In her first official statement as acting director of the Community Development Financial Institutions Fund, Marcia Sigal announced two key pieces of information for CDFI-certified institutions and good news for those who have been waiting to apply for certification due to the pause. First, the good news: The CDFI Fund intends to implement a one-time process change for the 2023-2024 Program Award Application round (the FA Awards) to permit organizations with pending CDFI Certification Applications to apply, rather than requiring certification to already be in place. As the Certification process has been on hold since October of 2022, this means the Fund plans to re-open the Certification Application portal before this fall before accepting Program Award Applications. Which brings us to those Program Awards. The Notice of Funds Availability (NOFA) marks the beginning of the period when these grant applications are accepted. Sigal’s statement describes the timing of this as late fall. CU Strategic Planning has been hard at work on our credit unions’ FY 23/24 grants for the past year to be ahead of the curve for the upcoming grant round. CDFI Certification Update Acting Director Sigal acknowledged that the CDFI certification revisions have piqued the interest of the entire community, and said a revised version still is expected to be released this fall. CU Strategic Planning and many other industry players have been providing input on the matter and working to keep our clients apprised of the situation. We recently learned that the CDFI Fund advisory board took credit unions’ issues to heart and recommended some of our suggestions to the Fund. As we await the final results for the certification process update, know that it will go into effect immediately for new CDFIs, according to the acting director. Existing CDFIs will receive a grace period before they must submit the newly revised application for recertification. Acting Director Sigal suggested, and we concur, that existing CDFIs use this time to assess their ability to meet the revised criteria. Know that we are on top of this with our credit unions and will continue to keep yours up to date on the changes that may be needed to ensure continued certification. Additionally, CU Strategic Planning received a communication from the CDFI Fund affirming our compliance and reporting methodologies earlier this year. Credit unions can continue to rely on CU Strategic Planning to guide your credit union to remain in compliance with CDFI requirements. Acting Director Sigal also shared that detailed information regarding the deadlines, guidance material and information on the new Application, Annual Certification and Data Collection Report (ACR) and abbreviated Transaction Level Report (TLR) will be provided. CDFI Fund staff will also offer training opportunities. Over our 15 years and more than 200 credit union certifications, the CU Strategic Planning team has seen first-hand that these changes are never straightforward. Our credit unions have come to rely on us to understand and translate the jargon in the Fund’s communications and provide guidance through areas that are not easily defined. When the new materials are released, we will provide a complete analysis as it pertains to credit unions.

Hopeful the Fund implements during certification update process CDFIs have been waiting, not-so-patiently, to learn the fate of the certification process from the Community Development Financial Institution Fund. We moved one step closer earlier this month with the advisory board’s recommendations to the Fund – and its seemingly positive news! You’ll recall, the advisory board was slated to meet and then abruptly canceled after the CDFI Fund’s report, FY 2021 activities of the CDFI Program and NACA program Financial Assistance Award Recipients, came out illustrating all the amazing work CDFI credit unions were doing in their communities in 2021. If you’d like to review all the key credit union data from the report, we summarized it here in our previous post, CDFI Fund Data Could Force Changes to Controversial Application Recommendations. When the advisory board met and shared its recommendations to the CDFI Fund, we saw several improvements moving the updated certification process in the right direction. Among the issues highlighted that affect credit unions: Ability to repay rules may impair CDFI flexibilities – allow for narrative explanations. The narrowed definition of development services excludes critical and cost-effective activities – should be expanded. Reconsider the financial conflict of interest policy which prohibits credit union board members from being considered as accountable to the Target Market if they get a loan from their own credit union. Certification requirements should not conflict with the Equal Credit Opportunity Act nor prudential regulators rules. Unintended consequences should be further examined. After the recommendations were released, CU Strategic Planning CEO Stacy Augustine said she was “encouraged” by the proposed changes to the certification updates. “I think our only disappointment is that there were only eight of recommendations in total, whereas there were dozens of comment letters submitted from our industry and others highlighting concerns with the proposal,” she said. Many credit unions could have been swept from CDFI certification if the previous proposal stands. After seeing in the CDFI’s own data that credit unions provided 92% of all reported loan dollars to low-income consumers, we simply cannot see how the previous proposal would stand. “However,” Augustine added, “the question is, what happens next? No timelines were given. If I got my crystal ball out, I would guess they might not want to implement these things until they have a new director. CU Strategic Planning Chief Experience Officer Mike Beall agreed, “There’s a whole lot of wait and see until we see what’s accepted and how those eight recommendations make their way – or not – into the final certification rule.” He added that whispers are swirling around Washington that the updated could be finalized toward the very end of the year, rather than the October-November timeframe we’d heard before. Regardless, our team will be by your side to ensure our clients are in compliance. Stay tuned!

