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Community Scope

Volume 4, Issue 1 2016

Capitalization

Key Findings

Respondent CDFIs are primarily small financial institutions that maintain loan portfolios that fall within recommended levels of risk, and rely on government programs for financial and technical assistance.

  • The median range of total assets for respondent CDFIs is $20 million–$30 million.
  • The median range of total loan funds for respondent CDFIs is $10 million–$20 million.
  • Regulated financial institutions are the most utilized source of operational and lending funds for respondent CDFIs
  • The percentages of high risk loans and leases contained in the portfolios of respondent CDFIs range from 0.0 percent to 60.0 percent, with a median of 3.0 percent. The majority of respondent CDFIs maintain portfolios that comply with the CDFI Fund’s Minimum Prudent Standard (MPS), which recommends less than 15 percent high-risk loans and leases. 
  • 45.6 percent of 125 respondent CDFIs receive financial and/or technical assistance from the CDFI Fund’s CDFI Program.

Figure 7: What were the dollar ranges of total assets and total loan funds of CDFIs in the survey sample as of December 31, 2014?

Source: Survey results from the Federal Reserve Bank of Richmond’s 2015 Survey of CDFIs in the Southeast

What are the top sources of operational funds and lending funds for CDFIs in the survey sample?

Figure 8.1: Top sources of operational funds:

Source: Survey results from the Federal Reserve Bank of Richmond’s 2015 Survey of CDFIs in the Southeast.

Figure 8.2: Top sources of lending funds:

Source: Survey results from the Federal Reserve Bank of Richmond’s 2015 Survey of CDFIs in the Southeast.

Figure 9: What is the percent of high-risk loans and leases contained in the portfolios of the respondent CDFIs?

Source: Survey results from the Federal Reserve Bank of Richmond’s 2015 Survey of CDFIs in the Southeast.

Figure 10: From which federal programs do respondent CDFIs receive funding and/or technical assistance

Source: Survey results from the Federal Reserve Bank of Richmond’s 2015 Survey of CDFIs in the Southeast.

Respondents had the opportunity to share the greatest challenges facing their CDFIs with regard to capitalization. These quotes are direct excerpts from their responses:

“The greatest challenge for us at this time is developing a capitalization strategy that will ensure that we have the capacity, both human capital and infrastructure, to reach our capitalization goals in an intentional and responsible manner.”
- Community Development Loan Fund in Alabama

“Our biggest challenge is maintaining a well-capitalized net worth while lending to high risk borrowers. Over the years, [we have] developed many policies to ensure repayment of loans for these borrowers, and we manage our risk well, but we do have additional losses due to our chosen target market.”
- Community Development Credit Union in Louisiana

“Generating capital from earnings is challenging because of soft loan demand and the need to maintain overhead at levels which allow us to remain in compliance with various federal and state regulations on insured depository institutions.”
- Community Development Bank in Georgia

“Finding low-cost, unrestricted funds. Low-cost funds from philanthropic or social impact investors may be available, but can come with restrictions that make it difficult to deploy. Non-restrictive funds often come with higher costs, requiring us to increase our interest rates.”
- Community Development Loan Fund in Washington, D.C.

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