The case for the multiple common bond credit union charter
The landscape of credit union chartering has evolved, and one charter type stands out for its performance, growth potential, and strategic advantages: the Multiple Common Bond (MCB) charter. While community charters have traditionally been favored for their seemingly expansive reach, MCB credit unions are proving themselves as a better, more adaptable option. In fact, most of the largest and fastest-growing credit unions in the country operate under this charter, capitalizing on its unique benefits.
This article explores why credit unions with a multiple common bond charter are outperforming community charters and how they offer unparalleled opportunities for organic and inorganic growth.
Multiple Common Bond vs. Community Charters: A Performance Edge
Data from 2010 to 2020 reveals a clear trend: multiple common bond credit unions consistently outperform their community charter counterparts across several key metrics.
Growth
MCB credit unions have shown higher growth rates than community charters. Adjusted for mergers, MCBs grew at an average rate of 6.4%, compared to 6.0% for community charters. When adjusted for inflation, the difference becomes more pronounced, with MCBs growing at 4.7% versus 4.2% for community charters. This suggests that MCBs are more effective at expanding their reach and services to their communities.
Loans and Member Service
MCB credit unions are more engaged in lending, with 65.1% of their assets allocated to loans, compared to 62.3% for community charters. This means MCBs are better at meeting the credit needs of their members, offering more loan products, and at better rates than both banks and community charter credit unions.
Financial Strength
MCBs also demonstrate greater financial resilience. They maintain a higher net worth as a percentage of assets (10.69% vs. 10.58%) and offer superior benefits on loans (0.79% vs. 0.56%) and deposits (0.32% vs. 0.25%). Additionally, MCBs operate more efficiently, with lower non-interest expenses (3.18% vs. 3.42%) and spend less on marketing (0.109% vs. 0.128%), growing faster without excessive spending on member acquisition.
Member Conversion
One of the most striking findings is that MCB credit unions are able to convert potential members into actual members more effectively. Community charters have a much larger pool of excess potential members (3,550% of actual members) compared to MCBs (868%). This suggests that community charters struggle to convert potential members, while MCBs thrive with smaller FOMs but better conversion rates.
The data tells a clear story: MCB credit unions are more efficient, better at serving their communities, and more financially solid than community charters.
The Largest Credit Unions are MCBs
When looking at the largest credit unions in the U.S., it’s no coincidence that nearly all of them operate under Multiple Common Bond charters. The flexibility and scalability of the MCB charter make it an ideal vehicle for credit unions to expand beyond their original member groups and grow into regional or national institutions.
MCB credit unions have the unique advantage of being able to serve multiple employers, associations, and communities, simultaneously, giving them access to diverse populations and market segments. This contrasts with the limitations of community charters, which are confined to serving a defined geographic area. The ability to expand across communities, industries, and other affiliations gives MCB credit unions a competitive edge, allowing them to serve broader markets without losing focus on their members.
This expansive potential is one reason why the largest credit unions in the country are MCBs. Their charter allows them to scale more easily, integrate different member groups, and diversify their portfolios, which leads to sustainable, long-term growth.
MCBs Can Leverage Underserved Areas for Larger Fields of Membership
One of the lesser-known, but highly valuable, advantages of multiple common bond credit unions—especially federally chartered ones—is their ability to serve larger communities than even community charters. By leveraging underserved areas, particularly underserved rural districts, MCB credit unions can expand their field of membership (FOM) far beyond what a community charter can typically achieve.
Federal MCB credit unions have the flexibility to add an unlimited number of underserved areas to their FOM. Each of these underserved areas must meet specific criteria, such as being economically distressed or underserved by depository institutions. However, once these areas are identified, they can be added to the FOM, significantly broadening the credit union’s reach.
For example, a credit union that serves a well-defined local community under a community charter may be confined to a specific geographic area. In contrast, an MCB credit union can continuously expand by incorporating underserved areas, enabling it to cover entire regions, sometimes even across state lines. This strategy allows MCBs to serve more members in need of financial services and penetrate deeper into markets where other charter types may struggle to reach.
This approach also rewards MCBs that are committed to providing financial services to communities that have been historically underserved. By focusing on areas that lack access to adequate banking services, MCBs can not only grow their membership but also fulfill the core credit union mission of serving the financial needs of their communities.
MCBs Can Partner with National Associations to Expand Membership Eligibility
Another significant advantage of MCB credit unions is their ability to partner with associations that have a national reach, making it easier for prospective members to qualify for credit union membership. Under an MCB charter, a credit union can add associations to its field of membership (FOM), allowing consumers to become eligible to join the credit union by first becoming members of the association.
This strategy is particularly useful for credit unions looking to expand their membership base beyond traditional employment or geographic ties. By joining the association, a consumer becomes eligible to join the credit union, regardless of where they live or work. Additionally, associations that operate on a national scale—such as professional groups, alumni networks, or even special interest organizations—offer a ready-made pool of potential members that a credit union can tap into.
These partnerships are especially powerful tools in areas such as:
Indirect Lending
In the competitive space of auto loans and other types of consumer lending, credit unions can leverage association memberships to reach more borrowers. By partnering with dealers or other indirect lending channels, a credit union can offer loans to consumers nationwide, making them eligible for membership via their association partnership. This removes traditional geographic or occupational barriers, allowing the credit union to serve a much broader market.
Fintech Partnerships
Fintech companies often need financial institution partners to offer banking services to their users. MCB credit unions, with their ability to easily expand their FOM through association partnerships, are in a prime position to work with fintechs. A fintech can direct its users to join a specific association, which then makes them eligible for membership in the credit union. This arrangement can help fintechs offer more comprehensive financial products to their users, while the credit union benefits from the increased scale and loan origination potential that comes from these partnerships.
These association partnerships create a seamless process for consumers to gain eligibility for membership, offering the credit union a scalable and flexible way to grow. It’s an innovative approach that allows MCB credit unions to stand out in today’s financial landscape, unlocking new opportunities for growth, especially in sectors like indirect lending and fintech collaboration.
MCBs Are Well-Positioned for Aggressive Growth Through M&A
One of the biggest advantages of multiple common bond credit unions, particularly federally chartered ones, is their ability to grow aggressively through mergers and acquisitions (M&A). MCB credit unions are uniquely positioned to voluntarily merge with credit unions from any charter type, be it community, SEG, or another MCB, giving them greater flexibility in expansion. This capability is not as easily leveraged by other charter types, which are often confined by geographic or FOM constraints.
Moreover, federal MCB credit unions can go beyond voluntary credit union mergers—they can also buy banks. The path to acquiring banks gives MCBs another powerful growth avenue, allowing them to tap into new markets and serve broader demographics while increasing their asset base. This is a huge competitive advantage, especially in today’s financial landscape where credit union-bank mergers are becoming more common.With the ability to merge across charter types and even acquire banks, MCB credit unions are in a prime position to continue expanding aggressively and sustainably, growing both their membership and financial impact.
Conclusion
When looking at the credit union landscape today, it’s clear that multiple common bond charters are a superior option for credit unions seeking sustainable growth and flexibility. From outperforming community charters in financial and operational metrics to offering pathways for mergers and acquisitions, MCB credit unions are better positioned to thrive in a competitive market.
Whether through organic growth, strategic mergers, or acquisitions, MCBs have proven their ability to serve larger and more diverse communities while maintaining financial strength. As the industry continues to evolve, MCB credit unions will likely continue leading the charge in terms of both size and service. If you’re considering ways to expand your credit union’s reach and impact, the multiple common bond charter could be the key to unlocking your potential.
CUCollaborate is a challenger consultancy that champions credit union growth through disruptive innovation.
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