Credit Union Charter Conversion
Converting your credit union charter can be daunting and without the right guidance can become cumbersome.
Interested in Converting?
The CUCollaborate team is dedicated to helping you expand your field of membership to the largest extent possible. We will walk you through the process of converting your charter as well as outline the benefits of the options available to you.
Call us today at (202) 831-2500 or fill out the form to learn more about how we can help expand your field of membership.
“We first tried two other consultants, but it was only after we engaged CUCollaborate that we were able to accomplish our conversion back to a FCU with a community charter. Because our community incorporated part of two MSAs and we also have a low-income designation, it made our request a bit more complex, but in the end CUCollaborate's approach was able to get the job done!”
President/CEO, Best Reward Federal Credit Union
Is Your Charter Type Still Working?
Credit unions must re-examine their big-picture needs from time to time, and that often leads to the question of whether you’re operating under the appropriate charter. It may have worked in the past, but will it take you where you want to go? Community charter or multiple common bond? State or federal? Given the changes in your business, the economy and regulations, it’s a good idea to look into all of these questions occasionally.
Market and Opportunity Assessment
Making the Switch
It’s a big investment of time and money to convert. When a state-chartered credit union converts to a federal charter, they are treated the same as any application for a federal charter. The NCUA will perform an on-site examination as appropriate and consult with the state regulator regarding the credit unions financial condition, management expertise and past performance.
When a state charter applies to convert, the credit union must:
- File proof that it is in compliance with state laws through the application process as well as the NCUA
- Submit the required conversion application, proposed federal credit union organization certificate, and other documents with NCUA
- Comply with the Federal Credit Union Act regarding chartering and reserve requirement.
- Be granted insurance through the National Credit Union Share Insurance Fund
You can download our helpful state to federal conversion checklist to help you convert from a state-chartered credit union to a federal charter credit union.
Federal Charter to State Charter
A Localized Approach
Even though the NCUA recently opened up some of its field of membership options, some credit unions may still find a state charter better suited to their strategy and needs. In addition, some state credit union field of membership regulations include a parity clause that allows credit unions chartered in that state to follow the federal FOM regulations if they provide greater authority than the state regulation.
In the first quarter of 2019, two federal credit unions converted to state charters with total assets of nearly $1.3 billion, while one credit union converted to a federal charter, totaling $149 million in assets. Late last year, CUCollaborate covered Merrimack Valley Credit Union’s conversion to a state charter and why it made sense for their future.
When a federal charter applies to convert, the credit union needs to submit the following:
- A current financial report
- A current delinquent loan schedule
- An explanation and appropriate documents relative to change in insurance
- A resolution of the board of directors; a proposed Notice of Special Meeting of the Members (NCUA 4221)
- A copy of the ballot to be sent to all members (NCUA 4506)
- Evidence that the state regulator is in agreement with the conversion proposal
- A statement of reasons supporting the request to convert
Learn more about converting from a federal charter to a state charter. We will outline it step by step for you!
Federal Community Charter to Multiple Common Bond
For Those That Want to Expand
A federal credit union may be chartered to serve a combination of distinct, definable single occupational and/or associational common bonds. This type of credit union is called a multiple common bond credit union. Each group in the field of membership must have its own occupational or associational common bond. For example, a multiple common bond credit union may include two unrelated employers, or two unrelated associations, or a combination of two or more employers or associations. Additionally, these groups must be within reasonable geographic proximity of the credit union. You will want to research the benefits of converting to a multiple common bond.
A credit union wishing to convert to a federal multiple common bond from a community charter will need the following:
- A cover letter to Martha Ninichuck
- A board resolution approving the request
- The appropriate version of form 4015
- Documentation for adding an underserved area
You can download our helpful conversion checklist to help you convert from a federal community charter credit union to a federal multiple common bond charter credit union.