2017-10088. Office of Small Credit Union Initiatives (OSCUI) Loan Program Access for Credit Unions

AGENCY:

National Credit Union Administration (NCUA).

ACTION:

Notice of funding opportunity.

SUMMARY:

The National Credit Union Administration (NCUA) is issuing a Notice of Funding Opportunity (NOFO) to invite eligible credit unions to submit applications for participation in the OSCUI Loan Program (a.k.a. Community Development Revolving Loan Fund (CDRLF)), subject to funding availability. The OSCUI Loan Program serves as a source of financial support, in the form of loans, for credit unions serving predominantly low-income members. It also serves as a source of funding to help low-income designated credit unions (LICUs) respond to emergencies arising in their communities.

Table of Contents

A. Program Description

B. Federal Award Information

C. Eligibility Information

D. Application and Submission Information

E. Application Review Information

F. Federal Award Administration

G. Federal Awarding Agency

A. Program Description

The purpose of the OSCUI Loan Program is to assist low-income designated credit unions (LICU) in providing basic financial services to their members to stimulate economic activities in their communities. Through the OSCUI Loan Program, NCUA provides financial support in the form of loans to LICUs. These funds help improve and expand the availability of financial services to these members. The OSCUI Loan Program also serves as a source of funding to help LICUs respond to emergencies. The Loan Program consists of Congressional appropriations that are administered by OSCUI, an office of the NCUA.

Permissible Uses of Funds: NCUA will consider requests for funds consistent with the purpose of the OSCUI Loan Program. 12 CFR 705.1. A non-exhaustive list of examples of permissible uses or projects of loan proceeds are contained in § 705.4 of the regulation, and include: (i) Development of new products or services for members, including new or expanded share draft or credit card programs; (ii) Partnership arrangements with community-based service organizations or government agencies; (iii) Loan programs, including, but not limited to, microbusiness loans, payday loan alternatives, education loans, and real estate loans; (iv) Acquisition, expansion, or improvement of office space or equipment, including branch facilities, ATMs, and electronic banking facilities; and (v) Operational programs such as security and disaster recovery.

NCUA will consider other proposed uses of funds that in its sole discretion it determines are consistent with the purpose of the OSCUI Loan Program, the requirements of the regulations, and this NOFO.

Regulation: Part 705 of NCUA's regulations implements the OSCUI Grant and Loan Program. 12 CFR 705. A revised Part 705 was published on November 25, 2016. 81 FR 85112. Additional requirements are found at 12 CFR 701 and 741. Applicants should review these regulations in addition to this NOFO. Each capitalized term in this NOFO is more fully defined in the regulations, the loan application, and the loan agreement. For the purposes of this NOFO, an Applicant is a Qualifying Credit Union that submits a complete Application to NCUA under the OSCUI Loan Program.

B. Federal Award Information

OSCUI loans are made to LICUs that meet the requirements in the program regulation and this NOFO, subject to funds availability. OSCUI loans are generally made at lower than market interest rates.

Congress has not made an appropriation to the OSCUI Loan Program for Fiscal Years 2016-2017. NCUA anticipates that approximately $3.2 million will be available for loans under this NOFO, derived from prior-year appropriated and earned funds. Monies for additional loans come from scheduled loan amortizations. NCUA reserves the right to: (i) Award more or less than the amount cited above; (ii) fund, in whole or in part, any, all, or none of the applications submitted in response to this NOFO; and (iii) reallocate funds from the amount that is anticipated to be available under this NOFO to other programs, particularly if NCUA determines that the number of awards made under this NOFO is fewer than projected.

The specific terms and conditions governing a loan will be established in the loan documents each Participating Credit Union will sign prior to disbursement of funds. The following are the general loan terms under the program

1. Maximum Loan Amount: NCUA makes loans based on the financial condition of the credit union. The applicable regulation does not provide a maximum limit on loan applications for consideration, but in practice NCUA discourages loan applications of higher than $500,000 to mitigate risk. There is no minimum loan amount.

The amount of the loan will be based on the following factors:

• Funds availability.
• Credit worthiness of the credit union.
• Financial need.
• Demonstrated capability of credit union to provide financial and related services to its members.
• Concurrence from the Region and/or the applicable State Supervisory Authority (SSA).

2. Dates: The application period corresponds to the date of this NOFO and is open until funds are exhausted.

3. Maturity: Loans will generally mature in five years. A credit union may request a shorter loan period, but in no case will the term exceed five years.

