Thursday, September 23, 2010

Two Credit Unions Get TARP Funds

Hope FCU (Jackson, MS) and Genesee Co-op FCU (Rochester, NY) have received TARP funds in the form of subordinated debt through the Community Development Capital Initiative. Hope FCU and Genesee Co-op FCU received $4,520,000 and $300,000, respectively.


  1. Disappointing. This action further dilutes the distinction between CUs and Banks.

  2. Nice spin. This is not "TARP" as it was for the banks. Do a little research and you will see this is a new program that was started with proceeds from returned TARP money. Only "viable" CU's can get any funds, it is not used to make CU's viable as the TARP was used to keep banks alive. Below is straight from the Treasury.

    Program Background

    On February 3, 2010, Secretary of the Treasury Timothy Geithner announced a new program to help two specific types of credit unions and banks expand their credit and services “to the country’s hardest hit communities.” The announcement was the culmination of six months of groundwork and collaboration with Treasury by the Federation, on behalf of low-income credit unions, and our counterparts representing community development banks.

    The Community Development Capital Initiative (CDCI) is a program of the U.S. Department of the Treasury. Using returned funds from the Troubled Assets Relief Program (TARP) to support the continued viability, growth and expansion of CDFI-certified depository institutions, CDCI will make low-interest secondary capital deposits in CDFI-certified community development credit unions and community develoment banks.

    Although the funding and authority for the CDCI are provided by and through the Treasury Department’s Troubled Asset Relief Program (TARP), this is not a “bailout” program and is quite different from other elements of TARP. However, the funding and authority for the CDCI are provided by and through TARP, and so CDFI credit unions and banks must comply with all Treasury guidelines regarding transparency, reporting, and monitoring.

    Which credit unions are eligible for the CDCI?

    The CDCI is restricted to credit unions that (a) are certified by the Treasury Department’s Community Development Financial Institutions (CDFI) Fund AND (b) have low-income designation from NCUA or state regulators.

    What kind of funding is available?

    This is NOT a grant program. Funds provided to credit unions must be in the form of secondary capital loans – deeply subordinated debt that is classified as net worth, subject to certain conditions, on the balance sheet of low-income credit unions. Currently, low-income credit unions are the only credit unions eligible to accept this kind of loan.

    Is this part of the $30 Billion Program Treasury Announced for Community Banks?

    No, it is separate from that. There is no set amount for CDCI, but it will probably be less than $1 billion.

    What are the terms?

    The basic terms for the loans are:

    Two-percent (2%) for the first eight years, escalating to nine-percent (9%) for an additional five years, should credit unions choose to retain the loans.

    Credit unions may choose to apply for CDCI funds for terms 8 or 13 years. If applying for 8 years, funds must be returned to Treasury by the end of the 8th year in order to avoid the rate increase.
    Writedown of CDCI secondary capital begins at 5 years before maturity.
    Credit unions must write down 20% of CDCI funds in each of the 5 years (Important: writedown funds do not count towards your regulatory net worth).
    How much can credit unions get?

    Credit unions can apply for amounts up to 3.5% of their total assets (e.g., $35,000/million in assets).

    What are the conditions and restrictions?

    Credit unions must be approved by NCUA to participate in the program. NCUA must ascertain the applicant credit union is “viable.” Credit unions that fall short of this standard may be able to access CDCI funds if they are able to raise dollar-for-dollar match funds from non-federal sources.

    Who administers the CDCI program?

    Treasury’s Office of Financial Stabilization, in cooperation with NCUA and the Treasury Department’s CDFI Fund.

    To learn more about the Community Development Capital Initiative, visit:



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