ORLANDO—New NCUA field of membership rules have dramatically slowed the trend of federal charters converting to state charters, NASCUS reports.
As CUToday.info has shared, in recent years conversions of federal CUs to state charters has far outpaced state-to-federal shifts. But NASCUS President and CEO Lucy Ito told attendees at the NASCUS 2018 Summit that NCUA’s new FOM rules have stalled the migration to state charters, and annual numbers now indicate that movement from state to federal and vice versa are almost identical.
“From 2012 to 2015 there was a marked conversion of federal credit unions to state, and the reason was due to greater growth opportunities from a state charter over federal,” said Ito. “In that period of high federal-to-state conversions, I think we saw only eight CUs changing to a federal charter. In that same time 40 federal credit unions went to a state charter.”
But in 2016 and 2017, that trend virtually stopped, said Ito, explaining that many credit unions said they were waiting to see what NCUA’s new field of membership rules would deliver following the agency’s announcement the new rule was coming.
“Yes, we saw an abrupt change,” Ito told the meeting. “We saw, in 2106, five switch to federal and four switch to state. And, in 2017, 24 state credit unions switched to federal.”
That seems like a huge reversal of a trend, noted Ito about 2017 numbers. However, she added that 15 of those 24 conversions occurred in Mississippi, which had enacted state rules unfavorable to CU state charters.
“Take out those 15 and you see that the conversion rate from both sides now is virtually equal,” Ito said. “In 2018, so far, there are no conversions in either direction.”
'Not A Contest'
Ito emphasized that what is happening between state and federal CUs is “not a contest,” and she applauded NCUA for making the FOM rule changes.
“But this is a wake-up call for state field of membership rules. We need to look at our chartering rules and interstate branching laws,” said Ito, noting that NASCUS is focusing on promoting interstate branching at the national level.”
Ito emphasized that the dual chartering system is “alive and well,” and “working as it should be.” She reviewed data that reflects what she termed a balance between state and federal credit unions, and dispelled some “myths”:
- There are 2,169 state CUs Vs. 3,477 federal
- Ito said people are typically “shocked” when they learn the percentage of overall CU assets is similar among state and federal credit unions—
51% federal and 49% state
- Federal CUs claim 52% of the industry’s membership, state’s 48%
- State credit unions account for eight credit unions above $10 billion in assets, with three close to surpassing that mark