4. Interest: The interest rate on loans is governed by the Loan Interest Rate Policy, which can be found on NCUA's Web site at https://www.ncua.gov/​services/​Pages/​small-credit-union-learning-center/​services/​grants-loans.aspx.

5. Repayment: All loans must be repaid to NCUA regardless of how they are accounted for by the Participating Credit Union.

(a) Principal: The entire principal is due at maturity.

(b) Interest: Interest is due in semi-annual payments beginning six months after the initial distribution of the loan.

(c) Principal Prepayment: There is no penalty for principal prepayment. Principal prepayments may be made as often as monthly.

C. Eligibility Information

The regulations specify the requirements a credit union must meet in order to be eligible to apply for assistance under this NOFO. See 12 CFR 705. Following are additional requirements for participating in the Loan Program under this NOFO.

1. Eligible Applicants: A credit union must have a Low-Income Credit Union (LICU) designation, or equivalent in the case of a Qualifying State-chartered Credit Union, in order to participate in the OSCUI Grant and Loan Program. Requirements for obtaining the designation are found at 12 CFR 701.34.

2. Matching Funds: Part 705.5(g) of NCUA's regulations describe the overall requirements for matching funds. NCUA, in its sole discretion, may require matching funds of an Applicant, on a case-by-case basis depending on the financial condition of the Applicant. NCUA anticipates that most Applicants will not be required to obtain matching funds. However, each Applicant should address in the Application its strategy for raising matching funds if NCUA determines matching funds are required (see 12 CFR 705 and the Application for additional information).

(a) Matching Funds Requirements: The specific terms and covenants pertaining to any matching funds requirement will be provided in the loan agreement of the Participating Credit Union. Following, are general matching fund requirements. NCUA, in its sole discretion, may amend these requirements depending upon its evaluation of the Applicant, but in no case will the amended requirements be greater than the conditions listed below.

(i) The amount of matching funds required must generally be in an amount equal to the loan amount.

(ii) Matching funds must be from non-governmental member or nonmember share deposits.

(iii) Any loan monies matched by nonmember share deposits are not subject to the 20% limitation on nonmember deposits under § 701.32 of NCUA's regulations.

(iv) Participating Credit Unions must maintain the outstanding loan amount in the total amount of share deposits for the duration of the loan. Once the loan is repaid, nonmember share deposits accepted to meet the matching requirement are subject to § 701.32 of NCUA's regulations.

(b) Criteria for Requiring Matching Funds: NCUA will use the following criteria to determine whether to require an Applicant to have matching funds as a condition of its loan.

(i) CAMEL Composite Rating.

(ii) CAMEL Management Rating.

(iii) CAMEL Asset Quality Rating.

(iv) Regional Director Concurrence.

(v) Net Worth Ratio.

(c) Documentation of Matching Funds: NCUA may contact the matching funds source to discuss the matching funds and the documentation that the Applicant has provided. If NCUA determines that any portion of the Applicant's matching funds is ineligible under this NOFO, NCUA, in its sole discretion, may permit the Applicant to offer alternative matching funds as a substitute for the ineligible matching funds. In this case: (i) The Applicant must provide acceptable alternative matching funds documentation within 10 business days of NCUA's request.

3. Other Eligibility Requirements:

(a) Financial Viability: Applicants must meet the underwriting standards established by NCUA, including those pertaining to financial viability, as set forth in the application and found in 12 CFR 705.7(c).

(b) Compliance With Past Agreements: In evaluating funding requests under this NOFO, NCUA will consider an Applicant's record of compliance with past agreements, including any deobligation of funds. NCUA, in its sole discretion, will determine whether to consider an Application from an Applicant with a past record of noncompliance, including any deobligation (i.e. removal of unused awards) of funds.

(i) Default Status: If an Applicant is in default of a previously executed agreement with NCUA, NCUA will not consider an Application for funding under this NOFO.

(ii) Undisbursed Funds: NCUA may not consider an Application if the Applicant is a prior awardee under the OSCUI Grant Program and has unused grant awards as of the date of Application.

D. Application and Submission Information

1. Application Form: The application and related documents can be found on NCUA's Web site at https://www.ncua.gov/​services/​Pages/​small-credit-union-learning-center/​services/​grants-loans.aspx.

2. Minimum Application Content: Each Applicant must complete and submit information regarding the applicant and requested funding. In addition, applicants will be required to certify applications prior to submission.

