1. CDFI Recertification 2013 Updates and Tips March 7, 2013

2. Federation Advocacy Streamlining the CDFI certification process for CUs Primary Mission  automatic pass for low income designated CUs Target Market  Federation developed random sampling methodology accepted by CDFI Fund to demonstrate target market eligibility  Advocating for inclusion of savings products in measure of TM activity Accountability  Gaining recognition that democratically-governed CUs are directly accountable to their target market (s)

3. Federation Advocacy Monitoring the Certification review process to: Hold CDFI Fund accountable to its 90-day turn-around time Make sure CDFI Fund consultants understand the CU model Resolve issues with CU certification applications

4. Federation Updates Application Workbook Initial workbook would not accept some DUNS numbers Corrected workbook available for download: www.cdfifund.govwww.cdfifund.gov myCDFI 2010 Address Geocoder Released Feb 4 th with error rate of approx 30% Federation identified issue, CDFI Fund resolved on Feb 25 th  If you used the new system to geocode addresses prior to Feb 25 th, please discard results and re-run your analyses

5. Federation Updates Cannot re-use last recertification materials New Investment Area data from 2010 census New formats Additional narratives More rigorous data requirements CDFI Fund Information Calls Now Completed Yesterday snowstorm call with 300+ CDFIs for 3 hours Emphasized time pressure and need for complete applications  Fund won’t have time to follow-up on missing, incomplete or unconvincing

6. The March to Recertification 6CDFI Certification for Credit Unions CDFI Recertification Deadlines 207 CDFI Credit Unions

7. Who Are We? 207 Credit Unions 2 million members $14.8 billion in total assets $9.4 billion in total loans 99% Low Income Designated 72% Federation members 7CDFI Certification for Credit Unions

8. When were we certified? 23% certified before 2005 8CDFI Certification for Credit Unions

9. When were we certified? 21% from 2006-2009 9CDFI Certification for Credit Unions

10. When were we certified? 10CDFI Certification for Credit Unions 56% since 2010

11. What were you certified for? Certifications based on 3 groups of “Target Markets” 1.Investment Areas (IA) 2.Low Income Targeted Populations (LITP) 3.Other Targeted Populations (OTP) CDFI Certification for Credit Unions11

12. IA  LITP  OTP Benchmark: 60% of “Activities” must be directed to one or more of these Target Markets “Activities” defined as lending for certification purposes 73% of CDFI Certified credit union HQs located in Investment Area (IA) census tracts Target Market single most important test for credit union certification CDFI Certification for Credit Unions12

13. Identifying Target Market(s) CDFI Recertification is identical to new certification Current CDFIs not tied to former Target Market(s) –Need fresh evidence to demonstrate eligibility Define Target Market(s) that: –Surpass 60% “activity” threshold –Are easiest to document, track, verify CDFI Certification for Credit Unions13

14. Investment Areas (IA) Many CDCUs will qualify simply on IA criteria Easiest Target Market to document and track –Random sample of members & borrowers addresses, loans –MyCDFI Fund mapping program –Geocode addresses to tell % that live in Investment Areas Investment Area most closely tied to NCUA estimation of low- income members for LI designation –NCUA counts members who live in LI census tracts –LI census tracts qualify as CDFI Investment Areas Unlike NCUA, CDFI Investment Areas must be contiguous and mapped 14CDFI Certification for Credit Unions

15. Low Income Targeted Pop (LITP) A bit more work to document and to track –Random sample of borrowers addresses and income –MyCDFI Fund mapping program –Geocode borrower addresses –Identify area median income benchmark for each borrower –Compare actual borrower income to low-income benchmark CDFI definition of LITP does not correlate with NCUA methodology for determining LI designation 15CDFI Certification for Credit Unions

16. Other Targeted Populations OTP data not typically collected systematically by credit unions Must provide basis for estimating % of total activities directed towards OTP Federation does not have standard tools for documenting OTP certifications OTP credit unions can generally qualify on basis of Investment Areas or Low-Income Targeted Populations 16CDFI Certification for Credit Unions

