Please note: The Community Development Investment Program is not currently accepting applications for equity grants.
What is an Equity Grant?
An equity grant is equity capital contributed to the credit union. It strengthens the capital of the institution and does not have to be repaid.
Who is eligible for an Equity Grant from the NFCDCU?
All credit unions that have been policy members in good standing of the Federation for at least six months are eligible to apply for equity grants from the Federation.
Are there any restrictions on the use of the proceeds of an Equity Grant?
Credit unions receiving equity grants from the Federation cannot use the funds for operating expenses. The grant must be used to increase Net Worth.
Are all of the funds from the Equity Grant disbursed at once?
Sometimes the entire amount awarded is disbursed at once. However, in the majority of cases, we disburse only a portion at the beginning and require that the credit union achieve certain performance goals in order to receive future installments of the grant. These goals are normally based on the objectives in the credit union’s business plan.
What are the advantages of an Equity Grant compared to a Secondary Capital Loan?
If an equity grant is booked as non-operating income, the NCUA permits its inclusion in Net Worth for the calculation of the Net Worth to Total Assets ratio and it does not have to be repaid.
What types of Equity Grants qualify as Net Worth for regulatory purposes (PCA)?
1) There must be no strings attached; i.e. once it is disbursed it cannot be recalled.
2) It must be accounted for by crediting non-operating income.
What types may not qualify?
If the grant is donated equity in the form of a fixed asset, for example, or if it had conditions attached, then the NCUA may not permit it to be included in Net Worth.
What is the accounting for Equity Grants?
When received, the entries are Debit - Cash and Credit - Non-operating Income. At the end of the accounting period, Net income is closed out to Undivided Earnings and then the amount of the grant should be transferred to Regular Reserves.
If approved, what documentation does the Credit Union and NFCDCU sign?
Both parties must sign an Equity Grant Agreement. Any performance goals, which must be achieved in order to receive future disbursements, are described in the agreement.
What is required in order to apply for an Equity Grant?
Complete and send in an application form and include:
amount and the proposed use of the funds
most recent NCUA Form 5300 and most recent financial statements since last Form 5300
last two annual financial statements
a three- to five-year business plan
a description of the credit union’s history and past performance
expected impact of the investment
plans for growth, for introduction of new products, and for attraction of new members
three to five year financial projections
copies of recent Letters of Understanding and Agreement and Documents of Resolution