3 CUs Remain in TARP's CDCI Program

At the end of 2019, four finacial institutions, including 3 credit unions, remain in the U.S. Department of the Treasury's Community Development Capital Initiative (CDCI) program.

The three credit unions are Cooperative Center Federal Credit Union (Berkeley, CA), D.C. Federal Credit Union (Washington, D.C.), and Buffalo Cooperative Federal Credit Union (Buffalo, NY).

During 2019, three credit unions repurchased their securities owned by the U.S. Treasury.

However, it is doubtful that two remaining credit unions will be able to exit the CDCI program. Both credit unions are undercapitalized.

CDCI program is part of the Troubled Asset Relief Program (TARP).

10 CUs Repay CDCI Investments in 2018

During 2018, 10 credit unions fully repaid investments from the Community Development Capital Initiative (CDCI) under the United States Department of Treasury's Troubled Asset Relief (TARP) program.

Below is the list of credit unions that repaid their CDCI investment and the amount of the repayment.

As of the end of 2018, there are 8 remaining CDCI financial institutions, of which 6 are credit unions.

Subordinated Debt at LICUs Up 57 Percent, Since the End of 2016

Since the end of 2016, subordinated debt counting as net worth has increased by almost 57 percent or $84.4 million.

As of March 2018, total subordinated debt placed with low-income credit unions (LICUs) was $232.8 million. This is up from $148.4 million at the end of 2016.

A number of large LICUs have issued subordinated debt (the dollar amount in parentheses) since the end of 2016, including Advia Credit Union ($5 million), Self-Help Credit Union ($13 million), Self-Help FCU ($5 million), Carter FCU ($6 million), Jefferson Financial FCU ($11,597), and Notre Dame FCU ($12 million).

Carter FCU's issuance of subordinated debt was partially used to repurchase subordinated debt issued from the U.S. Treasury Department as part of the Community Development Capital Initiative.

The following table lists the 10 LICUs holding the most subordinated debt as of March 31, 2018.

It is my belief that this trend of large LICUs issuing subordinated debt will continue.

16 CUs Have Outstanding CDCI Investments at the End of 2017

Sixteen credit unions still have outstanding investments under the Troubled Asset Relief Program's Community Development Capital Initiative (CDCI) at the end of 2017.

The total number of financial institutions with outstanding CDCI investments was 21 on December 31, 2017.

In 2017, six credit unions reported either fully or partially repurchasing their capital investment from the U.S. Treasury.

12 CDCI CUs Partially or Fully Repurchase Securities

Twelve credit unions repurchased either fully or partially outstanding securities owned by U.S. Department of the Treasury (Treasury) under the Troubled Asset Relief Program (TARP) Community Development Capital Initiative (CDCI) in 2016.

On August 1, 2016, Treasury, as part of its effort to wind down the TARP, began offering participating CDCI institutions an opportunity to repurchase early their outstanding securities owned by Treasury at fair value. On December 9, the window for CDCI institutions to submit proposals closed under the early repurchase option.

Under the early repurchase program, the fair value of the securities repurchased was less than the amount borrowed by thee credit unions.

Below is the list of credit unions that repurchased partially or fully their securities along with the amount paid and the amount borrowed.

As of the end of 2016, 21 credit unions reported outstanding securities owned by the Treasury through its CDCI program. Fairfax County Federal Credit Union (Fairfax, VA) owed the most to Treasury at $8.04 million, followed by Hope Federal Credit Union (Jackson, MS) at $4.52 million.

GAO: Health of CDCI CUs Improved Since 2011

The Government Accountability Office (GAO) noted that the financial performance of credit unions that participated in the Community Development Capital Initiative (CDCI) of the Troubled Asset Relief Program had improved.

According to the report, 36 banks and 48 credit unions originally participated in the program. As of March 31, 2016, 57 of the original 84 CDCI participants remained in the program, including 26 banks and 31 credit unions.

The GAO found that the financial condition of credit unions remaining in the CDCI program as of March 31, 2016, appears to have improved since the end of 2011. GAO examined five indicators -- the net charge-offs to average loans ratio, the delinquent loans ratio, the delinquent loans to net worth ratio, the return on average assets, and the net worth ratio.

