A group of seven Michigan-based credit unions have formally applied with the Michigan Department of Insurance and Financial Services to establish a new limited purpose financial institution that will provide trust services primarily to credit union members.
The proposed entity that will manage these services will operate as “Credit Union Trust.”
If the application is accepted, it will be followed by a review period of up to 100 days, after which organizers anticipate their application being approved. Principals involved in the project are targeting an opening a formal opening for Q1 2019.
"We have a long way to go and there's much work to be done, but we're very pleased and excited to be moving along in the application process," stated Scott McFarland, CEO of the $894 million Honor Credit Union of Berrien Springs, and spokesman for the organizers of Credit Union Trust. "We'll be working closely with state regulators to meet all requirements and we look forward to being approved."
The organizers are all executives with the following seven credit unions:
- Alpena Alcona Area Credit Union ($339 million in assets; based in Alpena, Mich.)
- Community Choice Credit Union ($1.08 billion; Farmington Hills)
- ELGA Credit Union ($605 million; Burton)
- Frankenmuth Credit Union ($621 million; Frankenmuth)
- Honor Credit Union($894 million; Berrien Springs)
- Members First Credit Union ($491 million; Midland)
- Team One Credit Union ($515 million; Saginaw).
Upon approval, Credit Union Trust will become the first such entity in Michigan organized by credit unions established to primarily serve the needs of credit union members. It will be headquartered in Farmington Hills, Mich. Robert Sajdak, a former senior executive at Comerica bank, has been named CEO in the application.
Credit Union Trust is intended to be a limited purpose, state-chartered institution that will offer investment and trust services primarily to members of credit unions. Though technically a bank, it is also a credit union service organization that will be equally owned by the founding credit union shareholders.
In addition, Credit Union Trust will be a Michigan banking corporation, subject to federal and state income taxes, as well as any other taxes that a Michigan banking corporation would be subject to, however, Credit Union Trust will not accept deposits or make loans.
Though a bank, Credit Union Trust will not be insured by the FDIC and will not be a member of the Federal Reserve. It will be regulated by the State of Michigan’s Department of Insurance and Financial Services, Bank & Trust Division.
"This is an important step for Michigan's approximately 5.23 million credit union members and the industry as a whole. 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," McFarland added.
He added that the Michigan legislature explicitly authorized the formation of such entities as Credit Union Trust in 2016 when Gov. Rick Snyder signed into law updates to Michigan's Banking Code and Credit Union Act.
”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," McFarland said.