As the charter of new credit unions accelerates after the pandemic has slowed this activity, newcomers must take a different approach to the market that emphasizes digital access and financial fairness.
The country’s newest credit union – Community First Fund Federal Credit Union in Lancaster, Pa. – intends to build equity through wealth-building opportunities for individuals and families, especially Afro- Americans, Latinos, immigrants and women, according to its mission statement. The credit union will serve the community of approximately 550,000 residents of Lancaster County.
Plans for the credit union have been in the works for three years, according to Joan Brodhead, senior executive vice president and director of strategic initiatives at Community First Fund FCU. Although the founders considered delaying plans due to the pandemic, they ultimately decided they had the capital in place and needed to move forward.
Brodhead said the COVID-19 lockdowns have also highlighted the economic divide between most Americans and those without access to traditional banking services, which has made the idea of ââputting the co-op even more important. credit in place and operate quickly.
âI think the pandemic highlighted some of the disparities there and continued to focus on thinking it was the right thing to do at the right time,â she said.
Like many other organizations, credit unions learned during the pandemic that not all employees need to be on-site, and they’ve also learned how to better serve members remotely, said Geoff Bacino, consultant for credit unions and former member of the board of directors of the National Credit Union Administration.
These lessons will be invaluable for all groups looking to start new credit unions, Bacino said. Investors now have a better roadmap of the appropriate steps to take to move from the drawing board to the brick and mortar.
“The three currents [NCUA] the members of the council are all in favor of the creation of new charters, âhe declared. âBoard membership is key to making this process go smoothly. “
Two have been chartered so far this year. The NCUA granted a federal charter to Community First Fund FCU on June 30; and the chartered regulator Maun Federal Credit Union in Kendall Park, New Jersey, in May.
The key for many credit unions will be their digital capabilities, said Vincent Hui, chief executive of Cornerstone Advisors.
This doesn’t mean that branches are going to disappear, but that credit unions will have more flexibility in how they think about channels – new organizations can look at their capabilities with a fresh look at their target membership area and not fall back. get bogged down by legacy things like branch office networks and old systems, Hui said.
âHowever, I wouldn’t expect a tidal wave of new credit unions, as it still takes a lot of time and resources to successfully launch a de novo project,â he said.
New federal credit union charters have been rare in recent years. There was a new credit union launched in 2020, and only 10 have started operations since 2017.
One of two new charters granted by the NCUA in 2019 was for the Maine Harvest Federal Credit Union, which now holds $ 3 million in assets.
Scott Budde, president, CEO and co-founder of the Unity, Maine-based credit union, said he was not sure the current economic environment is conducive to the formation of more credit unions.
âI guess we’ll see less of it,â he said. âBut I really think we’ll see another wave of consolidation due to the pressure on margins. Decreases in [net interest margin] are the worst for the industry in decades.
Maine Harvest loans are limited to commercial agricultural loans. The organization put the first loan on the books in March 2020, which Budde said was “good timing” due to the pandemic.
âI think the hardest thing for us to get started was the sudden and unfavorable change in the interest rate environment,â he said. âWe have a very restricted investment policy which, in this environment, reduces our investment income to almost nothing. “
As the second credit union established this year, Community First Fund FCU’s scope of membership is initially limited to Lancaster County. The group is considering growth in other nearby markets where it already has credit operations. Construction of its first branch in Lancaster will begin later this month and it is slated to open later this year.
The sponsor of the credit union is the Community First Fund, a private, independent, non-profit community development finance institution whose mission is to provide capital in places where it is not generally available. CDFI already provides commercial loans in 20 counties in Pennsylvania, New Jersey and Delaware.
In its first year of operation, Community First Fund FCU will provide its members with regular stock and stock drafts accounts, direct deposits and vehicle loans, among other products and services.
Until the NCUA grants it a low-income credit union designation, the credit union will offer deposits to non-members, Brodhead said. The credit union is still developing specific products, but will have minimum balance requirements and modest fees.
âWe’re definitely going to encourage people to take financial literacy training,â Brodhead said.
She added that there is a lot of mistrust of financial institutions among the unbanked and underbanked population, so part of the credit union’s job will be to change that.
Lancaster has a population of 50,000 and the poverty rate is around 30%. the hispanic The population represents around 35% of the city’s population and is marked by largely under-banked consumers.
Almost 100% of Community First Fund FCU’s executive committee and the vast majority of the management team have experience in credit unions and / or banks. âSo we knew exactly what the regulatory world was going to expect,â said Brodhead.