Although the funding process is nowhere near complete, it appears that fewer than 100 credit unions may wind up receiving any money from the U.S. Treasury's Troubled Asset Relief Program.
Credit unions and banks recognized by the Treasury Department as community development financial institutions are eligible to receive long-term capital loans from TARP funds in a program called the Community Development Capital Initiative.
Under the terms of the program, the NCUA has to indicate to Treasury that the credit unions applying for the funds are "viable" and the agency requires applying credit unions to file secondary capital plans as part of their applications.
National Federation of Community Development Credit Unions CEO Cliff Rosenthal reported that, as of the May 10 deadline, the federation knew of 111 CDCUs that filed secondary capital plans as part of their CDCI applications. The NCUA has already rejected a few, he said, and the agency confirmed the 111 applications.
Rosenthal said 142 credit unions took the first step of applying to the program, but not all of them filed secondary capital plans.
"Not all of our members applied to the program and not all of the applications came from our members, so we don't yet know exactly how many credit unions applied," he said. The NCUA has not yet identified which credit unions applied to the program.
Bill Luecht, spokesman for the Treasury's CDFI Fund, said his agency also did not know how many CUs completed CDCI applications, pointing out that the fund had a formal role only in the very first step of the multistage application process.
Rosenthal said the National Federation would launch a survey to find as many credit unions as possible that applied for CDCI money and find out how many received the funds.
Once the Treasury Department awards the CDCI money, it's unclear whether or not the department will make public a list of awards. In the past, litigation was required to find out which banks received TARP funds since, the Federal Reserve and Treasury argued, receiving the money was thought to carry a possible stigma. Banks that received TARP funds might be considered weaker than others. But both Rosenthal and Luecht agreed that the circumstances for credit unions should be different, since Treasury structured the CDCI program so that the funding is, in fact, a statement of regulatory confidence in the institutions that receive the funds.
Rosenthal also indicated that the National Federation is concerned by the lack of transparency in the CDCI process so far, particularly in instances where a credit union has an approved capital restoration plan but the NCUA has denied the CDCI application.
One such credit union is the $20 million Saguache County Credit Union, headquartered in Moffat, Colorado. Saguache has a net worth ratio of 4.24% as of the end of March, according to NCUA but has a capital restoration plan approved by the agency in March, according to its CEO, Robert Wertz.
Wertz said that the CU's capital fell after the recession hit its rural Colorado county particularly hard, forcing a number of its members out of the community to find work. Among those were a number of members who also held mortgages with the credit union and were forced to deed their property back to the credit union, Wertz said. The falling property values in the area have not helped either, he said.
SCCU applied for $700,000, or 3.5% of its assets, a number within the guidelines provided for in the program. Wertz said his CU filed a supplemental capital plan with the agency, the second step in the application process. The credit union received a letter, dated June 7, from the NCUA that stated the credit union was found ineligible for the program and that it would not finish reviewing the secondary capital plan.
"It's as though they're telling us we are in good enough shape to survive, but not in good enough shape to get help," Wertz said. He also noted that CDCI funds would enable SCCU to return to being able to make loans again in the very economically hard hit county.
Wertz said he sent a copy of the NCUA's letter to the CU's examiners and to his state regulator as well, but the Colorado Department of Regulatory Agencies' Division of Financial Services said that it didn't know anything about the NCUA's decision.
Chris Myklebust, commissioner of the division, said the NCUA does not consult with the division, "particularly on matters where they are cutting checks," but the NCUA notifies the agency of its actions.
The NCUA said it does not always consult with the state regulator "in cases where a credit union clearly does not meet the underwriting criteria."
A phone call with the NCUA did not resolve the matter and his board asked him to appeal. As of press time, he was scheduled to speak to someone at a higher level at the agency.
One thing that might work in SCCU's favor is that NCUA examiner initially gave the CU's management a low grade but then revised the number higher, Wertz said. It's unclear that the NCUA included the revision in its evaluation of the CU for the CDCI funds.
The NCUA staff said the agency did not consider a capital restoration plan a vote of confidence in the credit union but a legally required step a credit union must take to improve its capital position to survive. There is no guarantee a credit union might be able to successfully complete its capital restoration process, for example, they said. Further, CDCI funds are actually taxpayer funds that the agency considers requiring an additional level of care when putting at risk, the staff pointed out.
The NCUA said that it has completed 66% of the 111 applications and that it has forwarded the majority of those reviewed to the Treasury for approval.