GERMANTOWN, Md.—It required a great deal of “hard work” for SkyPoint FCU to finally close on a $7-million investment as part of the U.S. Treasury’s new Emergency Capital Investment Program (ECIP), but now the credit union is saying all of the hours and effort are worth it since the funds will bring the cooperative “transformative growth.”
CEO Jim Norris told CUToday.info the investment, which counts as secondary capital, increased SkyPoint’s net worth and that will allow for growth and expansion of its lending portfolio and add to its business services. The new programs will target small and minority-owned businesses and consumers in low-income and underserved communities.
The ECIP initiative is designed to provide access to capital for communities, businesses, and individuals traditionally excluded from the financial system, particularly those that have struggled during the COVID-19 pandemic. The credit union has a long history with members in this demographic, Norris said.
“It was a lot of work, take it from me,” said Norris, recalling the application process and the work to get the final investment. “But I knew that this would really transform our credit union and assist those communities that really need help.”
Norris acknowledged it was possible to go through the extensive application process and, in the end, be turned down by Treasury.
“That, however, should never deter a credit union from applying for this money, because, as I said, it is transformative dollars,” the CEO said.
‘A Year and a Half of Work’
Norris believes only 85 credit unions participated in the ECIP program
“I think the reason why only 85 took part is it’s a year-and-a-half of work, and we had to present a secondary capital plan to NCUA. We had to work with the Treasury Department and we had to work with the CDFI Fund,” Norris explained.
The $7 million is a loan from Treasury.
“We had an option of going with a 15-year loan or a 30-year,” explained Norris. “We chose a 15-year just because the rules were changed a bit in the middle of the process and we said we're sticking with the 15-year.”
Norris said the interest rate being charged Skypoint FCU is 0% for the first two years and 2% for the next 13.
Jim Norris
‘Almost Free Money’
“That's almost free money,” said Norris. “The other thing is this counts as secondary capital. We discussed this opportunity several years ago as a means to really boost our capital. We’ve always been in the 8% range, and in looking for ways to boost our capital the price for secondary capital (outside of the Treasury program) was much too high.”
Norris said that with SkyPoint’s capital hovering at 8%--a ratio boosted to 12.71% with the Treasury dollars—it wasn’t easy to pull the trigger on new programs and services.
“At 8% it's really kind of tough to grow,” he said.
Norris said some of the funds will be used to broaden the credit union’s portfolio of mortgage lending and personal loan programs that in turn will be marketed to communities most affected by the COVID pandemic, such as local mom-and-pop shops.
Business Services on Agenda
SkyPoint, as Norris noted, is also planning to add a line of business services with the dollars.
“With the high inflation that's going on now, businesses are struggling,” said Norris. “The research that we've done tells us that the large banks won't even talk to a business unless they're willing to borrow up to a million dollars. We want to help local businesses. So, during the past year and a half we’ve been designing and building a business program—business services, businesses accounts and business lending, that we just launched in the fall. We're ready to go with our new business services expansion and we think there will be a lot of takers.”
A ’Great Opportunity’
The research SkyPoint has conducted revealed the signficant need for business services among its existing members.
“We found that a number of our members run a small business as well as hold down their day jobs,” said Norris. “They need funding, as well. This is just a great opportunity for our members, and the credit union, to grow.”