National Case Statement

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Della Clarke
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1 Discussion Topics Session Description Learn about the advantages your Credit Union Members can receive by obtaining low-income designation and CDFI Certification and how this translates to Member value. Topics include: Member Benefit Value of CDFI Certification CDFI Certification Process and low-income designation Grant Writing 101 (tips and overview) Best practices to spend the money within your communities (Showcase opportunities successful programs utilizing grant funds and partnerships) 1

2 Introductions Aaron Bresko, EVP/Chief Lending Officer, GTE Financial FCU, Tampa, Florida Sharon Hall, CEO-Express Advantage Express Credit Union, Seattle, Washington Stacy Augustine, President/CEO, CU Strategic Planning, Tacoma, Washington 2

3 National Case Statement 8.2 percent of US households are unbanked. This represents 1 in 12 households in the nation, or nearly 10 million in total percent of US households are underbanked. This represents one in five households, or 24 million households percent of households do not have a savings account, while about 10 percent do not have a checking account. About two-thirds of households have both checking and savings accounts. One-quarter of households have used at least one alternative financial services AFS product in the last year, and almost one in ten households have used two or more AFS. In all, 12 percent of households used an AFS product in the last 30 days, including four in ten unbanked and underbanked households FDIC National Survey

4 Interesting Facts 10% of all credit unions reported grant income in ,438 grants $118 million total amount of grant income $95.6 million reported by CDFI credit unions Approximately 18% of total from CDFI Fund 82% from sources other than CDFI Fund CDFI credit unions represent a viable business model for community development finance CUNA/Federation Report -May 2014

5 Interesting Facts The Community Development Financial Institutions (CDFI) Fund was established by Congress and certified their first financial institution in Five types of financial institutions are eligible for certification provided they meet the CDFI Fund criteria: community-focused credit unions; community development banks, depository holding companies; non-profit loan funds; and community development venture capital funds. A certified Community Development Financial Institution (CDFI) is a specialized financial institution that works in market niches that are underserved by traditional financial institutions. CDFIs provide a unique range of financial products and services in economically distressed target markets, such as mortgage financing for low-income and first-time homebuyers and not-for-profit developers, flexible underwriting and risk capital for needed community facilities, and technical assistance, commercial loans and investments to small start-up or expanding businesses in low-income areas. CDFIs include regulated institutions such as community development banks and credit unions, and non-regulated institutions such as loan and venture capital funds. CDFI certification is a designation conferred by the CDFI Fund and is a requirement for accessing financial and technical award assistance from the CDFI Fund through the CDFI Program, Native American CDFI Assistance Program, and certain benefits under the BEA Program to support an organization's established community development financing programs. Goal of the program is to serve moderate to low income people and distressed communities lacking access to capital.

6 Moderate to Low Income Defined Moderate to low income = Any family making less than 80% of the HUD median family income. (Calculated by metropolitan statistical area or using a national average, whichever is greater.)

7 LID v. CDFI Designation

8 Value of CDFI Certification Low-income designation and CDFI Certification provides: Valuable tools for eligible credit unions to raise external resources to fund growth Opportunities for credit union to grow at an accelerated pace through access to external resources Makes credit unions eligible to attract secondary capital from additional public and private sector sources Use of Grant Funds For program and/or new innovative projects, Tied to specific activities, outputs and objectives Operational such as Loan Loss Reserves supporting specific programs Equity or can serve as permanent capital Positive Impact Credit Unions that receive awards lend more than their similarly sized counterparts over the three years following the award CDFI s net worth ratio is positively correlated with receiving an award. This means that CDFI Fund awards go toward recapitalizing credit unions as well allowing credit unions to continue to make loans in the future because credit unions require a 7% capital-toasset ration to be able to expand their loan portfolio. On average, credit unions have capital ratios near 10% to11%, but CDFIs hover around 8% or 9%.

