CDCUs Face Range of Cuts to Survive
The roughly 85 CDCUs which have been certified as community development financial institutions enjoy the possibility of applying to the U.S. Treasury Department's CDFI Fund for additional financial assistance this year (see related story, page 6). But should they do so successfully, any money they receive will likely go to helping them recover from the loss imposed by the corporate stabilization assessment, CDCU executives explained.
CDCUs are doing everything from canceling celebratory annual meetings to cutting back on health insurance, eliminating contributions to 401k programs and closing branches in order to pay their part of NCUA's NCUSIF assessment.
"This year was our 10th anniversary and so we planned a little bit of a celebration at our annual meeting," explained Bruce Wright, CEO of the $3.6 million Brookland Federal Credit Union in West Columbia, S.C. "Well, that went from $5,000 in the budget to $1,000 for a bare bones annual meeting. We have cut travel, cut benefits, cut everything we could cut and that was before these latest numbers came in," he said, referring to the increased assessment in the wake of the corporate conservatorships.
The credit union would do everything it could to avoid laying off any staff, Wright said.
The $16 million Bethex Federal Credit Union had already decided to close one of its three branches to help make up for the $58,000 that the initial assessment was going to cost, and CEO Joy Cousminer said the CU had not yet figured out how it would make up the new money.
"What's so infuriating and disheartening is that you work so long and so hard, building up the credit union little by little, a little here a little there, and it can all be wiped out because of the actions of other people," Cousminer said.
Cousminer explained that the CU had decided to close the branch and had just called an emergency meeting of its 21 staff members to explain what the CU would do and why and how it was going to work. The adjustment will be difficult because the remaining open branch was one the CU gained through a merger and was thus some distance from where most of the staff live.
"Most of our staff live in the Bronx," Cousminer pointed out. "This branch is down in Manhattan, lower Manhattan," she said.
She said she had been particularly annoyed at a series of talking points from CUNA that advised CUs to tell their members that the conservatorship of the corporates would have no impact on them.
"I was a little shocked when I read that," Cousminer said. "This is damn well going to impact many of our members."
Among the most frustrating parts of this for Cousminer is that Bethex may have to return some nonmember deposits because the CU's falling capital ratio might demand it.
"We have always run between 6.8% and 7.2% since we are trying to do so much with our resources," Cousminer said. "Usually it has not been a problem, but now it looks like it might be and, you know, if you give back any of those deposits, you are not going to get them back. Even if they made them for CRA, they can get CRA credit somewhere else."
The B.O.N.D. Community Federal Credit Union, headquartered in Atlanta, said the corporate stabilization program would simply force the $35 million credit union into even deeper negative earnings.
"We were chartered in 1972 specifically to be a mortgage lending credit union in the parts of central Atlanta that were being redlined," explained Ruth Artis, CEO of B.O.N.D. "So we were already exposed to the economic downturn in a significant way."
Starting in July of 2008, Artis said, the credit union began cutting costs by doing things like stopping making matching contributions to employee retirement programs, finding less expensive health insurance that carries larger co-pays, cutting back on lights and other utilities and doing everything it could short of laying off any staff.
"We believe we are going to make it," Artis said, "we were very well-capitalized before, but right now we are very buttoned down and this is only going to make it worse."
The recent news of increased funding for the CDFI Fund is one of the only recent bright spots, even if only a minority of CDCUs is currently eligible to apply for them.