5th District Footprint

Community development financial institutions (CDFIs) are loan funds, banks, credit unions and other financial institutions with an institutional mission to provide affordable lending to low- and moderate-income (LMI) individuals and communities. These institutions play an important role in providing capital to small businesses, investing in affordable housing and community facilities and offering financial products and services to LMI consumers. In 2016, the cumulative value of this investment nationwide totaled nearly $4 billion.¹ To understand the impact of CDFIs in the Fifth District, this issue of 5th District Footprint explores the question: What was the total dollar value of CDFI investment in Fifth District counties from 2010 to 2016?

The Community Development function at the Richmond Fed – and throughout the Federal Reserve System – helps promote economic growth and financial mobility in communities across the United States, particularly those that are LMI.² This mission aligns with the work of the 1,074 CDFIs nationwide that are certified through the U.S. Department of the Treasury’s CDFI Fund.³ A majority of certified CDFIs are loan funds (51.0 percent or 548 CDFIs), and these institutions primarily fund their operations and lending through public grants – including those available through the CDFI Fund – as well as private capital.⁴ The private capital available to CDFIs often comes from regulated financial institutions. Investment in CDFIs is one way that regulated financial institutions can fulfill federal standards set in place by the Community Reinvestment Act (CRA) that require them to help meet the credit needs of their local communities.⁵ In addition to loan funds, 420 certified CDFIs (39.1 percent) are banks, thrifts or credit unions. These institutions have access to the public and private funding available to CDFI loan funds and can also fund their operations and lending activity in the same way as their non-CDFI counterparts – through deposits, fees and interest.⁶ The remaining 106 certified CDFIs are depository institution holding companies (8.4 percent or 90 CDFIs) and venture capital funds (1.5 percent or 16 CDFIs).

The CDFI Fund publishes annual Transaction Level Report (TLR) data that capture investments originated over time by the CDFIs that were awarded CDFI Fund financial assistance in the respective fiscal year.⁷ The TLR data collected and released in 2018 capture 170,361 loans originated by 357 CDFIs representing $17.4 billion in total investment from Jan. 1, 1977, to Dec. 31, 2016.⁸ The most-represented loan category was home purchase loans (42,195 loans or 24.8 percent of all loans originated), which represented $3.5 billion in total investment.⁹ The average size of a home purchase loan over this time period was $83,618. The loan category with the highest total dollar value was small business loans, which represented $3.9 billion in total investment (22.1 percent of all lending) and averaged $172,373 per loan.¹⁰

For the purpose of this analysis, the time period of loan origination is restricted to post-Great Recession lending, from Jan. 1, 2010, to Dec. 31, 2016.¹¹ During this time period within the Fifth District, the TLR data captured 10,142 loans originated by 77 CDFIs representing $1.7 billion.¹² Home purchase loans represented the highest number and dollar value at 4,137 loans (40.8 percent) representing $0.4 billion (25.9 percent).¹³ Within the Fifth District states, South Carolina had the highest number and dollar value of loan originations with 3,075 loans (30.3 percent) representing $0.5 billion (32.7 percent). In contrast, West Virginia had the lowest number and dollar value of loans at 166 loans (1.6 percent) representing $30.7 million (1.9 percent).¹⁴ The District of Columbia also provides an interesting example, with a relatively small number of loans originated (303 loans) but a relatively high amount of total CDFI investment ($0.2 billion).

Cumulative county-level CDFI investment varied widely in the Fifth District from 2010 to 2016, with 73 of the 359 counties and localities (20.3 percent) receiving no CDFI investment and 33 (9.2 percent) receiving over $10 million each.¹⁵ The interactive map below displays these county-level variations – lighter green shading represents lower amounts of CDFI investment, and darker green shading represents higher amounts of CDFI investment. Hovering over a particular county will allow you to identify the county name as well as the dollar value of total cumulative CDFI investment in the county from 2010 to 2016.

Within the 286 Fifth District counties and localities (79.7 percent) that received CDFI investment from 2010 to 2016, the dollar value of total investment ranged from $1,000 in Lexington City, Virginia, to $275,578,205 in Aiken County, South Carolina. CDFI investment in the Fifth District was relatively concentrated in the urban counties surrounding the Fifth District’s major cities, including Washington, D.C., Baltimore, Maryland, Charlotte and Raleigh, North Carolina, Columbia, South Carolina, and Richmond, Virginia. One hundred and twenty-three of the 166 nonmetropolitan counties in the Fifth District (74.1 percent) received CDFI investment that totaled $0.1 billion.¹⁶ This investment averaged $820,790 per county. Meanwhile, 163 of the 193 metropolitan Fifth District counties (83.9 percent) received CDFI investment from 2010 to 2016.¹⁷ This investment totaled $1.5 billion and averaged $7.9 million per county – approximately $7.1 million more per county than nonmetropolitan counties.¹⁸