The median of all five indicators of financial condition that GAO analyzed improved from 2011 to 2015. However, since December 2014, the median of one indicator — the return on average assets — weakened.

The report noted that for those credit unions that had not repaid CDCI investment, beginning no later than September 2018, the rates paid on the CDCI investment will increase from 2 to 9 percent. But Treasury officials expect most will repay their investment before September 2018.


Read the report.

Seven CUs Repurchased Some or All of Their CDCI Investments in 2015

Seven credit unions repurchased all or part of their outstanding Community Development Capital Initiative (CDCI) investments from the U.S. Treasury in 2015.

The evidence suggests that the pace of CDCI repurchases by credit unions accelerated in the second half of 2015.

Faith Based Federal Credit Union (Oceanside, CA) on August 19 fully repurchased its $30,000 of outstanding CDCI investment.

Prince Kuhio Federal Credit Union (Honolulu, HI) on September 9 bought back in full its CDCI investment of $273,000. The repurchase appears to be associated with Prince Kuhio merger into Hawaii FCU.

Fidelis Federal Credit Union (New York, NY) on October 14 fully repurchased $14,000 in CDCI investment from the U.S. Treasury Department.

Independent Employers Group Federal Credit Union (Hilo, HI) on November 18 repurchased in full $698,000 in CDCI investment. The repayment appears to be associated with the merger of Independent Employers Group FCU into HawaiiUSA FCU.

Liquidated Bethex Federal Credit Union (Bronx, NY) on November 18 fully repurchased $502,000 in outstanding CDCI investment.

Two credit union partially repurchased their CDCI investments in 2015. Liberty County Teachers Federal Credit Union (Liberty, TX) on December 16 partially repurchased its CDCI investment. Vigo County Federal Credit Union (Terre Haute, IN) partially repurchased its CDCI investment on February 25 and December 23.

Conserved Bethex FCU Owes TARP Funds

Last Friday, the National Credit Union Administration (NCUA) placed Bethex Federal Credit Union into conservatorship.

Bethex FCU is currently holding $502,000 in subordinated debt issued through the TARP's Community Development Capital Initiative.

This $502,000 in subordinated debt represents the majority of the credit union's net worth of $745,570.

Without an injection of new capital, Bethex FCU will probably have difficulty repaying these TARP funds and may default on its TARP obligations.

I suspect that NCUA will engineer a merger of Bethex with another credit union, which would repay the TARP funds.

GAO: CDCI CUs Weaker Than Certified Non-CDCI CUs

The Government Accountability Office (GAO) released a report which examined the performance of Community Development Capital Initiative (CDCI) participants of the Troubled Asset Relief Program.

As background, the U.S. Treasury in September 2010 invested $570 million TARP funds into 36 banks and 48 credit unions. The program was only eligible for certified Community Development Financial Institutions (CDFI). As of April 2014, 68 of the original 84 CDCI institutions remained in the program. Six banks and nine credit unions had exited through repayment, while one institution had exited as a result of its subsidiary bank’s failure.

The report found that "remaining CDCI banks generally are financially stronger than certified CDFI banks that did not participate in the program, but remaining CDCI credit unions are generally weaker than nonparticipating CDFI credit unions."

GAO concluded that CDCI credit unions were, in general, smaller and financially weaker than nonparticipating certified CDFI credit unions (non-CDCI credit unions).

As of December 31, 2013,

• the remaining CDCI credit unions had a median return on average assets of 0.27, compared to 0.53 for non-CDCI credit unions.
• Twenty-six percent of CDCI credit unions were unprofitable compared to about 19 percent of non-CDCI credit unions.
• CDCI credit unions had a delinquent loan ratio of 1.78 -- 35 basis points higher than non-CDCI credit unions.
• CDCI credit unions had a median net worth ratio of 7.35, compared with 9.98 for non-CDCI credit unions.
• Forty-one percent of CDCI credit unions had net worth ratios less than 7 percent, while only about 10 percent of non-CDCI credit unions fell below the 7 percent threshold.
• CDCI credit unions had a median ratio of total delinquent loans to net worth of 9.18, compared to 8.30 for non-CDCI credit unions.

