Two Idaho lenders received new funding announced by the Biden Administration in September. The funding is meant to spur continued investment in minority and low-income communities.
The Emergency Capital Investment Program sent $8.28 billion to 162 institutions designated as Community Development Financial Institutions and Minority Depository Institutions, community lenders with a special focus on serving populations that face barriers to full participation in our financial system.
On a call with members of the media, Vice President Kamala Harris touted some examples of ECIP funds in action.
“In North Dakota, Native American Bank lent $10 million to help fund an opioid addiction treatment facility on Tribal lands. In Georgia, Carver Bank lent just over half a million dollars to help a Black-owned housing developer build more affordable housing. In Mississippi, Hope Credit Union, led by the great Bill Bynum, lent $10,000 to a Black-and woman-owned coffee company to help them expand,” Harris said.
In Idaho, Lewis Clark Credit Union received $4.9 million and Meridian’s Clarity Credit Union received $2.3 million The government is offering both loans at low-interest rates after a no-interest period of 24 months.
At Clarity, the money won’t directly fund projects as the Vice President described.
“Since we focus on lower credit scores, we're really trying to help our members become better with their credit,” Clarity Credit Union Chief Financial Officer Nick Fugal.
The credit union has five locations between Meridian, Canyon County and Emmett, primarily serving lower-income members.
The government’s loan, Fugal explained, will help balance the books after an influx of stimulus money arrived in member’s bank accounts, doubling the credit union’s assets in three years.
“Everybody got money from the government, and the money didn't leave. With that asset growth, our capital ratio took a little bit of a bath. And when that happens, regulators come and say, ‘hey, you don't have enough retained earnings to cover a disaster.’ And then they start regulating you.”
In that situation, institutions typically have to look at reducing expenses to increase income and appease regulators. Fugal said that could have meant having to cut back or potentially end the bank’s ‘progress in credit’ program, offering interest rate reductions on member’s loans as their credit rating improves.
“We've actually saved our members about $1.4 million in interest payments, future interest payments,” Fugal said. “If we didn't have the grant money, I have to look at that program and be like, I don't think we can do this anymore because we need to bring income in because of all this growth that happened.”
Another option to bring the capital ratio back into balance could have been to encourage members to pull money out of the bank.
“To tell your members, ‘go spend your money or don't save it,’ It was just counterintuitive,” Fugal said.
More money is coming to Idaho, too. On October 11, the U.S. Treasury announced $65.6 million for the State Small Business Funding Initiative, funded as part of the American Rescue Plan.
Thirty-nine million dollars will expand access to capital for underserved communities by working closely with established lenders and a CDFI in the state, according to a White House news release. Another $26 million will go toward companion loans meant to fill financing gaps needed to qualify for senior loans.
Idaho estimates thatprogram will support 346 loans, generate approximately $67 million in private financing, and create or retain 497 jobs.
