NCUA’s Low Income Designation Initiative Brings New Capacity & Focus to Building Financially Independent Communities Through CUs
(New York City, NY October 30, 2012)
A recent National Credit Union Administration initiative aimed at expediting and pre-approving the Low Income Designation for eligible credit unions has dramatically expanded the number of Low Income Designated (LID) Credit Unions to 1,874, up from 1,169 in June 2012. That represents an increase of over 60% in the number of low-income credit unions (LICUs). So far 676 of the 1,003 credit unions that were informed by NCUA about their eligibility have accepted the designation. As a group, the newly low-income designated credit unions serve more than 12 million members and have more than $105 billion in combined assets.
“We applaud NCUA’s leadership in facilitating this important designation for credit unions that serve low and moderate income communities, which provides valuable tools to better serve their existing and future members” said Cathie Mahon, CEO of the National Federation of Community Development Credit Unions. “Bringing safe and affordable credit union services to these markets will yield significant impact in helping to build financially healthy and sustainable communities” Mahon added. “This significant expansion of LID credit unions also underscores the opportunities the growing number of unbanked and under-banked consumers represent for the future and relevance of the credit union system” Mahon concluded.
The newly designated LICUs serve communities throughout the country, and vary in size. There are now 16 credit unions (up from only 4 before) with over $1 billion; 19 CUs between $500 million and $1 billion (up from 7) and 199 CUs between $100 M and $500 M (up from 101). These are high capacity institutions that will have a positive and lasting impact in the communities they serve.
Aaron Bresko, SVP/Chief Lending Officer at newly designated LICU GTE Financial, a $1.5 billion credit union serving over 180,000 members in Tampa, FL, says “We are excited at the opportunity to work with the Federation to better meet the needs of LMI members in our communities. The goals of the Federation align with our mission and core to credit union values”.
“Local Government Federal Credit Union looks forward to exploring the opportunities this new designation will provide,” said Bill Carter, LGFCU’s VP, Commercial Lending. “This allows us to continue our efforts to improve the lives of our members and the communities in which they live across North Carolina through future economic and community development initiatives, and other credit union services.” “We are proud to join the Federation and look forward to leveraging their expertise to do this work” He concluded.
To obtain the LICU designation, a credit union must demonstrate that a majority (at least 50.01%) of its members are low-income as defined in Section 701.34 of the NCUA Rules and Regulations (earn 80% or less than the median family income for the metropolitan area where they live or national metropolitan area, whichever is greater).
The Low Income Designation has significant regulatory benefits for these credit unions including:
- The right to accept non-member deposits from any source
- The right to accept supplemental (secondary) capital Exemption from the MBL limit of 12.25% of assets
- Exemption from the MBL limit of 12.25% of assets
In addition, eligible low-income credit unions have access to:
- NCUA's Community Development Revolving Loan Program, which provides loans and Technical Assistance grants
- Technical Assistance by NCUA's Economic Development Specialists (EDS)
- Resources and expertise developed by the National Federation of Community Development Credit Unions to help credit unions serve LMI consumers
The Federation and CUNA have partnered together to present a series of webinars to educate executives at the newly designated LICUs on the benefits surrounding this new opportunity. "We look forward to working with low income designated credit unions, NCUA and CUNA to share the expertise and resources the Federation has developed over almost 40 years of working with credit unions serving economically vulnerable populations" said Pablo DeFilippi, Director of Membership for the Federation which is the primary credit union industry CDFI intermediary investing secondary capital, nonmember deposits, nominee deposits and other resources in LICUs.
"If all 1003 eligible credit unions accept the designation, then approximately a third of the entire credit union system would be low income designated. LICUs would then serve 17 million members and have assets of over $140 billion" said Mahon. "Since the NCUA fast track initiative is only aimed at federally chartered credit unions, there are potentially hundreds of additional eligible credit unions that are state chartered. NCUA has announced plans to work with state regulators to replicate the fast track approach to them. We're certainly looking at a transformation of our industry," Ms. Mahon concluded.
© 2012 National Federation of Community Development Credit Unions.