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The Value of a Multiple Common Bond

By Sam Griswold - January 14, 2020

Choosing the right charter for FOM (Field of Membership) expansion is vital to a credit union’s strategy for growth. Institutions are offered the opportunity to operate under three specific types of charter: single common bond, community or multiple common bond. The choice will determine the future of the credit union, from regulatory requirements to growth to marketing investment.

Historically, credit unions focused on a sole group or physical location, which has allowed for strong, intimate member relationships, but that arrangement has not always facilitated growth. For credit unions in this position that wish to expand their FOM while maintaining a close connection to their members, the multiple common bond may be an avenue worth pursuing.

“Multiple common bond credit unions want to grow beyond a single market,” Sam Brownell, founder/CEO of CUCollaborate, said. “They want to preserve their identity with their SEGs (Select Employee Groups) with the benefits of a community charter.”

A multiple common bond credit union is chartered to serve a combination of distinct, definable single occupational and/or associational common bonds. According to the NCUA, this may include “an employer-based group or persons employed within a Trade, Industry or Profession” or “a member-based group meeting the NCUA’s threshold requirement and totality of circumstances test.”

“These two approaches can and should be combined to maximize growth potential,” Brownell explained. Adding new employee groups helps open a credit union to the greater possibility of collaboration with other institutions, while adding an association can expand eligibility exponentially.

In addition to the new groups these credit unions are able to include, the charter further allows for expansion into underserved areas, a vital aspect for membership growth. “Often, you can actually get a larger community through multiple underserved areas than you could ever get as a community charter,” Brownell continued.

Adding underserved areas to a credit union’s FOM is a huge opportunity for growth, and one that credit unions need not sacrifice their initial mission to achieve. These expansions allow credit unions with employer-based fields of membership to preserve their original FOMs, while adding geographically defined communities.

CUCollaborate has helped guide several institutions through this process already. This past year, the company worked with LA Capitol FCU, a multiple common bond credit union in the New Orleans area, to reach more than 624,000 potential new members by adding underserved areas to its field of membership while maintaining their long-standing SEGs.

As Brownell puts it: “Field of membership can be a huge challenge for credit unions but determining the most strategic areas to serve can lead to great success.”

For many, the multiple common bond charter is the first step toward measured growth thanks to the various benefits offered by the FOM, which:

1) Allows credit unions to serve occupational and/or associational select groups;

2) Helps credit unions expand geographically;

3) Permits credit unions to preserve their identity while providing the benefits of a community charter;

4) Allows credit unions to add underserved areas to their fields of membership;

5) Helps facilitate collaboration—such as mergers and acquisitions—with other like-minded credit institutions.

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