complete consideration and discussion of such matter based upon the advice of neutrally selected expert independent third parties who have no financial interest in the outcome.

Upon any conversion of organization form, the Board of Directors will take appropriate action to incorporate within the organizing documents specific provisions to ensure that directors and executive management are provided no financial advantages other than those provided to the general members of the institution. Additionally, the Board recognizes that upon such conversion, further conversion to a for-profit, stock mutual entity might be legally permissible and might be sought by certain members for their own personal gain and not in the best interests of the membership. Accordingly, to preclude such action from being taken for improper purposes, the Board of Directors will take appropriate action to also incorporate within the organizing documents specific provisions that permit only those members who joined the organization prior to the date of the decision to convert from a credit union to a mutually owned institution to participate in any profit associated with further converting the mutually owned institution into a for-profit, stock organization. Any gains new members would have accrued will be transferred to an affiliated not-for-profit foundation.

Finally, in the event of a change in organizational form, the Board of Directors will also undertake appropriate efforts, to include ensuring appropriate provisions are included in the organizing documents, to ensure all employees will be provided with financial protection against any adverse employment action resulting from the change in organizational form.

Pentagon Federal Credit Union, established in 1935, serves more than 764,000 members, holds assets in excess of $10.4 billion, and provides worldwide service to Army, Air Force, Coast Guard, Department of Defense, and Department of Homeland Security personnel; members of the VFW; and others in the defense community and their families. For more information about Pentagon Federal Credit Union, or to learn more about membership, visit www.penfed.org.

References: Wilcox, James. Federal Reserve Bank of San Francisco Economic Letter. 22 June 2007. Federal Reserve Bank of San Francisco. 5 June 2008 http://www.frbsf.org/publications/economics/letter/2007/el2007-16.html.

For more information about this topic or to schedule an interview with Frank Pollack, please call Teresa Kovarik at (541) 345-6311 x7305 or e-mail teresa.kovarik@penfed.org.

Contact Information

  • Contact:
    Teresa Kovarik
    Tel. 541.345.6311 x7305
    Email: Email Contact