ALEXANDRIA, Va.–NCUA has sent to Congress its report on Minority Depository Institution (MDI) credit unions—which represent about one in 10 federally insured CUs—saying they remain “well positioned to provide access to safe, fair, and affordable financial products and services within under-resourced communities.”
“The products and services MDI credit unions provide benefit their members and communities,” said NCUA Chairman Todd Harper in a statement accompanying the release of the new report. “They also further the broader vision of advancing economic equity and justice within the U.S. financial system. Their existence means an entrepreneur who might have been overlooked by other financial institutions gets the loan needed to start a business. It also means a young couple who live in an under-resourced neighborhood can begin saving for their child’s college education or to purchase a new home. And, it means a family has a way to learn financial management skills. Simply put, for millions of Americans, the work of MDI credit unions means they have a chance to build better and more secure financial futures.”
In short, added Harper, “the majority of MDIs are small credit unions (but) they punched above their weight. In fact, their performance in some categories was stronger than the credit union system overall.”
Overall Increases
MDIs reported $42.2 billion in loans outstanding in 2022, an $8 billion increase from the previous year. Assets and membership both increased. Net worth and return on average assets were also robust.
Harper also noted NCUA expanded its support for MDIs in 2022 and continued to look for ways to more effectively target its efforts, including finalizing plans to adjust its examination processes to recognize the “distinctive business model of MDI credit unions.”
“Based on that report and other research and discussion, the NCUA has laid out a plan for its MDI preservation activities in the future,” Harper continued. “One step has already been completed; at the agency’s request, Congress added the MDI designation as an eligibility category for 2023 Community Development Revolving Loan Fund funding.”
The agency noted federally insured credit unions self-designate as MDIs by affirming in the NCUA’s Credit Union Online Profile that more than 50% of their current members, the communities they serve, and their boards are from one or a combination of the four minority categories defined in FIRREA: Asian Americans, Black Americans, Hispanic Americans, or Native Americans.
MDI Financial Performance Highlights
According to NCUA’s new report:
- At the end of 2022, there were 503 federally insured credit unions designated as MDIs, about one in 10 of all federally insured credit unions. They were located in 35 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
- MDIs traditionally tend to be small institutions; at the end of 2022, the average MDI credit union held $128.6 million in assets. By comparison, average assets for all federally insured credit unions were $455.4 million.
Improved Performance
Generally, MDI credit unions saw improved financial performance metrics in 2022, in several categories outpacing growth in the credit union system overall, with NCUA noting:
- The 503 MDI credit unions reporting at the end of 2022 is a slight decrease from year-end 2021, when there were 509. This was largely due to mergers and credit unions no longer self-designating as MDIs. Over the course of 2022, 19 credit unions became newly designated.
- The 503 MDI credit unions served more than five million members, up from approximately 4.5 million in 2021. This represents an increase of 14.1% compared to the 4.4% membership growth in federally insured credit unions generally during the same period.
- Of those 503 MDI credit unions, 411 also held the low-income credit union designation, and 104 were certified as Community Development Financial Institutions.
Other Metrics
NCUA further noted:
- MDI credit unions’ total assets were $64.7 billion, up from $58.9 billion in 2021, an increase of 9.8% compared to the 5.2% growth in assets of all federally insured credit unions as a group during the same period.
- MDI credit unions reported $42.2 billion in loans outstanding compared to $34.2 billion in 2021, primarily concentrated in one-to-four-family unit first-mortgage loans ($15.7 billion) and vehicle loans ($14.7 billion). The loan growth rate, 23.2%, was slightly higher than the 20% growth in federally insured credit unions overall during the same period.
- The net worth ratio for MDI credit unions at the end of 2022 was 12.21%, higher than the credit union industry’s net worth ratio of 10.74% for the year.
- Return on average assets was 98 basis points at the end of 2022 compared to 89 basis points for federally insured credit unions as a whole.
- MDI credit unions had a delinquency rate of 73 basis points, slightly higher than the rate of 61 basis points for federally insured credit unions overall.
- MDI credit unions had a net charge-off rate of 39 basis points compared to 26 basis points for all federally insured credit unions.
- MDI credit unions had a loan-to-share ratio of 66.3% compared to 70.2% for federally insured credit unions overall.
- Of the 503 MDI credit unions reporting at the end of 2022, 480, or more than 95%, reported a net worth ratio of at least 7%, the statutory standard for a “well-capitalized” institution, which aligns closely to the 97% for federally insured credit unions overall.
MDI Preservation Activities in 2022
According to NCUA, during 2022, its support for MDIs included:
- Chartering two new MDI credit unions: WeDevelopment Federal Credit Union in Kansas City, Mo., and People Trust Federal Credit Union in North Little Rock, Ark.
- Approving field-of-membership expansions for 26 MDIs, thereby adding 833 new member groups or geographic areas and more than 7.7 million potential members.
- Providing $270,000 in technical assistance grants funded by the Community Development Revolving Loan Fund to 16 MDI credit unions. Appendix 2 has a complete list of MDI credit unions that received CDRLF awards in 2022.
- Awarding two of the three CDRLF small credit union and MDI mentoring grants of $25,000 each to MDI credit unions to support their partnerships with stronger, more experienced credit unions that provided technical and other assistance.
- Launching the Small Credit Union and MDI Support Program, which directed agency resources to identify the needs of these credit unions. The most common areas of assistance were examinations, staff training, and improving earnings in a rising interest-rate environment. NCUA said it dedicated 1,534 staff hours per region to this effort, and 136 MDI credit unions participated.
- Adding an MDI filter for financial performance reports, enabling users to search by the MDI designation.
- Facilitating contacts between MDIs and the Government National Mortgage Association for Ginnie Mae’s initiative for minority communities.
- Distributing information to credit unions designated as community development financial institutions, many of which are MDIs, about the Community Development Financial Institutions Fund’s Equitable Recovery Program(opens new window).
MDI Mentoring Cohort
According to NCUA, the 2022 MDI Mentoring Cohort included the four MDIs awarded MDI Mentoring Grants during 2021 and their three mentors, one of which was also an MDI.
NCUA launched its MDI Mentoring Grants program in 2019, funded through the agency’s CDRLF appropriation.
“Mentoring grants have facilitated the ability of small, low-income MDIs to establish support relationships with stronger, more experienced low-income credit unions that provide expertise and guidance in serving low-income and underserved populations,” the agency said. “Making recommendations on building staff capacity and expanding membership.
The cohort held quarterly video conferences where the credit unions could hear from NCUA subject-matter experts and guest speakers and discuss successful strategies in meeting their goals. Mentees also participated in the ‘Federal Funding Sources for MDI and Other Credit Unions’ webinar, a joint presentation of the NCUA and the Community Development Financial Institutions Fund.
Training and Education
NCUA said its Learning Management System is an online service providing training at no cost to credit union board members, management, and staff.
The LMS offers on-demand courses that cover topics like management and governance, operations, regulations, and federal programs. During 2022, 109 LMS users who were affiliated with MDI credit unions accessed content there.
In addition to online education, the agency hosted seven webinars on topics of particular interest to MDIs, the agency said.
For additional information: Office of Credit Union Resources and Expansion
It’s Called Fresh for a Reason. And We Offer Home Delivery. For Free!
The biggest, best and freshest news reporting in credit unions remains free in ’23! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more.
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com