CU Expansion to Serve the Underserved

Community credit unions typically must serve a well-defined community, neighborhood or rural district, but there are exceptions. One such exception is for “underserved” areas. A federal credit union may be allowed to expand outside its defined area if the target area is an “investment area” (as defined in the Community Development Banking Act) and is underserved by other financial institutions (as defined by the Federal Reserve Act).

During the course of calendar 2021, each of the credit unions listed on page 7 expanded their possible membership using this exception.

For example, 4-Star Affinity Plus FCU, Saint Paul, MN the first credit union listed, had 227,703 members at September 30, 2021 (out of a possible 5.6 million). During the fourth quarter, it expanded its Field of Membership (FOM) to include White Earth Indian Reservation, that spans all of Mahnomen County and parts of Becker and Clearwater counties, all in northwest Minnesota. This expansion gave Affinity Plus almost 10,000 new potential members.

White Earth Reservation is already home to 1-Star White Earth Reservation FCU, Mahnomen, MN which is open to anyone who lives or works on the reservation. White Earth Res. FCU has been in operation since 1966 and has 1,444 members. These are from the same pool of potential members that Affinity Plus is now dipping into.

You will notice that some of the credit unions on page 7 are listed more than once. That indicates the expansion into underserved areas covers more than one state.

In the first quarter 2021, 5-Star Carolinas Telco FCU, Charlotte, NC expanded to include underserved areas of South Carolina that spanned 148 census tracts in eight counties. Then, in the second quarter, it expanded more in its home state of NC adding 49 additional census tracts in Gaston County.

Similarly, 5-Star Orion Federal C.U., Memphis, TN expanded into neighboring states, but was able to do it in one transaction. That’s because all of its new territory (214 census tracts) belongs to the Memphis, TN-MS-AR Metropolitan Statistical Area (MSA).

Then there are others that decided to spread their wings farther than next door. 5-Star Service 1 FCU is headquartered in Muskegon, MI but also operates in Missouri and Alabama. Its 87 new tracts consist of “a portion of a single political jurisdiction” in Alabama.

And let’s not skip over 4-Star New Orleans Firemen’s FCU (NOFFCU), which operates in Louisiana and neighboring Mississippi. Founded in 1934, NOFFCU is the second oldest federally-insured credit union still in operation in the United States today. In the fourth quarter 2021, NOFFCU successfully completed five separate transactions providing access to over 500 new underserved tracts, 401 in Louisiana and 117 in Mississippi.

Combined, the 31 credit unions listed on page 7 added the potential to service over 23 million new members. (For reference, federally-insured credit unions added 4.9 million members in the 12 months ended 9/30/2021 for a total of 128.6 million.)

That’s great news for the new regions they are expanding into. It will give some consumers a broader selection for their banking needs and will provide others with a place to bank period.

Municipal Credit Union Returned

In a rare twist of fate, the NCUA released Zero-Star Municipal Credit Union, NY, NY from conservatorship on Tuesday (2/23/22) and returned control to its members.

There’s been a lot going on, so let’s recap:

2018: Kam Wong, CEO was terminated after being arrested for fraud and embezzlement.

2019: Regulators take control of the then $3 billion asset Municipal Credit Union.

2019: After pleading guilty, Kam Wong was convicted on charges of defrauding the credit union out of nearly $10 million and was sentenced to 66 months in prison + 3 years supervised parole.

2020: Undercapitalized with a capital ratio dipping to 4.41%, Municipal CU employees take pay cuts to help get the credit union back on solid footing.

2021: Capital ratios begin to climb again and the CU gains “adequately capitalized” status.

2022: Conservatorship ends and Municipal CU is returned to its members.