Community Development Revolving Loan Fund Makes a Difference for LICUs
ALEXANDRIA, Va. - Though NCUA's regulatory and insurance functions are fully funded by the credit union industry, each year the agency goes to Congress to fight for a small appropriation to lend a helping hand to its low-income designated credit unions.
NCUA has historically asked for around $1 million for either low-interest loans or grants or both for its Community Development Revolving Loan Fund. However, in the last couple years, with the federal government tightening its belt, NCUA has asked for, and received, a bit less money. For fiscal year 2007, the appropriations request is around $941,000.
That is not to say the fund will have any trouble doling out the dough. April's profit alone to the CDRLF on its loans was $42,474.45 with a year-to-date total of $105,956.26. Total assets of the CDRLF are $16.3 million with liabilities of $588,553.26 and equity of $15.7 million as of April 30, 2006.
The credit unions that take advantage of the fund find it invaluable and it allows them to offer services and employee training they would have difficulty offering otherwise. For example, Joy Cousminer, CEO of Bethex Federal Credit Union in Bronx, N.Y., commented, "As a low-income CDFI (community development financial institution), we're allowed to have $2.5 million in non-member deposits. Since that money is so cheap, we said, let's take it."
She explained that Bethex serves a lot of money remitters and some of the money is not credited as fast as the members need it sent out and using a CDRLF loan keeps the cost of the service to the credit union down because they do not have to tap their higher cost line of credit with Empire Corporate.
But, Bethex has discovered a downside to the loan, which is that funds have lowered the credit union's net worth. "We're keeping it, but watching constantly to not go below 7%," Cousminer stated.
Northeast Community Federal Credit Union (San Francisco) Manager Lily Lo said the loan and grants her credit union has received helped them with outreach into the unbanked in the surrounding community. The credit union received a $2,700 grant for its Volunteer Income Tax Assistance site for a couple of years in a row where they have processed tax returns for nearly 1,000 people. "We got members by doing that," she said. "We're also educating our members and getting them to sign up for direct deposit." The bonus is that it steers them away from the check cashers, Lo explained, and to the $8 million credit union.
Growing new and younger members was a key goal for Kingsville (Texas) Community Federal Credit Union CEO Armando Martinez. With a $299,000 loan at 1% from the CDRLF, Kingsville Community was able to "reposition ourselves in the market place" figuratively and literally. Kingsville, with a population of about 31,000, suddenly found itself with eight banks and five credit unions to choose from with Kingsville Community the smallest among them at $7.1 million in assets. It occupied a 30 by 60 building with no drive-thru, no ATM, and minimal parking.
With the loan, and a fixed asset waiver to start with though the credit union qualified for RegFlex the next year, the credit union was able to move just a couple months ago into a 6,000 square foot building with all the modern financial amenities and run some print advertisements. Just six weeks after the grand opening celebration, loan demand spiked, jumping the credit union's loan portfolio from $5.8 million to $6.3 million and they opened 40 new accounts, according to Martinez. Membership grew from 1,893 to 1,912. "For us, it's a total reconfiguration, total rebirth," he said.
Kingsville Community is actually able to do more cross selling now with the greater exposure it has received, Martinez said. The credit union's Web site (www.kingsvillecommunityfcu.com) will be going "real time" in the next few months, he added, and is looking into business checking accounts and ACH origination. "You can see the smiles of the members who walk in.It's well worth it," he concluded.
Lo said the whole application process was easy for her, just one to two pages with projections and the amount applied for.
Cousminer agreed, saying that it is even easier than the CDFI Fund and National Credit Union Foundation. "One of the ways to help you is to make it easier for you," she commented. Many credit unions cannot afford to pay a grant writer and the longer the application, the more it costs. "I really feel that NCUA respects that," she said. Bethex received $14,000 from the CDRLF for its VITA site, homeownership counseling, and summer intern program in 2005.
"I've often felt that small credit unions-not necessarily ours, but the little church credit unions," Cousminer continued, "are penalized by the complicated grants and the NCUA grants are the only ones that give everyone a fair chance." -firstname.lastname@example.org