Branching Authority of Federal Credit Unions

Can’t stop the feeling of wanting to branch out, but are afraid you may have to have an Act of Bergen’s to do so? Well, what if I told you that spreading your wings may not be as difficult as one may think? I’m not trolling you.

Doesn’t appear that Branch liked that quip. Nonetheless, NCUA opines that Federal Credit Unions are not required to ask the agency for permission to expand into new geographical areas, subject to a few limitations. This NCUA opinion letter tackles such limitations:

“An FCU does not need NCUA authorization to expand into new branches. The letter and the Chartering Manual address “significant portion” as it relates to “planned service facilities,” that is, a proposed branch for the purpose of field of membership expansion. Chartering Manual, Chapter 2, Section II.A.1. In the Chartering Manual, the NCUA Board expressed its concern with the safety and soundness of opening branch offices where there were few existing members to be served. The underlying purpose of this policy is to prevent FCUs from using field of membership expansion as a primary reason for planning new branches. If an FCU wants to use a proposed branch to expand field of membership, then the Board will require that “[t]he current field of membership constitutes a significant portion of the total field of membership to be served initially by the proposed facility.” Chartering Manual, Chapter 2, Section II.A.1. Consequently, if an FCU opens a new branch without having met the “significant portion” requirement, NCUA may restrict the credit union’s ability to add new groups within the new branch’s operational area.”

This excerpt reads promising, but a credit union should be sure to understand the nuance of its seemingly unfettered branching power.

Tough crowd… For the record, a federal credit union does not need NCUA approval to service existing members by opening a new branch. In practice, if your credit union decides it wants to relieve the headquarters branch from heavy customer traffic by opening a branch in another area of Troll Forest, NCUA will likely not have to be notified.

However, if a federal credit union’s sole purpose for opening a branch is to expand its field of membership, then this triggers a few responsibilities. A credit union must determine whether a significant portion of existing members will be served by the proposed branch. If the “significant portion” (determined by the credit union’s NCUA’s regional office) prong is not met, then NCUA may restrict the credit union’s ability to add new groups of members in the new branch’s operational area.

Federal Credit Unions looking to expand their field of membership should review the prescribed ways of doing so. At its inception, a federal credit union’s charter defines its field of membership. If a credit union chooses to expand its field of membership, then it must apply to amend its charter to get the changes approved by NCUA. Opening a new branch for the sole purpose of expanding its field of membership likely inappropriately circumvents the application process found in NCUA’s Chartering and Field of Membership Manual.

Feel free to reach out to America’s Credit Union’s Compliance team for any questions.

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