(a) DUNS Number: NCUA will not consider an Application that does not include a valid Data Universal Numbering System (DUNS) number issued by Dun and Bradstreet (D&B). Such an Application will be deemed incomplete and will be declined. See Section 3 for additional information.

(b) System for Award Management (SAM): All Applicants are required by federal law to have an active registration with the federal government's System for Award Management prior to applying for funding. NCUA will not consider an Applicant that does not have an active SAM status. Such an Application will be deemed incomplete and will be declined. See Section 3 for additional information.

(c) Employer Identification Number: Each Application must include a valid and current Employer Identification Number (EIN) issued by the U.S. Internal Revenue Service (IRS). NCUA will not consider an application that does not include a valid and current EIN. Such an Application will be deemed incomplete and will be declined. Information on how to obtain an EIN may be found on the IRS's Web site at www.irs.gov.

(d) Narrative Responses: Each Application must include the narratives listed below. Applicants must adhere to character limitations contained in the Application. NCUA will not consider narrative comments beyond the limits specified. Additionally, NCUA will only review information requested in the Application and will not consider supplemental attachments that have not been requested in this NOFO or the Application.

(i) Use of Funds: A narrative describing how it intends to use the loan proceeds. The narrative should demonstrate that the loan will enhance the products and services the credit union provides to its members. It also should describe how those enhanced products and services will support the economic development of the community served by the credit union.

(ii) Matching Funds: A narrative describing its strategy for raising matching funds from non-federal sources if matching funds are required.

(e) Large Loans: An Applicant requesting a loan in excess of $300,000 is required to complete an online application form that contains additional narrative comments supporting such request. The additional narrative consists of a business plan.

(i) Business Plan: The business plan must: describe the community's need for financial products and services and the Applicant's need for funding; summarize the services, financial products, and services provided by the Applicant; describe the Applicant's involvement with other entities; describe the credit union's marketing strategy to reach members and the community; and include financial projections.

(f) Non-Federally Insured Applicants:

(i) Additional Application Requirements: Each Applicant that is a non-federally insured, state-chartered credit union must submit additional application materials. These additional materials are more fully described in § 705.7(b) (3) of NCUA's regulations and in the Application.

(ii) Examination by NCUA: Non-federally insured, state-chartered credit unions must agree to be examined by NCUA. The specific terms and covenants pertaining to this condition will be provided in the loan agreement of the Participating Credit Union.

3. Dun and Bradstreet Universal Numbering System (DUNS) Number and System for Award Management (SAM): In accordance with Office of Management and Budget, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Chapter I, Chapter II, part 200, et al.), credit unions are required to: (i) Be registered in the System for Award Management (SAM) before submitting its application; (ii) provide a valid Data Universal Numbering System (DUNS) number issued by Dun and Bradstreet (D&B); and (iii) continue to maintain an active SAM registration with current information at all times during which it has an active Federal award or an application or plan under consideration. NCUA will not consider an Application that does not include a valid DUNS number and an active SAM status. Such an Application will be deemed incomplete and will be declined. Information on how to obtain a DUNS number may be found on D&B's Web site at http://fedgov.dnb.com/​webform or by calling D&B, toll-free, at 1-866-705-5711. Information on how to register for SAM may be found on SAM's Web site at https://www.sam.gov.

4. Submission Dates and Times: The application period corresponds to the dates of this NOFO and is open until funds are exhausted.

5. Other Submission Requirements: Under this NOFO, Applications must be submitted online at http://www.cybergrants.com/​ncua.

E. Application Review Information

1. Review and Selection Process:

(a) Eligibility and Completeness Review: NCUA will review each Application to determine whether it is complete and that the Applicant meets the eligibility requirements described in the Regulations and in this NOFO. An incomplete Application or one that does not meet the eligibility requirements will be declined without further consideration.

(b) Substantive Review: After an Applicant is determined eligible and its Application is determined complete, NCUA will conduct a substantive review in accordance with the criteria and procedures described in the Regulations and this NOFO. NCUA reserves the right to contact the Applicant during its review for the purpose of clarifying or confirming information contained in the Application. If so contacted, the Applicant must respond within the time specified by NCUA or NCUA, in its sole discretion, may decline the application without further consideration.

(c) Evaluation: The evaluation criteria are more fully described in § 705.7(c) of NCUA's regulations. NCUA will evaluate each Application that receives a substantive review on the four criteria described in the regulation: financial performance, compatibility, feasibility, and examination information and applicable concurrence.