In conclusion, with limited access to capital some CDCI credit unions may have difficulty exiting the TARP CDCI program when the dividend or interest rate goes from 2 percent to 9 percent in 2018.

Read the report.

4 Credit Unions Repay TARP Funds

Four credit unions have repaid in full their investments from the Treasury Department's Community Development Capital Initiative.

The four credit unions are:

• Atlantic City FCU, Lander (WY);
• Gateway Community FCU, Missoula (MT);
• Brewery Credit Union, Milwaukee (WI); and
• Greater Kinston Credit Union, Kinston (NC).

UNITEHERE Missed TARP Dividend Payment

UNITEHERE Federal Credit Union (Workers United FCU) of New York City missed its interest/dividend payment on its capital investment of $57,000 from the TARP Community Development Capital Initiative (CDCI), according to a report from the Department of Treasury. UNITEHERE is the first credit union to miss an interest/dividend payment.

Five banks have also missed CDCI interest/dividend payments, although one bank subsequently made up its missed payment.

Did Politics Influence Which Credit Unions Received TARP Funds?

Did political influence play a role as to which community development credit unions received funds from the TARP Community Development Capital Initiative (CDCI)?

This is the conclusion of a paper published by Linus Wilson at the University of Louisiana at Lafayette.

Forty-eight community development credit unions received almost $70 million in funds through CDCI, although 189 credit unions could have participated in the program. The study does state that it does not know which credit unions applied for the program, so it compares credit unions that received the funding to those that were eligible to receive CDCI funds.

The key finding of the paper was "that credit unions eligible for TARP funds were three times more likely selected for those funds if they were headquartered in the district of member of the U.S. House Financial Services Committee even after controlling for other factors. This indicates that political influence may have driven the selection of credit unions."

The study also concludes that credit unions that received CDCI funds had significantly lower loan-to-deposit ratios relative to other eligible credit unions that did not receive TARP investments. The author found this result to be startling, as these institutions were picked "because they would provide much needed loans to the credit union’s underserved communities.”

Furthermore, the study found mixed evidence as to whether regulators and Treasury selected stronger community development credit unions to receive these funds. The selected credit unions had significantly lower tangible net worth ratios; but also, had lower provisions for loans losses and fewer non-performing assets.

CU TARP Recipients (Update)

Below is a list of more tax-exempt credit unions that received a taxpayer capital infusion from Treasury through the Community Development Capital Initiative. (See prior postings for the other credit unions that have received a capital infusion from Treasury).

Southern Chautauqua Federal Credit Union (Lakewood, NY) $1,709,000
Fidelis Federal Credit Union (New York, NY) $14,000
Bethex Federal Credit Union (Bronx, NY) $502,000
Shreveport Federal Credit Union (Shreveport, LA) $2,646,000
Carter Federal Credit Union (Springhill, LA) $6,300,000
Workers United Federal Credit Union (New York, NY) $57,000
North Side Community Federal Credit Union (Chicago, IL) $325,000
East End Baptist Tabernacle Federal Credit Union (Bridgeport, CT) $7,000
Community Plus Federal Credit Union (Rantoul, IL) $450,000
Border Federal Credit Union (Del Rio, TX) $3,260,000
Opportunities Credit Union (Burlington, VT) $1,091,000
First Legacy Community Credit Union (Charlotte, NC) $1,000,000
Union Settlement Federal Credit Union (New York, NY) $295,000
Southside Credit Union (San Antonio, TX) $1,100,000
D.C. Federal Credit Union (Washington, DC) $1,522,000
Faith Based Federal Credit Union (Oceanside, CA) $30,000
Greater Kinston Credit Union (Kinston, NC) $350,000
Hill District Federal Credit Union (Pittsburgh, PA) $100,000
Freedom First Federal Credit Union (Roanoke, VA) $9,278,000
Episcopal Community Federal Credit Union (Los Angeles, CA) $100,000
Vigo County Federal Credit Union (Terre Haute, IN) $1,229,000
Renaissance Community Development Credit Union (Somerset, NJ) $31,000
Independent Employers Group Federal Credit Union (Hilo, HI) $698,000
Brooklyn Cooperative Federal Credit Union (Brooklyn, NY) $300,000