Participation in Community Development initiative swells from trickle to flood

The number of banks, thrifts and credit unions participating in the Treasury Department's Community Development Capital Initiative more than doubled last week, with the program registering its biggest single-day increase since its inception.

According to the Sept. 28 TARP Transaction Report, 26 financial institutions entered the program. Two were banks that had previously received government investments through TARP's Capital Purchase Program and converted to the lower-cost CDCI.

 On Sept. 17, the roster of CDCI participants consisted of 20 financial institutions that had received a little more than $199 million over a roughly two-month period. As of Sept. 24, the CDCI consisted of 46 institutions that had tapped more than $258 million in funding.

 The stated goal of the program is to "invest lower-cost capital in Community Development Financial Institutions (CDFIs) that lend to small businesses in the country's hardest-hit communities." 

 The two banks that transferred from the Capital Purchase Program were Cerritos, Calif.-based First Choice Bank swapped its $5.17 million in CPP cash for an equal amount of CDCI monies, and New Orleans-based Liberty Financial Services. Liberty not only swapped its $5.64 million in CPP monies, but also received an additional $5.69 million in CDCI funds, bringing the Treasury's investment in Liberty to $11.3 million.

The 24 newcomers to TARP programs are mostly credit unions, and the level of their participation in the community-development initiative varies widely. The smallest Treasury investment was $10,000, while the largest investment was more than $8 million.  The businesses, home bases and amount of Treasury investment are listed below in the order they appear in the September 28, 2010 TARP Transaction Report:

1)  Bainbridge Bancshares Inc. (Bainbridge, Ga.) -- $3,372,000

2)  Virginia Community Capital Inc. (Christiansburg, Va.) -- $1,915,000

3)  Lower East Side People's Federal Credit Union (New York) -- $898,000

4)  Atlantic City Federal Credit Union (Lander, Wyo.) -- $2,500,000

5)  Neighborhood Trust Federal Credit Union (New York) -- $283,000

6)  Gateway Community Federal Credit Union (Missoula, Mont.) -- $1,657,000

7)  Union Baptist Church Federal Credit Union (Fort Wayne, Ind.) -- $10,000

8)  Buffalo Cooperative Federal Credit Union (Buffalo, N.Y.) -- $145,000

9)  Tulane-Loyola Federal Credit Union (New Orleans, La.) -- $424,000

10)  Alternatives Federal Credit Union (Ithaca, N.Y.) -- $2,234,000

11)  Liberty County Teachers Federal Credit Union (Liberty, Texas) -- $435,000

12)  UNO Federal Credit Union (New Orleans, La.) -- $734,000

13)  Butte Federal Credit Union (Biggs, Ca) -- $1,000,000

14)  Thurston Union of Low-Income People Cooperative Credit Union (Olympia, Wash.) -- $75,000

15) Phenix Pride Federal Credit Union (Phenix City, Ala.) -- $153,000

16)  Pyramid Federal Credit Union (Tucson, Ariz.) -- $2,500,000

17)  Cooperative Center Federal Credit Union (Berkeley, Calif.) -- $2,799,000

18)  Prince Kuhio Federal Credit Union (Honolulu, Hawaii) -- $273,000

19)  Community First Guam Federal Credit Union (Hagatna, Guam) -- $2,650,000

20)  Brewery Credit Union (Milwaukee, Wisc.) -- $1,096,000

21)  Tongass Federal Credit Union (Ketchikan, Alaska) -- $1,600,000

22)  Santa Cruz Community Credit Union (Santa Cruz, Calif.) -- $2,828,000

23)  Northeast Community Federal Credit Union (San Francisco, Calif.) -- $350,000

24)  Fairfax County Federal Credit Union (Fairfax, Va.) -- $8,044,000


Financial institutions that get government investments through TARP issue preferred stock or convertible debentures to the Treasury in return. Under the terms of the Capital Purchase Program - the main TARP aid vehicle - the dividend rate they pay the government on those securities starts at 5 percent annually and jumps to 9 percent after five years.

The CDCI program, however, does not require the recipient to pay more than a 2 percent dividend for the first eight years.  After that time, the dividend would rise to 9 percent.

The CDCI allows entities such as Liberty Financial to exchange their five percent CPP funding for two percent CDCI funding, and in some cases allows the institutions to borrow even more money at the lower rate.  Participation requires the Treasury's certification that the bank, thrift or credit union qualifies as a CDFI, targeting more than 60 percent of its small business lending and other economic development activities to "underserved communities."

For only the second time, the Treasury allowed an existing CDCI participant to borrow even more funds at the 2 percent rate. Mission Valley Bancorp, based in Sun Valley, Calif., first converted its $5.5 million in CPP monies to CDCI rates on August 20. It received an additional $4.84 million at the 2 percent rate last Friday.  The Atlanta-based Citizens Bancshares Corp. completed a similar transaction one week earlier.


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