(i) Assessment of Impact: The Compatibility criteria will take into consideration the extent of community need and projected impact of the funding on the Applicant's members and community.

(ii) Effective Strategy: The Feasibility criteria will take into consideration the quality of the Applicant's strategy and its capacity to execute the strategy as demonstrated by its past performance, partnering relationships, and other relevant factors.

(iii) Evaluating Prior Award Performance: For prior participants of the OSCUI Grant and Loan Program, loans may not be awarded if the participant: (1) Is noncompliant with any active award; (2) failed to make timely loan payments to NCUA during fiscal years prior to the date of Application; and (3) had an award deobligated (i.e. removal of unused awarded funds) during fiscal years prior to the date of Application.

(d) Examination Information and Applicable Concurrence: NCUA will not approve an award to a credit union for which it's NCUA regional examining office or SSA, if applicable, indicates it has safety and soundness concerns. If the NCUA regional office or SSA identifies a safety and soundness concern, OSCUI, in conjunction with the regional office or SSA, will assess whether the condition of the Applicant is adequate to undertake the activities for which funding is requested, and the obligations of the loan and its conditions. NCUA, in its sole discretion, may defer decision on funding an Application until the credit union's safety and soundness conditions improve.

(e) Funding Selection: NCUA will make its funding selections based on a consistent scoring tier for each applicant. NCUA will consider the impact of the funding. In addition, NCUA may consider the geographic diversity of the Applicants in its funding decisions. When loan demand is high, applications will be ranked based on the aforementioned.

F. Federal Award Administration

1. Federal Award Notices: NCUA will notify each Applicant of its funding decision. Notification will generally be by email. Applicants that are approved for funding will also receive instructions on how to proceed with disbursement of the loan.

2. Administrative and National Policy Requirements: (a) Loan Agreements: Each Participating Credit Union approved for funding under this NOFO must enter into agreement with NCUA before NCUA will disburse loan funds. The agreement documents include, for example, a promissory note, loan agreement, amortization schedule, and security agreement (if applicable). The Loan Agreement will include the terms and conditions of funding, including but not limited to the: (i) Loan amount; (ii) interest rate; (iii) repayment requirements; (iv) accounting treatment; (v) impact measures; and (vi) reporting requirements.

3. Administrative and National Policy Requirements: (a) Loan Agreements: Each Participating Credit Union under this NOFO must enter into agreement with NCUA before NCUA will disburse loan funds. The agreement documents include, for example, a promissory note, loan agreement, repayment schedule, and security agreement (if applicable). The Loan Agreement will include the terms and conditions of funding, including but not limited to the: (i) Loan amount; (ii) interest rate; (iii) repayment requirements; (iv) accounting treatment; (v) impact measures; and (vi) reporting requirements.

(b) Failure To Sign Agreement: NCUA, in its sole discretion, may rescind a loan offer if the Applicant fails to return the signed loan documents and/or any other requested documentation, within the time specified by NCUA.

(c) Multiple Disbursements: NCUA may determine, in its sole discretion, to fund a loan in multiple disbursements. In such cases, the process for disbursement will be specified by NCUA in the Loan Agreement.

3. Reporting: The reporting requirements are more fully described in § 705.9 of NCUA's regulations. Annually, each Participating Credit Union will submit a report to NCUA. The report will address the Participating Credit Union's use of the loan funds; the impact of funding; and explanation of any failure to meet objectives for use of proceeds, outcome, or impact. NCUA, in its sole discretion, may modify these requirements. However, such reporting requirements will be modified only after notice to affected credit unions.

Report Form: Applicable credit unions will be notified regarding the submission of the report form. A Participating Credit Union is responsible for timely and complete submission of the report. NCUA will use such information to monitor each Participating Credit Union's compliance with the requirements of its loan agreement and to assess the impact of the OSCUI Loan Program.

G. Agency Contacts

1. Methods of Contact: Further information can be found at: https://www.ncua.gov/​services/​Pages/​small-credit-union-learning-center/​services/​grants-loans.aspx. For questions email: National Credit Union Administration, Office of Small Credit Union Initiatives at [e-mail].

2. Information Technology Support: People who have visual or mobility impairments that prevent them from using NCUA's Web site should call [phone] for guidance (this is not a toll free number).

Authority: 12 U.S.C. 1756, 1757(5)(D), and (7)(I), 1766, 1782, 1784, 1785 and 1786; 12 CFR 705.

By the National Credit Union Administration Board on May 12, 2017.

Gerard Poliquin,

Secretary of the Board.