Proposed Application Process Would Exclude ‘Significant Swaths’ of Credit Unions A newly released CDFI Fund report might have forced the delay of a meeting that would have provided recommendations regarding the proposed updates to the CDFI Fund certification application process. The data in the report point to just one possible outcome: It’s imperative upon the CDFI Fund to reconsider its proposal and the impact it would have on credit unions’ participation. The FY 2021 activities of the CDFI Program and NACA program Financial Assistance Award recipients showed that despite accounting for less than one-quarter of CDFI Fund award recipients, credit unions account for more than 89% of all loans. That’s 13 times the banks, 22 times the loan funds and more than 2,000 times the venture funds. Given that proposed CDFI Certification changes could exclude “significant swaths” of credit unions, this report provides overwhelming evidence of credit unions’ significance to the mission of the CDFI Fund and lending to the historically disenfranchised. In fact, credit unions are delivering the greatest impact nearly across the board: Credit unions provided 93% of all consumer loans reported to the CDFI Fund in 2021. Credit unions also provided the largest number of home improvement and purchase and residential real estate loans, at a rate 4X that of banks and nearly 8X that of loan funds. Banks and loan funds led credit unions only in business/microbusiness lending and commercial real estate. Credit unions also lead for: Lower interest rates compared to every other CDFI type for business/microbusiness, commercial real estate, home improvement/purchase and residential real estate (interest rate data are not collected for consumer loans). Longer loan terms, making the loans more accessible than every other CDFI type. Providing 92% of all reported loan dollars that went to low-income consumers. Making $13.8 billion in loans across all categories of distressed borrowers – more than all the other CDFI types combined. Providing five times more loans to Persistent Poverty Counties than those granted by loan fund CDFIs, despite the number of loan fund award recipients numbering nearly three times that of credit unions. This number is especially notable, given that congressional appropriations carved out funds specifically devoted to lending in Persistent Poverty Counties. Ignoring credit unions’ results in support of the CDFI Fund mission shown in the data from its own report would be folly on the CDFI Fund’s part. It is incumbent upon the CDFI Fund to rethink the proposed changes to the application process, which would eliminate many credit unions from its programs.

CU Strategic Planning recognized Ronaldo Hardy’s talents and innovative spirit long before he joined the company as an owner and is proud that he’s been named the next president/CEO of NACUSO. Hardy joined CU Strategic Planning to launch its Diversity, Equity, Inclusion, Belonging and Accessibility practice in October 2019. Since that time, he’s achieved significant accomplishments as an owner of the firm. His DEIBA consulting and thought leadership has touched the lives of nearly 2,500 credit union employees and nearly one million credit union members through 150 credit unions and industry organizations. “We’re excited to see the impact Ronaldo will have at NACUSO, an organization founded on sparking collaboration and innovation within the credit union community,” CU Strategic Planning CEO Stacy Augustine said. She continued, “Ronaldo’s legacy during his time at CU Strategic Planning has been organizational change. CU Strategic Planning and many of our credit unions are more inclusive, diverse and equitable organizations as a result of Ronaldo’s efforts.” When he joined CU Strategic Planning, it was a much smaller organization and his was one of the only faces of color. Today, the company comprises 22% Black, Indigenous and People of Color (BIPOC). “CU Strategic Planning looks forward to continuing its DEIBA journey and incorporating its work with CDFIs,” Augustine concluded. Hardy also hosts Opportunity Knock$, the Telly award-winning PBS series created by CU Strategic Planning Founder/Owner Jamie Strayer. The reality show, inspired by her work with Community Development Financial Institutions, features CDFI-certified credit unions and nonprofits guiding families from the brink of financial ruin to financial empowerment.

