Credit Unions Forming Bank to Offer Investments

Seven Michigan credit unions have proposed forming a bank that will allow them to provide investment and trust services directly to credit union members.

The hope to open their bank, to be called Credit Union Trust, in the 2019’s first quarter in a leased office in Farmington Hills, Mich. Their application was accepted in July by Michigan regulators and its approval is expected within about three months under a recent Michigan law that allows the creation of a state-regulated, limited-purpose bank able to act as a fiduciary.

“To our knowledge, ours is the first such application for a limited purpose financial institution—owned by credit unions to serve members—that has been made in Michigan,” said Scott McFarland, president/CEO of Honor Credit Union, a southwest Michigan credit union that is one of the seven founders.

Credit Union Trust will not accept deposits or make loans. Instead, it will offer investment and trust services primarily to members of credit unions.

Credit Union Trust will also be a CUSO that will be equally owned by the founding credit union shareholders. As a CUSO, the majority of its customers will be credit union members.  It will also offer investment management solutions for foundations, not-for-profit entities and other community-based entities.

The bank will be regulated by the State of Michigan’s Department of Insurance and Financial Services, Bank & Trust Division. It will not be insured by the FDIC and will not be a member of the Federal Reserve.

“This is an important step for Michigan’s approximately 5.23 million credit union members and the industry as a whole,” McFarland said. “Over the years, many members have asked for trust services under the umbrella of our local, community-based credit union co-op model, and now we hope to be able to serve them. Presently those members are forced to go elsewhere.”

Prospects include credit union members who need the services of a fiduciary, investors, exceptional savers, high net worth individuals, individuals who could benefit from financial planning, and people with more complex financial matters, according to a news release from the organizers.

The CEO will be Robert A. Sajdak, an attorney with over 40 years of trust experience in a bank setting. He spent 35 years at Detroit’s Comerica Bank until 2012. He was the senior vice president and group business manager for its traditional personal trust activities and for strategic trust alliances with brokerage firms.

The seven Michigan credit unions, which collectively have $4.5 billion in assets and 429,578 members, are:

• Honor Credit Union, Berrian Springs ($878.8 million in assets, 78,620 members)
• Community Choice Credit Union, Farmington Hill ($1.1 billion in assets, 97,672 members)
• Alpena Alcona Area Credit Union, Alpena ($339.2 million in assets, 28,375 members)
• Elga, Burton ($596 million in assets, 69,943 members)
• Frankenmuth, Frankenmuth ($602.5 million in assets, 42,639 members)
• Members First Credit Union, Midland ($488.2 million in assets, 62,268 members)
• Team One Credit Union, Saginaw ($515 million in assets, 50,061 members)