June 13, 2012
CDFIs Rebound from Financial Crisis
by Robert Kropp
The National Community Investment Fund reports that 88 certified community development financial
institutions earned a net income of $82 million in 2011, reversing a two-year decline.
As of May, national unemployment remained at a stubbornly high rate of 8.2%. In economically
distressed communities, of course, it is markedly higher, as evidenced by the double-digit
unemployment rates endured by Hispanics and blacks.
"Many of the low-
and moderate-income communities in the US that were hardest hit during the recession are still
suffering, as the fragile US economy has not yet produced significant job growth in these
populations," the report states.
Unlike many of the nation's big banks, whose
manipulations led to the financial crisis and recession, CDFIs "leverage their assets to meet the
specific needs of the communities that they serve," the report continues. Despite their exposure to
risk, both as a result of their generally small size—average assets were $342 million—and the often
distressed communities they serve, many CDFIs experienced both growth and improved financial
performance in 2011, according to the report.
That the economic conditions of their
communities affect the financial performance of CDFIs was borne out by NCIF's previous annual
reports. In 2009, CDFIs lost $112 million in net income. The number improved somewhat in 2010, when
they lost $15 million.
But in 2011, CDFIs turned conditions around, and their net income
of $82 million suggests that their financial performance is returning to pre-crash levels.
In 2011, the total assets of the 88 certified CDFIs included in the report increased by 16.3%.
Loans grew by 10% to $18.4 billion, and deposits increased by 17.6%.
financial performance should attract additional investors—the compound annual growth rate from 2006
to 2011 was 2.33%—but it is in the social context that the impact of CDFIs distinguishes itself.
For every $100 of home lending generated by a CDFI, more than $53 is lent to a resident of a low-
and moderate-income community. The number is more than three times higher than that of the nation's
largest banks, and for all banks as well.
The vast majority of branch locations of
CDFIs—two-thirds of them, according to NCIF—are located in low- and moderate-income communities.
This number is more than four times higher than that of all banks.
"CDFI banks play a
critical role in assisting small business owners grow their businesses and helping new investors
develop new economies in underserved markets," the report states. "Continued support of these
unique types of financial institutions is critical for the success of the economic recovery."