Chartering a New Credit Union: Insights from Industry Experts
In a recent episode of the "With Flying Colors" podcast, host Mark Treichel sat down with Keith Stone, CEO of The Finest Federal Credit Union and New Jersey PBA Federal Credit Union, and Rick Mumm, former NCUA examiner and current credit union consultant. Their discussion provided valuable insights into the process of chartering a new credit union and the challenges faced along the way.
The podcast episode is summarized below or you can listen to the entire episode HERE
Key Takeaways:
1. The Importance of Capital and Proof of Concept
Keith Stone emphasized that starting a new federal credit union requires both proof of concept and sufficient capital. The proof of concept demonstrates that there's a specific group of people who need financial services they're not currently receiving. The capital requirement is crucial, as it shows the NCUA that the organizers have "skin in the game" and helps cover initial losses as the credit union establishes itself.
2. Navigating the NCUA Charter Application Process
Rick Mumm highlighted the complexities of the NCUA charter application process. He stressed the importance of understanding "NCUA speak" - the specific language and format the agency expects in applications. Mumm's expertise in translating credit union plans into NCUA-friendly language proved invaluable in expediting the charter approval for the New Jersey PBA Federal Credit Union.
3. Leveraging Shared Services
One innovative approach discussed was the use of shared services agreements between credit unions. Keith Stone explained how The Finest FCU and New Jersey PBA FCU share back-office operations, allowing them to achieve economies of scale and reduce costs. This strategy can be particularly beneficial for new credit unions looking to manage expenses while establishing their operations.
4. Serving Niche Communities
The podcast highlighted the importance of credit unions serving specific communities. Keith Stone shared inspiring stories about how The Finest FCU serves law enforcement personnel, including offering affordable loans to help new police recruits purchase required equipment. This demonstrates how credit unions can fill crucial gaps in financial services for niche communities.
5. The Ongoing Challenges of Credit Union Management
Both guests emphasized that the work doesn't stop once a charter is obtained. Ongoing challenges include maintaining safety and soundness, following regulatory guidelines, and continually adapting to meet member needs. Keith Stone's commitment to providing responsive, member-focused service was particularly noteworthy.
Conclusion:
Chartering a new credit union is a complex process that requires careful planning, sufficient resources, and a deep understanding of regulatory requirements. However, as the success of The Finest FCU and New Jersey PBA FCU demonstrates, it can be a rewarding endeavor that provides vital financial services to underserved communities.
For those considering chartering a new credit union, the insights shared in this podcast episode provide a valuable roadmap. From navigating the application process to implementing innovative operational strategies, the experiences of Keith Stone and Rick Mumm offer practical guidance for aspiring credit union organizers.
As the financial services landscape continues to evolve, new credit unions have the potential to play a crucial role in serving niche communities and promoting financial inclusion. By learning from the experiences of successful credit union leaders and leveraging expert knowledge, future organizers can be better prepared to overcome the challenges of chartering and operating a new credit union.
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