The Community Development Capital Initiative (CDCI) of the U.S. Department of the Treasury has launched a program through which low-income credit unions (LICUs) certified as Community Development Financial Institutions (CDFIs) can obtain up to 3.5% of their assets as secondary capital, which will count toward their regulatory net worth. Eligibility for the CDCI program will be determined by NCUA in conjunction with the Treasury Department.  Highly rated credit unions that are well capitalized are expected to qualify readily, in the absence of material negative trends.  Credit unions that fall below that standard may still qualify for funds if they are able to obtain matching secondary capital from non-governmental sources.

In order to assist more community development credit unions (CDCUs) qualify for CDCI funds, the Board of Directors of the National Federation of Community Development Credit Unions (Federation) recently voted to make an additional $1 million in secondary capital available, which will serve as matcing funds for member CDCUs that might not be immediately eligible for CDCI investments.

Federation Board Chairman Randy Chambers, CFO of Self-Help CU (Durham, NC) commented on Treasury’s new initiative. “We believe the CDCI program is a unique opportunity for low-income credit unions to rebuild the net worth that was eroded over the past year by the corporate meltdown, share insurance charges, and the troubled economy,” he said.  “While our resources are limited, we plan to do whatever we can to help our members access these funds.”

The Federation has been the primary private-sector provider of secondary capital since 1996, when through the Federation’s advocacy NCUA introduced secondary capital exclusively for low-income credit unions.  “We are extremely pleased that NCUA has expressed such strong support for the Community Development Capital Initiative,” said Federation President/CEO Cliff Rosenthal. “They have worked with us every step of the way to make this new program accessible to as many credit unions as possible, and their efforts should be praised.”

Based on Treasury’s guidelines, the CDCI program will invest secondary capital at a rate of two percent for eight years, after which the rate escalates to nine percent as an incentive for institutions to repay the money.  “We have no doubt that most credit unions will repay CDCI funds by the eight-year mark, so they won’t be encumbered by the high rate of funds for the last five years,” said Rosenthal.

Deadlines to apply for CDCI are extremely tight.  All applications must be submitted by April 2.  “We commend the Treasury Department for keeping the application so brief – really, only two pages – that part of the process will not be burdensome at all,” said Rosenthal, “However, credit unions that are not yet CDFI certified and want to apply for CDCI must submit their certification applications to the CDFI Fund by April 15, and must also submit a secondary capital plan to NCUA by May 3.

The Federation has committed to helping CDCUs to apply for CDCI funds by providing extensive technical assistance to its members on all aspects of the program and its various applications.  They also offer extensive consulting services to other credit unions inrterested in applying.  Additional information about the CDCI program, as well as membership in the Federation is available on the Federation's website (www.cdcu.coop), and from Associate Director of Membership Development, Pablo DeFilippi at pablo@cdcu.coop or (800) 437-8711 x304.

“Our staff is committed and prepared to help credit unions to access this important program,” said Rosenthal. “We have extensive experience working with both the Treasury Department and NCUA, and provide assistance with the CDFI certification process, development of secondary capital plans, and other aspects of this program,” he added.

© 2010 National Federation of Community Development Credit Unions.