President/CEO Stacy Augustine Marks 10th Anniversary at CU Strategic Planning Milestones are not just markers of time; they signify achievements, growth, and a commitment to excellence. Today, we happily mark milestone at CU Strategic Planning as our President/CEO and co-owner, Stacy Augustine, celebrates her 10th anniversary with us. As we reflect on her exceptional leadership and dedication, it's worth acknowledging that Stacy's tenure has not only transformed our business but has also had a profound impact on credit unions and the communities they serve. With the company's 15th anniversary approaching in October, we take pride in Stacy's instrumental role as the second CEO of our organization. Her visionary approach and commitment to collaboration have been instrumental as we’ve grown to a team of over 30. A Visionary Leader When Stacy Augustine assumed the role of President/CEO at CU Strategic Planning a decade ago, she embraced the challenge of building upon the strong foundation laid by our company founder, Jamie Strayer. As Jamie stated, "I recruited Stacy because I knew she would be a CEO that could create a culture of collaboration while scaling the business to unlock more opportunities for credit unions to change lives and their communities." Under Stacy's leadership, CU Strategic Planning has flourished, establishing itself as a trailblazer in providing strategic consulting services to credit unions. Her visionary mindset has guided the organization to navigate a rapidly evolving landscape, enabling credit unions to thrive in an increasingly competitive industry. A Culture of Collaboration One of Stacy's most significant achievements during her tenure has been the fostering of a culture of collaboration within the company. Recognizing the value of diverse perspectives and collective intelligence, she has cultivated an environment that encourages open dialogue, innovation, and the pursuit of excellence. This collaborative spirit has not only strengthened our internal teams but has also translated into more impactful solutions for our credit union partners. Scaling for Success Scaling a business while maintaining its core values and purpose is no easy feat, but Stacy's leadership has allowed CU Strategic Planning to successfully navigate this journey. By strategically expanding our team, broadening our service offerings, and forging strategic partnerships, Stacy has positioned our organization to better serve credit unions across the nation. Her ability to foresee emerging trends and adapt our services accordingly has allowed credit unions to enhance their impact and address evolving member needs effectively. Looking to the Future As we celebrate Stacy's 10th anniversary as our CEO, we want to thank her for her unwavering commitment, strategic foresight, and her relentless pursuit of excellence. Congratulations, Stacy, on this milestone. Your tenure as CEO exemplifies the power of visionary leadership, collaboration, and a passion for creating positive change. We look forward to the next chapter of our journey under your guidance as we continue to unlock new opportunities for credit unions and make a lasting impact in the lives of individuals and communities.

Looking into the impact of bias in AI-generated headshots It seems like everywhere you turn there’s another article about AI and its future in business. Half of them are singing the praises of the latest AI-driven tool to make an appearance, the other half are sounding the alarm about how this is signaling the end of jobs and the downfall of society. The credit union industry is already familiar with the complexity behind the use of AI tools for lending, with federal agencies looking into claims of digital redlining on one hand, and tools arriving specifically to assist lenders in finding less discriminatory alternative (LDA) underwriting models on the other. Lately, one of the more popular, and seemingly low-stakes, subsets of this AI chatter is the AI headshot. You may have seen some these on your LinkedIn feed: someone posts about how they decided to give it a try, laughs about the versions they get back that have too many fingers or misaligned eyes, but in the end they show off several decent looking photos of themselves. All for around $20-30. It seems like a fun, low-cost and convenient way to get employee photos, especially for an organization like ours with a mostly remote team that’s located all over the country. We thought we’d give it a try recently with one of our new employees, Mark Volz. He gamely submitted ten selfies and awaited the results. “When I saw the photos, none of them looked like me,” Mark explained. “They were all Asian men with facial hair, but they weren’t me. They didn’t even particularly look Filipino.” It’s also worth noting that the AI-generated images showed someone with lighter skin than in most of the photos Mark provided. Imagine you’ve tried out this service for your organization – you pick a few people to be test subjects, and hey, they look pretty good! So, you roll it out for all staff. Only to have some of those employees get the same types of results that Mark did. They may feel like their identity has effectively been erased. And beyond that, they might not feel comfortable pointing that out because they know they only have so many opportunities to voice those kinds of objections without seeming like a complainer. Why is this happening? Generative AI, of course, can only produce output based on what it’s been trained on. We don’t know what pools of images the creators of tools like Studioshot or TryitonAI used, but it certainly seems like, just like in much of the media, there’s an underrepresentation of certain groups going on. It’s a perfect example of inherent bias. There’s not a conscious effort to exclude any groups, but there’s also no effort to ensure that all groups are included. So existing biases are reinforced. “Growing up in Wisconsin, there weren’t a lot of other Filipinos around, so in a way I’m used to not seeing myself reflected in the culture around me,” said Mark. “But to see that invisibility reinforced in brand new technology is really disappointing.” Images aren’t the only area where these more subtle elements of bias can crop up. It’s only been in recent years that the definition of what constitutes “professional” communication has started to slowly expand, allowing people of color to bring more of their authentic selves to the table instead of having to code-switch to try to fit in with the company culture. But when tools like ChatGPT are used to support copywriting, it’s easy to fall back on the homogenized, ‘whitewashed’ language. Or as ChatGPT itself puts it, “Recognizing the limitations and biases inherent in AI-generated copy is vital for organizations to actively address and mitigate them.” Not exactly the way I would have put it. I’m a lover of new technology, and a heavy advocate for it. In fact, I have prioritized innovation in organizations I’ve led. However, it is important that as we evolve and move forward with technology, we do our best to leave no one behind. And that means we must do all we can to reduce bias in AI. Or else, we’ll be creating a new problem while solving another, and that hinders progression for all.