17. The more things change… What stays the same –7 Criteria for CDFI Certification What has changed –CDFI Mapping Program Investment Areas themselves have changed –CDFI Certification Application Additional narratives Direct link between loan products and development services –Narrowed definition of “activities” –CDFI Recertification Schedule What may change for you –The Target Market(s) you choose for CDFI certification CDFI Certification for Credit Unions17

18. The Application Before you start √Copy of Charter (plus any amendments) √Copy of Board-Approved By-Laws √Copy of IRS letter confirming EIN √Copy of NCUA Low Income Designation Letter √FYE 2012 data (members, assets, loans, shares & deposits) √YTD 2013 data (same as above) CDFI Certification for Credit Unions18

19. 7 Tests for Certification CDFI Certification for Credit Unions19

20. 7 Tests for Certification CDFI Certification for Credit Unions20

21. Target Market Strategy Investment Area (IA) Only –Easiest, most objective basis for certification, if possible –Can use list of members and borrowers addresses and loans –Recommend sampling for all but smallest credit unions Limited processing capacity of mapping program for geocoding –Qualified Investment Areas must have contiguous census tracts Bridge separate IAs into single with non-qualifying tracts, if possible Multiple, separate IAs will require multiple TM narratives on specific needs CDFI Certification for Credit Unions21

22. Target Market Strategy Investment Area (IA) + Low Income Targeted Pop (LITP) –Recommended when IA% below threshold Less than 60% for census of all borrowers Less than 65% for random sample of borrowers –IA+LITP can use data from list of borrowers and income –Recommend sampling for all but smallest credit unions –Account for overlap in sample Members may belong to both IA and LITP target market, but can only be counted in one or the other CDFI Certification for Credit Unions22

23. Target Market Strategy Low Income Targeted Pop (LITP) only –Rare occasions when CU serves no significant IA census tracts –LITP analysis can use data from list of borrowers –Recommend sampling for all but smallest credit unions CDFI Certification for Credit Unions23

24. Target Market Strategy Other Targeted Populations –Recommended only when IA+ LITP does not reach 60% –OTP normally a standalone Target Market Difficulty combining OTP with IA and LITP Different data sources for OTP make it difficult to account for overlapping Target Markets –OTP must specify specific population i.e., Hispanic, African American –Credit unions must describe methodology for estimating percent of activities directed to OTP Also means of verifying delivery to OTP CDFI Certification for Credit Unions24

25. Accountability Strategy Target Market and Accountability must be balanced –Each Target Market selected evaluated separately –First look at composition of Board, alignment with each selected TM –Another reason to keep TM definitions as simple as possible! Credit unions are different –CU boards are democratically elected by the people they serve –No other types of CDFIs have such direct accountability to their TMs Democratic Election of Board should be sufficient if: –LITP Target Market (any percentage) –More than 50% of members belong to any TM –Provide narrative to describe the AGM process, consultation with members and election of boards (in AC03) 25CDFI Certification for Credit Unions

26. Primary Mission Strategy Low Income Designated Credit Union’s automatically pass –99% of you are LICUs! Additional requirements for all applicants –Brief narrative on consistency w/CDFI Fund Mission –Brief “customer profile” –List of products (not services) Non-LICUs must demonstrate primary mission of community development with board-approved document –Show institutional commitment and intent CDFI Certification for Credit Unions26

27. Recertification Process CDFI certification is good for 3 years. –Then we get to do this all again! Annual analysis of Target Market activities provides: –Primary data for CDFI grant applications –Target Market estimates useful for reporting –Insight into trends, emerging markets for management, board –Ready source of data for next recertification 27CDFI Certification for Credit Unions

28. Federation Assistance Federation methodology can determine IA & LITP eligibility Accepted by CDFI Fund –Now also by NCUA for LICUs Sampling can be used for Certification, Recertification, Monitoring and Compliance Federation toolkit & CU Breakthrough can help 28CDFI Certification for Credit Unions

29. 29 Pablo DeFilippi Membership Director pablo@cdcu.coop 212.809.1850 ext 304 For more information National Federation of Community Development CUs 39 Broadway Suite 2140 New York, NY 10006-3003 www.cdcu.coop CDFI Certification for Credit Unions