The Value Of A Low-Income Designation

Why Suncoast Credit Union took on a low-income designation and how it plans to tap the benefits that designation provides.

Founded in 1934 as a cooperative for teachers in Florida’s Hillsborough County, Tampa-based Suncoast Credit Union now has more than 588,000 members, more than 50 branches, and $5.8 billion in assets. When the credit union converted from a federal to a state charter in late 2013, executives discovered the institution qualified for a low-income designation because more than 50% of its membership resides in a low-income area. With this new designation came the benefits of secondary capital accounts, exemption from member business lending caps, access to various types of government assistance, and a gateway to community development financial institution (CDFI) designation.

Julie Renderos is the credit union’s executive vice president and chief financial officer. Here, she discusses how the credit union discovered it qualified as a low-income institution and how it plans to make the most of this designation for its members.


Suncoast Credit Union

  • HQ: Tampa, FL
  • ASSETS: $5.8B
  • MEMBERS: 588,818
  • 12-MO SHARE GROWTH: 4.52%
  • 12-MO LOAN GROWTH: 6.62%
  • ROA: 1.30%

I first heard about the low-income designation several years ago when the NCUA published an initial list of credit unions that met the criteria. At that time Suncoast was not on the list, but when we switched from a federal charter to a state charter, we learned NCUA looks at whether you qualify for the low-income designation each time it conducts an exam.

In order to qualify, 50.01% or more of your membership must live in a low-income designated area, which is determined using zip codes. Low-income areas are designated by the United States Treasury and are based on census data, which includes factors such as unemployment and median income. The NCUA already looks at this criteria during its exams, so it was easy to find out what we needed to know.

Making It Official

Once we were aware of the opportunity, securing low-income designation was fairly simple. Because it had been more than six months since our last exam, the NCUA needed a new Automated Integrated Regulatory Examination System (AIRES) download so it could look at updated membership information and ensure we still qualified. We sent the latest information and received a letter from NCUA within a week stating that Suncoast now had low-income designation.

Becoming certified as a community development financial institution (CDFI), however, is a longer process and is something we are still working through.

A credit union doesn’t have to have low-income designation to apply to become a CDFI, but it does need to meet seven different tests. One of the requirements is to prove the credit union’s primary mission is to serve low-income consumers, which can be satisfied through a low-income designation. For us, a majority of our members are in low-income areas and that is where we make the majority of our loans, so it is not an issue.

Did You Know?

More than 2,100 U.S. credit unions were designated as low-income as of August 2014, according to the NCUA.

The application process here does require more data and time, which is why NCUA recently announced a grant for $2,500 to assist smaller credit unions who are looking to become CDFI certified. We’re pushing to become certified before Labor Day, as the fall is when grants generally become available.

We’ve spoken with a number of credit unions that are CDFI certified and they suggested we outsource the grant writing to someone with expertise. It’s a seasonal need so it doesn’t make sense to have someone in-house, but you definitely need someone who is experienced in that arena. Our board, which is composed mostly of educators, had the same reaction. If you’re going for a grant, you need someone with successful experience to provide guidance during the application process.

The Benefits Of Designation

For low-income designation, there are four main benefits.

The first is that you can accept non-member deposits. This doesn’t mean you can swing the doors wide open and take anyone’s funds though. An example might be if we had another credit union that was not in our area but we wanted to deposit institutional funds in a certificate to help them. We might not qualify as a member but we could still make that deposit.

The second benefit is the ability to apply for grants from the NCUA’s Community Development Revolving Loan Fund.

The third benefit is an ability to have secondary or supplemental capital. That is huge. The credit union industry has been asking for supplemental capital for years. We don’t know what it will mean for us yet as I don’t think anyone has created a secondary capital vehicle, but it has the potential to be a big advantage.

The last benefit of the low-income designation is an exemption from the business loan limit, which is normally 12.25% of assets.

Becoming a CDFI brings its own set of benefits. One, which we are very excited about, is the ability to apply for additional grants. For example, CDFI-certified credit unions can receive up to $2 million per year in grants from the U.S. Treasury. This would be tremendously beneficial for our members and the community, as it would allow us to significantly expand financial education and other efforts.

Another major benefit is being able to leverage partnerships with other CDFIs in the area to develop programs to assist members in need within the communities we serve.

CDFIs are also exempt from the Consumer Financial Protection Bureau’s Ability-to-Repay and Qualified Mortgage rules, so the exemption would allow us to make more loans to low-income members that may not qualify otherwise.

We’ll be defining the success of both designations according to what we can do for our members and how we can improve the communities we serve. We already offer things like financial literacy programs and free tax preparation. However, budget constraints have limited us. If we are able to apply for grant money to enhance our efforts, then we will be able to provide more to our members and community. It won’t change our business model it will allow us to expand it.

Advice For Credit Unions

First, if you are unsure about what percentage of your membership lives in low-income areas, ask the NCUA for that information. If you qualify for the low-income designation, I strongly recommend you also consider CDFI certification.

Second, take advantage of the abundant resources available to help you navigate this process. For example, the National Federation of Community Development Financial Institutions offers consulting services for a nominal fee to help you through the certification process.

I’m by no means an expert in this area, but I’m also happy to share our experience. We feel like a whole new world will open up with CDFI certification and are looking forward to continuing our journey and expanding what we can offer to members and our community.

As told to Sharon Simpson

October 13, 2014

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