The following is the letter CU Strategic Planning provided in response to the Treasury's request for public comment on the Community Development Financial Institutions Program and Native American CDFI Assistance Program Financial Assistance and Technical Assistance applications May 10, 2023 Pooja Patel, CDFI Program & NACA Program Manager Community Development Financial Institutions Fund U.S. Department of the Treasury 1500 Pennsylvania Ave. NW Washington, DC 20220 cdfihelp@cdfi.treas.gov Subject: CDFI Program and NACA Program Financial Assistance and Technical Assistance Applications, OMB Number: 1559-0021 CU Strategic Planning is a consultancy working with CDFI-certified and emerging CDFI credit unions nationwide. On behalf of our clients, we appreciate the opportunity to provide comments in response to the CDFI Fund’s request for public comment on its proposed changes to its CDFI Program and NACA Program Financial Assistance and Technical Assistance applications. General Input on FA Application Content With recent, past Financial Assistance applications windows, the CDFI Fund has required applicants to be certified prior to the release of the Notice of Funding Availability. Because the CDFI Fund has postponed the release of its certification standards, with this pause likely to extend for about a year, we urge the CDFI Fund to allow applicants to apply for a Financial Assistance grant prior to being certified. Originally the CDFI Fund had planned to release its final certification guidelines in the Spring of this year. This would have allowed organizations intent on applying for grant funds during the joint FY23/FY24 grant funding round to attempt to become certified prior to the release of the NOFA. We respect the CDFI Fund’s careful and deliberate consideration of comments submitted concerning the certification standards proposed, but the department’s pause on the acceptance of certification applications represents a factor out of the control of organizations seeking certification and intent on applying for grant funding. Specific Input on FA Application Content With its request for comments, the CDFI Fund asks for specific input on its Financial Assistance application. The following comments and feedback are labeled using the numbering structure provided in the request for comments and only include those topics where we are providing specific feedback (and are not, therefore, consecutive). 2. Are certain data fields, questions, or tables redundant or unnecessary? If yes, which ones and why? Question 13, which asks the applicant to describe how an award would build, increase or improve an applicant’s ability to achieve its strategic goals, seems redundant with Question 4 (use of funds) and Question 5 (strategic goals). Alternatively, the CDFI Fund could consider marrying Question 4 with Question 13 to eliminate the overlap between the two questions. 3. Should any data fields, questions or tables be added to ensure collection of relevant information? While it represents an additional burden to the applicant, the CDFI Fund should consider adding two years to the financial input tables to correspond with the application’s request for five-year strategic goals. This expanded financial projection would allow applicant financial input to align and support five-year strategic goals. 7. Are the character limitations for narrative responses appropriate? Should certain questions allow additional or fewer characters? With its proposed changes to the Financial Assistance application, the CDFI Fund proposes reducing the characters available to describe the CDFI’s demographic information and adding tables that parse the data. While the tables are helpful, we believe it will be difficult to address all the data in Table 1 and Table 2 within the 2,000 characters provided, particularly because the CDFI Fund asks applicants to expand upon the demographic information provided in the Beneficiary Snapshot and Portfolio Statistics charts. In order to adequately expand the statistics being collected, additional characters are needed. The character limitations associated with Question 10, which seeks to describe both marketplace competitors (and there can be many) and trends, should be longer to truly address the question being asked. The characters provided for Question 4, which asks the applicant to describe how the award funds will be used are greater than those needed. Alternatively, this question could be adequately described using a table with short narratives that describe the use of funds in each category. 12. Beneficiary Data The CDFI Fund proposes requesting beneficiary data separately for Financial Products, Financial Services and Development Services. While it is understandable that the receipt of this data would provide a good snapshot of the beneficiaries served, it is important for the CDFI Fund to recognize that, except in limited circumstances, regulated financial institutions cannot collect information on the race, ethnicity, disability status or (generally) marital status of their members or customers. When providing Financial Services or Development Services, a credit union does not collect information needed to categorize a beneficiary by income level (i.e., when opening a checking account or helping a member balance their checkbook, the credit union does not ask the member about their income). A proxy for this type of information could be provided to give the CDFI Fund a greater understanding of the beneficiaries served—but not the actual data. It is important to note that the Beneficiary Table breakdown of beneficiaries by income level (low income, very low income, etc.) will accurately reflect the beneficiaries served by a CDFI with a LITP Target Market. The Beneficiary Table breakdown for a CDFI with an IA Target Market, OTP Target Market or a blended Target Market, which are Target Markets not based on income (or blended with Target Markets not based on income), may reflect a significantly lower beneficiary breakdown percentage than the CDFI’s certification numbers based on actual loans made. As such, applicants are asked to discuss Beneficiary Table income percentages significantly higher than the income among borrowers the CDFI specializes in serving. The CDFI Fund proposes requesting beneficiary data projections for the three-year performance period to help assess impact. This type of projection would be cumbersome for applicants. For example, each loan type would have its own unique methodology for calculating the beneficiaries of the loan. For example, a credit card loan might have just one beneficiary, whereas a commercial business loan would have many potential beneficiaries depending on the purpose of the loan. Is the commercial loan to a business? A grocery store? Etc. Finally, it’s worth noting that while using proxy data to determine and break down the information requested does provide a more accurate depiction of beneficiaries served; it does require skill, making the application more difficult to complete—particularly for CDFIs sporadically applying on their own. 13. FA Objectives The CDFI Fund proposes the elimination of several Financial Assistance Objectives in the interest of streamlining the application and has suggested that the Financial Assistance Objectives proposed for elimination are rarely used by applicants. While we would concur with the CDFI Fund’s proposal to eliminate the majority of these FA Objectives, we would suggest that the CDFI Fund retain the Financial Services FA Objective for the time being—only because this would be consistent with the department’s separate certification proposal which better recognizes the importance of Financial Services as a community development tool. 14. FA Objectives – Proposed Use of Multiplier The CDFI Fund proposes changing the formula for establishing Performance Goals & Measures related to FAO 1-1: Increase the Volume of Financial Products and suggests the adoption of a multiplier in place of the current methodology. Using a multiplier would address several concerns and complications created by the current methodology but does not appear to overcome the difficulty of projecting future growth based on what may be anomalous historical lending. First, the proposed multiplier methodology overcomes the long-standing difficulty of developing projections based on the receipt of a requested award amount and being held to those projections despite being awarded a lower award amount—a helpful change. For awardees with more than one award during a three-year reporting period, the proposed multiplier methodology overcomes the difficulty of layering past awards. Currently, awardees with awards in more than one year must ensure that loan dollars are not counted toward more than one award. Moving to a multiplier would simplify and clarify the grant reporting process. Unfortunately, the proposed multiplier methodology does not overcome the long-standing difficulty of developing projections based on a historical track record that may be anomalous. Recent examples impacting projections include Paycheck Protection Program loans and an enormous uptick in lending associated with extraordinarily active mortgage market. These dramatic swings in lending represent unsustainable anomalies. Using a multiplier, if these anomalies are removed to create a sustainable lending projection, the multiplier is likely to become negative. Alternatively, if the anomalies are left in the applicant’s historical lending and projections are based off anomalous loan growth, the projected loans become unsustainable. If the multiplier becomes a factor in making a due diligence decision or assessing an applicant’s award, a negative multiplier would be likely to disqualify otherwise eligible applicants with a proven track record of leveraging grant funds for community development impact. If the multiplier were in place today, it is reasonable to guess that nearly every credit union applicant’s growth multiplier would be negative because of factors entirely out of the applicant’s control—the financial market. The CDFI Fund asks whether a standard multiplier should be chosen for the Financial Assistance award, or whether applicants should be able to choose a multiplier. Using matching funds requirements as a touchstone, core FA applicants are required to show “skin in the game” by providing a 1:1 match to funds awarded. This precedent would argue for a multiplier of at least 1:1. However, if the purpose of the CDFI’s grant program is to leverage federally appropriated funds to achieve their most significant community development impact, perhaps the CDFI Fund should consider a 1:1 multiplier baseline for the application and allow applicants to choose a higher multiplier. Applicants with a higher multiplier should be evaluated more positively as part of the evaluation process because they can leverage grant dollars for greater impact. Whether or not the CDFI Fund adopts a multiplier formula for establishing Performance Goals & Measures related to FAO 1-1, we encourage the CDFI Fund to reassess its definition of “loans granted.” The definition of “loans granted” used to calculate projections in the application includes purchased and refinanced loans (which do not represent new loans into the community). Instead, we encourage the CDFI Fund to look to “loans originated” in its calculations. This subtle change in definition can make a dramatic difference in calculating projections to a CDFI’s Target Market and represents a more accurate description of new loans deployed to the Target Market. General Input on TA Application Content Speaking generally to the CDFI Fund’s proposed changes to its Technical Assistance Application, the proposed TA application incorporates many of the certification changes proposed last Fall, such as requiring a board-certified strategic plan evidencing a community development strategy, accountability changes and establishing product approval standards. Because the CDFI Fund is still actively reviewing comments on these changes and has indicated that it is conducting public outreach that includes discussions with functional regulators concerning the impact of these proposed changes, we urge the CDFI Fund to similarly pause any proposed changes to the TA Application, allowing the CDFI Fund to consider stakeholder input. Other CDFI Program and NACA Program-Related Topics and Considerations With its request for comments, the CDFI Fund asks for responses to CDFI and NACA Program policy topics. The following comments and feedback are labeled using the numbering structure provided in the request for comments and only include those topics where we are providing specific feedback (and are not, therefore, consecutive). 2. Deep Impact Lending The CDFI Fund asks whether its FA/TA applications should incorporate the applicant’s commitment to deep-impact lending as part of the application evaluation process. Deep-impact lending was incorporated into the Emergency Capital Investment Program (ECIP) and represents financing activities that reach the hardest to serve borrowers and underserved communities. Under ECIP, deep-impact lending resulted in a rate reduction on subordinated debt provided to the participating applicant. Recognizing service to these populations or communities encourages applicants to increase outreach to the hardest-to-serve borrowers and underserved communities, but it also represents additional risk. Consistent with ECIP, if the CDFI Fund weaves the concept of deep-impact lending into its application (or evaluation process), we encourage an increase in deep-impact lending (or investing) to be commensurate with an increased grant award. 3. Net Asset Ratio Recognizing that a CDFI’s net asset ratio represents a good measure of the organization’s overall capital structure, the CDFI Fund asks whether a CDFI’s net asset ratio is the appropriate measure to assess if a CDFI is effectively leveraging its assets. Among credit unions, this ratio is described as a net worth ratio. The CDFI Fund’s proposal seems consistent with the department’s past practice of prioritizing awards to those organizations that are both financially healthy and able to effectively leverage grant awards for greater impact. However, if the CDFI Fund establishes net asset ratio benchmarks used as part of an award evaluation process, we urge the department to provide a transparent, bright line guidelines concerning the net asset ratio range considered acceptable or, alternatively, how the applicant’s net asset ratio will be evaluated (i.e., 7%-9% is excellent, 9.01% - 11% is good, etc.). To avoid confusion, if the CDFI Fund adopts these benchmarks, we urge the department to rely on the categories created by the applicant’s functional regulator if the applicant is a regulated financial institution. 5. Small and Emerging CDFI Assistance The CDFI Fund requests input on the threshold for defining a small credit union for the purpose of qualifying to apply as a Small and Emerging CDFI. The current $100 million threshold aligns with the definition of a small credit union established by the National Credit Union Administration. While we would encourage the CDFI Fund to remain consistent with regulatory standards, in this circumstance, we’d encourage the CDFI to establish a higher threshold for defining a “small credit union” because the current definition could more accurately define a “very small credit union” as the average asset size of American credit unions continues to grow. Although the NCUA has not updated its definition since 2015, we hope to encourage the NCUA to update its definition soon. The definition proposed to define a small depository institution or depository institution holding company ($346 million) is a more reasonable definition of a “small credit union” in today’s market. The CDFI Fund asks if CDFIs that qualify as “Small and Emerging” should be prohibited from applying as Core applicants. While a SECA-qualified applicant may be a smaller organization, many American credit unions have almost one hundred years of operational experience. Some would be well advised to apply as Small and Emerging CDFIs. Others have the sophistication to qualify as a Core applicants. Therefore, we would encourage the CDFI Fund to allow SECA-qualified applicants to apply in either category. 8. Funding Levels for CDFIs The CDFI Fund asks whether larger CDFIs that qualify for an award should have the dollar amount of their awards limited within a provided timeframe. The CDFI Fund’s mission is to expand economic opportunity for underserved people and communities by supporting the growth and capacity of CDFIs. Large CDFIs are often the most capable of leveraging award dollars for impact, which aligns with the department’s mission. We encourage the CDFI Fund to continue to make awards based on community development impact, which we believe would be counterintuitive to limiting dollar awards to larger CDFIs, which, in some circumstances, are more effective at leveraging award dollars to expand economic opportunity for underserved people and communities. Thank you for the opportunity to provide our input on the CDFI Fund’s proposed changes to its Financial Assistance and Technical Assistance grant applications. We hope that our suggestions are helpful to the CDFI Fund as it works to finalize its proposal. If you have any questions concerning these comments, please do not hesitate to reach out. Respectfully yours, Stacy S. Augustine President/CEO

Credit union calls for greater transparency from the CDFI Fund are being met with bipartisan support. A CUNA-supported bill was put forth by U.S. Representatives John Rose (R-TN) and Brittany Pettersen (D-CO), both members of the House Financial Services Committee, with their introduction of the CDFI Fund Transparency Act. It will require the Community Development Financial Institutions (CDFI) Fund Director to testify annually before the House Financial Services Committee and the Senate Banking Committee. "CU Strategic Planning has joined system partners in submitting numerous comment letters over the past 15 years as the CDFI Fund has been accorded greater responsibility," said CEO Stacy Augustine. "We support greater transparency and accountability." The Credit Union National Association also supports the legislation. Their President and CEO, Jim Nussle, said in a letter: “The CDFI Fund must be fair and well-functioning on behalf of underserved persons and communities, and the credit unions that serve them. It is also in everyone’s best interests that oversight in support of this goal does not impede the CDFI Fund in its operation. This bill appropriately strikes that balance.” The CDFI Fund Transparency Act would, in addition to requiring the CDFI Fund Director to testify annually, requires the Treasury Secretary or their designee to appear at the hearing and provides the House Financial Services Committee with the discretion to convene the hearing at a subcommittee or full committee level. The full text of the bill is available here.

New Orleans Firemen’s Federal Credit Union has been serving underserved communities since before credit unions officially existed. While the membership has evolved over the last nine decades, the mission to serve those in need is very much a part of its mission. New Orleans Firemen’s FCU has grown to $246 million in assets and now leverages financial assistance awards from the Community Development Financial Institution Fund to “aggressively serve designated low-income areas,” CEO Judy DeLucca said. With the help of CU Strategic Planning, the credit union has received six awards since 2019 totaling more than $15.5 million: $8.5 million from the Treasury Department’s Community Development Financial Institutions Fund, plus $7 million in secondary capital from the Treasury’s Emergency Capital Investment Program. The number of lives the credit union can change is largely dependent upon the CDFI Fund awards it earns. DeLucca explained, “CU Strategic Planning has been such an important partner because they’re good at telling our story. We did these things for years, but we didn't go out and talk about it that much. We just did what we believe we're supposed to be doing. “Credit unions exist to serve the underserved individuals, to serve those people who don't have access to fairly priced products and services and, and without credit unions and CDFIs, without that credit union heart, their families would continue to be unable to bridge that wealth divide and start building generational wealth that has been denied them for so many years." Download the complete case study to learn more about how New Orleans Firemen's FCU has found success as a CDFI.