9 CDFI Overview Quick Facts The CDFI Fund has awarded nearly $1.5 billion in financial and technical assistance to certified CDFIs across the country, including $157 million in awards to 173 CDFI certified credit unions. Credit Unions make up 177 of the 811 CDFIs (active at the end of 2013) Credit Unions that receive awards lend more than their similarly sized counterparts over the three years following the award. CDFI s net worth ration is positively correlated with receiving an award. This means that CDFI Fund awards go toward recapitalizing credit unions as well allowing credit unions to continue to make loans in the future because credit unions require a 7% capital-to-asset ration to be able to expand their loan portfolio. On average, credit unions have capital rations near 10% to 11%, but CDFIs hover around 8% or 9%.

10 CDFI Overview With CDFI Certification credit unions are eligible for: Financial Assistance or Technical Assistance Awards of up to $2 million per year Deposits from institutions participating in the Bank Enterprise Award Program participation in the CDFI Fund Community Investment Impact System to measure and demonstrate impact Low cost lines of credit to promote affordable housing lending through the Federal Home Loan Bank s community development program other government programs as they become available, like the Community Development Capital Initiative (CDCI) that distributed $70 million in low cost secondary capital to 48 credit unions in 2010 The CDFI Bond Guarantee Program, potentially the largest source of secondary capital ever made available to eligible credit unions The Bureau of Indian Affairs loan guarantee program

11 Types of Awards Technical Assistance (TA Grants): New CDFIs or small credit unions to build capacity. Financial Assistance (FA Grants): Granted to strong credit unions to deploy more loans to positively impact field of membership.

12 What can CDFI funds be used for? Technical Assistance ($125,000) Personnel (Salary) Personnel (Fringe Benefits) Training Travel Professional Services Materials / Supplies Equipment and Other Capital Expenditures Other Costs

13 What can CDFI funds be used for? Financial Assistance ($2 million) Financial Products - Launch new products. Marketing Materials - Outreach and education. Financial Services - Offer more services. Staff and equipment to provide services. Loan Loss Reserves - Make loans with less risk. Capital Reserves - Increase net worth.

14 Showcase of Best Practices: Creative Model

15 Showcase of Best Practices: Impact Story Express-Credit Union Advantage J.P. has a full-time job as a motorcycle mechanic and has a monthly income. His wife, who had a neurologic disorder, was being discharged from the hospital but the facility would not release her until she had a home to return to. J.P. needed a loan to secure an apartment, together with the first and last month s rent, but he also had an outstanding debt of $53,000 in hospital bills. No one would help him. J.P. joined the credit union with the help of the Express community tellers at the YMCA Opportunity Place in February 2009.

16 About GTE Community Mission Statement GTE Financial is dedicated to promoting community development in all of the areas it conducts business and to provide affordable financial services and financial literacy education to members of low and moderate means. In doing so, we will help build assets and achieve financial stability. Quick Facts Established in 1935 $1.68 billion in assets 223,662+ members 21 Community Financial Centers across West Central Florida (18 of 21 branches are located in lowincome neighborhoods) GTE s Target market is the second most financially distressed MSA in the country GTE provides loans to more extremely low income people than 5,000 credit unions serve in their entire membership

17 Transformation of a mainstream credit union to a low-income credit union FUNDEMENTAL ASSET BUILDING STRATEGIES: Our Approach and Steps THINKING & CREATING Achieving results through business model innovations, partnerships, productivity gains, and growth INFLUENCING Aligning resources with national, regional, local policy and planning work CONVENING & MOBILIZING Lead and support a network of partnerships that reflect unmet community need and growth beyond grants FINANCE TOOLS Offer a comprehensive set of financial products and services COVERAGE Ensure broad market coverage serving distressed and underserved communities CAPACITY BUILDING Identify funding and resources for sustainability and growth IMPACT Improve quality of life for low-income and disadvantaged individuals and families by increasing financial stability and economic opportunity Of the 485,756 consumer borrowers GTE serves, 140,869 are low-income, 111,724 very low income and 63,148 extremely low income.

