Although the funding process is nowhere near complete, itappears that fewer than 100 credit unions may wind up receiving anymoney from the U.S. Treasury's Troubled Asset Relief Program.

Credit unions and banks recognized by the Treasury Department ascommunity development financial institutions are eligible toreceive long-term capital loans from TARP funds in a program calledthe Community Development Capital Initiative.

Under the terms of the program, the NCUA has to indicate toTreasury that the credit unions applying for the funds are “viable”and the agency requires applying credit unions to file secondarycapital plans as part of their applications.

National Federation of Community Development Credit Unions CEOCliff Rosenthal reported that, as of the May 10 deadline, thefederation knew of 111 CDCUs that filed secondary capital plans aspart of their CDCI applications. The NCUA has already rejected afew, he said, and the agency confirmed the 111 applications.

Rosenthal said 142 credit unions took the first step of applyingto the program, but not all of them filed secondary capitalplans.

“Not all of our members applied to the program and not all ofthe applications came from our members, so we don't yet knowexactly how many credit unions applied,” he said. The NCUA has notyet identified which credit unions applied to the program.

Bill Luecht, spokesman for the Treasury's CDFI Fund, said hisagency also did not know how many CUs completed CDCI applications,pointing out that the fund had a formal role only in the very firststep of the multistage application process.

Rosenthal said the National Federation would launch a survey tofind as many credit unions as possible that applied for CDCI moneyand find out how many received the funds.

Once the Treasury Department awards the CDCI money, it's unclearwhether or not the department will make public a list of awards. Inthe past, litigation was required to find out which banks receivedTARP funds since, the Federal Reserve and Treasury argued,receiving the money was thought to carry a possible stigma. Banksthat received TARP funds might be considered weaker than others.But both Rosenthal and Luecht agreed that the circumstances forcredit unions should be different, since Treasury structured theCDCI program so that the funding is, in fact, a statement ofregulatory confidence in the institutions that receive thefunds.

Rosenthal also indicated that the National Federation isconcerned by the lack of transparency in the CDCI process so far,particularly in instances where a credit union has an approvedcapital restoration plan but the NCUA has denied the CDCIapplication.

One such credit union is the $20 million Saguache County CreditUnion, headquartered in Moffat, Colorado. Saguache has a net worthratio of 4.24% as of the end of March, according to NCUA but has acapital restoration plan approved by the agency in March, accordingto its CEO, Robert Wertz.

Wertz said that the CU's capital fell after the recession hitits rural Colorado county particularly hard, forcing a number ofits members out of the community to find work. Among those were anumber of members who also held mortgages with the credit union andwere forced to deed their property back to the credit union, Wertzsaid. The falling property values in the area have not helpedeither, he said.

SCCU applied for $700,000, or 3.5% of its assets, a numberwithin the guidelines provided for in the program. Wertz said hisCU filed a supplemental capital plan with the agency, the secondstep in the application process. The credit union received aletter, dated June 7, from the NCUA that stated the credit unionwas found ineligible for the program and that it would not finishreviewing the secondary capital plan.

“It's as though they're telling us we are in good enough shapeto survive, but not in good enough shape to get help,” Wertz said.He also noted that CDCI funds would enable SCCU to return to beingable to make loans again in the very economically hard hitcounty.

Wertz said he sent a copy of the NCUA's letter to the CU'sexaminers and to his state regulator as well, but the ColoradoDepartment of Regulatory Agencies' Division of Financial Servicessaid that it didn't know anything about the NCUA's decision.

Chris Myklebust, commissioner of the division, said the NCUAdoes not consult with the division, “particularly on matters wherethey are cutting checks,” but the NCUA notifies the agency of itsactions.

The NCUA said it does not always consult with the stateregulator “in cases where a credit union clearly does not meet theunderwriting criteria.”

A phone call with the NCUA did not resolve the matter and hisboard asked him to appeal. As of press time, he was scheduled tospeak to someone at a higher level at the agency.

One thing that might work in SCCU's favor is that NCUA examinerinitially gave the CU's management a low grade but then revised thenumber higher, Wertz said. It's unclear that the NCUA included therevision in its evaluation of the CU for the CDCI funds.

The NCUA staff said the agency did not consider a capitalrestoration plan a vote of confidence in the credit union but alegally required step a credit union must take to improve itscapital position to survive. There is no guarantee a credit unionmight be able to successfully complete its capital restorationprocess, for example, they said. Further, CDCI funds are actuallytaxpayer funds that the agency considers requiring an additionallevel of care when putting at risk, the staff pointed out.

The NCUA said that it has completed 66% of the 111 applicationsand that it has forwarded the majority of those reviewed to theTreasury for approval.

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