The $87 million Shreveport Federal Credit Union has used thelong-term funding it received from the U.S. Treasury's CommunityDevelopment Capital Initiative to grow its portfolio of very smallbusiness loans.

Funded with money from the Troubled Asset Relief Program, theCDCI funneled longer term, low-interest loans to communitydevelopment credit unions that NCUA approved as “viable.” Creditunions that accepted the loans had to agree to repay the money ineight years and to accept a host of other restrictions meant tocontrol the use of TARP funds by much larger banks.

While the restrictions on the money led some credit unions thathad received awards to, ultimately, not accept them, in the end 38credit unions wound up taking about $70 million from the CDCIprogram.

One of those was Shreveport Credit Union, headquartered inShreveport, La., a city of more than 200,000 people situated in thewestern part of the state, not far from the border with Texas.

Shreveport CEO Helen Godfrey-Smith explained that the CDCI moneywas the push the credit union needed to finally iron out someproblems with a lingering application to the Treasury's communitydevelopment fund for recognition as a community developmentfinancial institution. CDFI status was a requirement to apply forCDCI money.

Godfrey-Smith explained that Shreveport FCU had been charteredin 1956 to serve the public employees of the city of Shreveport.Aside from opening its membership further to include employees inthe city's transportation services, the credit union did not movemore deeply into the community until the early 1980's when it beganto add SEGs until it reached its current level of roughly 125.

According to NCUA records, the CU has maintained strongperformance even through the economic downturn, closing out 2010with a capital ratio of 13.37% and a return on assets of 0.77%. Ifit had not been for the additional NCUA premiums, the CU would havea return on assets of 1.66%, after the CDCI money.

Godfrey-Smith attributed some of the CUs strength to a focus onmaking Shreveport her members primary financial institution. Thatmeant Shreveport had almost become designated as a high-performingcredit union, or one where every member uses at least 3 of the CU'sproducts or services.

“We are at, I think, between 2.5 and 2.7,” Godfrey-Smith said.“So we aren't at three yet, but we are getting close.”

She reported that the CU received $2.6 million from the CDCIprogram and that the credit union had opted to take the money eventhough, in many ways, it was not a good fit for theorganization.

For example, even though the credit union has never given itsemployees bonuses of more than a few thousand dollars–and very fewof those–the credit union's top 20 most highly paid employees hadto sign documents that they would not accept excessive bonuspayments.

“We are very fortunate in that we have a very flexible andunderstanding staff which believes in what we are trying to do,”Godfrey-Smith said, recounting how at least one CDCU had to declinethe money because not every staff person would sign the paper.

Then there is the matter of the “excessive or luxuryexpenditures policy” that the credit union both put into place andput on its website because, Godfrey-Smith said, having one was acondition of the CDCI money.

“It was one of the conditions, but it really didn't apply to us.We have never had excessive or luxury expenditures,” she saidlaughing. “It's true, I drive a Mercedes, but its mine. It's tenyears old and it's paid for,” she said.

As an example, the policy sets strict limits on facilityupgrades, dictating that anything in excess or beyond reasonablevariation of standard and not having approval is considered“prohibited” and is not acceptable for implementation. Examplesinclude expenditures for specialty or antique furniture, customizedfinishes or construction of nonstandard office sizes or privaterestrooms.

Even with the extra requirements that the CDCI funds carried,Godfrey-Smith said the money was still valuable to the CU as it hasallowed Shreveport to jump start a program of microlending to theCU's entrepreneurial members.

She said a microloan in her membership was running at about$10,000 and that the CU was making the loans to members who hadestablished businesses that needed the capital to expand.

She explained the CU had opted to help members with at leastfive years of entrepreneurial experience to both help it bettermanage loan risk and to help make sure the money went more quicklyto job creation.

“Maybe they have had a lawn care or home improvement businessthat they have wanted to expand for some time and just lacked themoney for additional equipment they need,” Godfrey-Smith explained.“A loan from their credit union can help them get that equipmentand then have to hire additional people to help with the extrawork.,” she added.