18 GTE Impact In 2013, Low-income Designation, CDFI Certification and a subsequent $1.34 million CDFI Financial Assistance grant helped GTE expand its ongoing community work and created a building block to support GTE s growth and Member value; increasing our lending to low-income areas in West Central Florida. In addition to traditional credit union services, we offer a full range of community development products & services designed to meet the needs of members low to moderate means : Community development loan products, such as credit builder loans, First Time Auto Buyer program(provide members with no credit access to auto financing to allow them reliable transportation to work), shared secured credit cards, micro business and consumer loans and small amount loans. In the process of exploring offer payday loans, anti-predatory short-term loans and other products/services. First Time Auto Buyer program to provide members with no credit access to auto financing to allow them reliable transportation to work. Community development savings and account services, such as prepaid debit cards. Exploring alternatives to compete with other business s for check-cashing and money orders Also under consideration are business share account and international remittances. Capacity-Building Services, such as financial counseling, financial education, first-time home buyers programs and bilingual services. By 2015, the goal is to have front-line staff trained as Certified Financial Counselors (funded by CDFI Award). Partnerships, such as Federal Home Loan Bank of Atlanta (offering a variety of purchase and rehabilitation products such as First-time Homebuyer, Community Partners & Veterans, etc.) and auto loans through new partnerships with Wheels of Success and Sun Coast Services (unique character lending and credit building loans).

19 GTE IMPACT From WOS to GTE ABC! L.M. was a repair only contract for Wheels of Success (WOS). She came to us a victim of a severe domestic violence and was attempting to escape her situation. She came to Wheels of Success with a vehicle that was in desperate need of repairs. She couldn t make her break and keep her job without a reliable vehicle. However, as most life crisis moments happen there is often no notice. Before work could begin on her vehicle she made her break for Independence from her abuser. She met with WOS and the assistance of friends until her vehicle was ready for her. L. M. s original vehicle that was repaired allowed her to get to work and receive a raise! She continued with her success in life and her professional life for a year when she completed the WOS program. Upon the completion of the program L.M. s finances improved and a car with a vehicle payment was something that she could now budget and look forward to. We approved her for the GTE ABC program and she purchased the GTE donated vehicle of a 2006 Honda Accord. The vehicle is a huge step up from her 1998 Dodge Stratus (which is still running as well and was used as a trade in for this vehicle). She has confidence, independence and AC something that hasn t been enjoyed for 10 years.

20 OUR IMPACT!

21 CDFI Grant Writing Tips Demonstrate commitment and develop a Community Development Mission Statement Leverage Community Partnerships, show how they make the credit union s application more powerful Determine community need (environmental scan) Be compelling Act like a CDFI (have policies & practices in place that already frame you as a CDFI

22 More CDFI Grant Tips Start early Treat your application like a business plan (because it is) and run it like a project Don t go it alone: use grant funds to create greater staff depth Recordkeeping requirements

23 Community Partnerships Leverage Partnerships to: o Expand and create bigger social impact o Expand markets and create opportunities o Access a broader, more diverse customer pool o Partners could include public entities (agencies or affiliates of Federal, State and Local Government ), banks (CRA credit) private entities (non-profit & forprofit) and other Credit Unions.

24 Federal Opportunities In addition to the CDFI Fund (biggest single source of permanent capital grants), the following is a list of a few other Federal grant opportunities that can be leveraged by the CDFI Certification: NCUA Community Dev. Revolving Loan Fund Technical Assistance and Capacity Building grants DHHS Assets for Independence Individual Development Account Matching Grants HUD Housing Counseling Community Development Block Grants (CDBG) Federal Reserve Bank

25 Other Opportunities Community Foundations Asset-building, economic empowerment Corporate Foundations Business links with local community, CU field of membership Regional and National Foundations Local innovations that may be nationally replicable Non-Profit Intermediaries Banks (focused on CRA credits) Aggregate funding from multiple sources to test, replicate and expand innovations

26 Resources Opportunity Finance Network The Federation Foundation Center-or other grant search databases? NCUA offers a technical assistance grant of $2500 to help with preparation of CDFI Certification CUNA CDFI Fund Credit Union Leagues/Associations Handout: May 2014 report-cdfi Certification: A Building Block for Credit Union Growth (prepared by CUNA and Federation)

27 Questions?

28 HANDOUTS

29 2011 FDIC National Survey % Underbanked x State

Strengthening Your Capacity to Serve the Underserved

Strengthening Your Capacity to Serve the Underserved Blake Myers Consultant, National Federation of Community Development Credit Unions Teri Robinson CEO, Pacific NW Ironworkers FCU Agenda 1. The Opportunity: