People in the Two Harbors area who believed townspeople could benefit from an alternative to commercial banks founded THFCU in 1948. Founders envisioned a model financial cooperative where people pooled their money for borrowing and would have a safe place to save money. In contrast to a commercial bank, the "credit union" - as financial cooperatives came to be known - is owned and managed by its members, and has a nonprofit status that allows excess revenue to be returned to members. Because the founders wanted many people to enjoy the benefits of the credit union, they opened membership to anyone living or working in Two Harbors and the immediate surrounding area. They secured a federal charter and backed deposits with government insurance.