Only 31 credit unions remain in the Troubled Assets Relief Program (TARP) Community Development Capital Initiative (CDCI), according to a report released this week by the Government Accountability Office (GAO).
“Overall, the financial condition of credit unions remaining in the CDCI program as of March 31, 2016, appears to have improved since the end of 2011,” the report reads. “The median of all five indicators of financial condition that we analyzed improved from 2011 to 2015.”
The U.S. Treasury established CDCI under TARP in February 2010 to help credit unions and banks certified as Community Development Financial Institutions (CDFIs) maintain services to underserved communities after the financial crisis.
“This report is good news. Credit unions with CDFI status play an important role in generating economic growth and opportunity. Many are located in areas that experienced extreme distress and disruption during the financial crisis and the CDCI provided invaluable help to participating institutions, their members and their communities. The program infused capital into communities that really needed it,” said Mike Schenk, CUNA’s vice president of economics and statistics. “The GAO’s finding of broad-based improvement in the financial health of the 31 credit unions remaining in the program is a direct reflection of the program’s success and bodes well for their ability to continue to meet financial obligations.”
The CDCI program offered CDFIs favorable terms for raising capital, including a low dividend or interest rate. As of March 31, the 10 largest CDCI institutions are banks, accounting for 67% ($286 million) of the outstanding investments.
The remaining 33% ($141 million) is spread among the 31 credit unions, as well as 61 banks. The interest rate is scheduled to increase to 9% for the credit unions on the eighth anniversary of the investment, which occurs in 2018.
CUNA met with the GAO earlier this year during its review of the CDCI program.