Are state charters losing steam?
As the NCUA changes the rules around field of membership, more charter options are available for new and existing credit unions. For years, the dual charter system has featured more federal charters converting to state charters compared to state charters switching to federal charters, but the pendulum has swung both ways throughout credit union history. Field of membership rules are continually being challenged by banks, which has led to groundbreaking decisions modernizing credit union field of membership. With new federal charter types such as a multiple common bond born of HR 1151, states charters lost some momentum. Let’s dive into the stats!
State-chartered credit unions have held their own. Based on NCUA call report data dating back to 1994, state-chartered credit unions have remained relatively consistent at 39% of credit unions. This year, a slight increase in the number of state-chartered credit unions has occurred. According to the National Association of State Credit Union Supervisors, mid-year data released by the National Credit Union Administration – along with figures NASCUS obtained on privately insured credit unions – show state charters holding 49% of assets ($753 billion) and 48% of credit union memberships (57.4 million). NASCUS says those figures are the highest they have been in four years although the number of new state charters has been declining.
State charters face fierce competition from federal multiple common bonds. There have been approximately 61 new federal charters and 23 new state charters since 2000, based on information found in the NCUA’s annual reports. The data portrays a strong preference toward federal charters for de novo credit unions in the last few years. Two trends could be causing a shift toward federal charter preferences. The first is the expanded field of membership rules for federal credit unions, and the second is around a lack of online resources.
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