The Treasury’s Community Development Financial Institutions Fund has, in recent years, accepted applications for its annual Program awards (Financial Assistance and Technical Assistance) in early spring. These are awards of up to $1,000,000 for CDFIs to sustain and expand their products and services. In February, the CDFI Fund director announced that the 2023 Program round would not open until sometime this fall, and would be combined with 2024 funding in a single application. What does this mean for CDFI credit unions? It’s time to start your application now. 1. There will be no opportunity to apply in 2024. This is the most obvious reason. If you were considering applying next year, you simply won’t be able to. The FY 2024 funding is being combined with FY2023, so that means that if you don’t submit an application this year, you won’t have another chance until 2025. 2. Get the loan loss reserves and capital reserves you need. The CDFI Fund grants Program awards of up to $1 million to certified CDFIs in the form of FA awards. FA awards can be used for lending capital, loan loss reserves, capital reserves, financial services, and development services. Simply put, your credit union can increase its community impact with grant funds that will allow for lending to higher-risk members in need of financial inclusion and affordable financial products and services in underserved communities. A CDFI’s success is measured not just on their financial performance, but also by their impact on underserved communities. An FA award enables your credit union to increase the direct, measurable impacts you have on your members and change lives. 3. It’s later than you think. The CDFI grant application development is a large-scale project, not simply an application to complete. To prepare for the application, a credit union must begin research to develop strategies, conduct meetings with community leaders, government officials and local non-profits. An award-winning CDFI application that supports lending and increases ROA driven by research and team collaboration takes months in planning and results in a five-year business plan that includes projected lending goals and community impacts. For 2023 and 2024, the timeline has shifted greatly. Instead of two application rounds with the Notice of Funding Availability appearing early in the year (applications are due 60 days after this NOFA is released), there will be one round, with this NOFA scheduled for late fall. This means that now is when your credit union needs to prepare. CU Strategic Planning spends months with clients gathering data, developing a strategy tailored to your target market, analyzing financials and writing the application. Find out more about our CDFI certification, grant writing and compliance services.

The U.S. Department of the Treasury’s Community Development Financial Institutions Fund awarded grants totaling $1.73 billion to 603 CDFIs across the country through the CDFI Equitable Recovery Program this week. The applications submitted by CU Strategic Planning resulted in $139.34 million in awards for its credit union clients. “We are ecstatic to see 93% of the credit unions we assisted in applying for ERP funds receive this funding, which will provide the opportunity to improve the lives of even more people in need,” CU Strategic Planning CEO Stacy Augustine said. “With the more than $139 million in awards they received through the ERP, over the last 15 years we’ve assisted credit unions in earning $945 million – nearly $1 billion! – to serve historically underserved areas.” The ERP funds were specified by the CDFI Fund to strengthen the ability of CDFIs to help low- and moderate-income communities recover from the COVID-19 pandemic and invest in long-term prosperity. A complete list of all award winners, including 203 credit unions, is available at the CDFI Fund website. “Knowing the CDFI Equitable Recovery Program from the U.S. Treasury believes and supports Calhoun Liberty Credit Union's mission in supporting economically challenged rural communities is priceless,” CEO Thomas Flowers said. “This funding will only strengthen our efforts to help bring financial services to rural underbanked individuals. Calhoun Liberty Credit Union does its best every day to improve the financial lives of everyone we interact with each day. This funding will be life changing in so many ways.” The CDFI Fund states that the ERP was designed to: “1) provide funding to CDFIs to expand lending, grant making and investment activities in low- or moderate-income communities and to borrowers that have significant unmet capital and financial services needs and have experienced disproportionate economic impacts from the COVID-19 pandemic, and 2) enable CDFIs to build organizational capacity and acquire technology, staff, and other tools necessary to accomplish the activities under a CDFI ERP Award.” Awards granted across all recipients ranged from $500,000 to $6.2 million. “This is the largest single grant program we’ve ever worked on, and I’m so proud of our credit unions and our team for the hard work it took to get to this point,” CU Strategic Planning Chief Experience Officer Mike Beall said. “Now the real, life-changing work begins. I can’t wait to see what’s next for our credit unions!” CDFI credit unions and other CDFIs must deploy the ERP funds in designated eligible areas, which are census tracts that demonstrate severe impact from the COVID-19 pandemic, have a median income at or below 120% of the area median income, and are CDFI investment areas, or Native areas.

Silicon Valley Bank (SVB) failed in March, creating some concern for consumers here in the U.S. and around the world. Typically following a scenario like this, as well as during down economies, credit unions capitalize on the safety and soundness of their not-for-profit status to grow members and loans. Now, it’s particularly important amid the liquidity crunch to earn member deposits, but also their loans and other business. Credit unions can be the calm in the current economic storm. Let’s look at what happened at SVB. Three primary risks – and lack of standard banking risk mitigation techniques – led to its downfall: 1. Concentration risk 2. Interest rate risk 3. Liquidity risk Each of these played a role in bringing down the $200 billion bank, from its investment concentration (at low rates and longer terms in a presumably desperate attempt to earn yield to benefit SVB shareholders), to interest rate risk (by investing long even as rates were beginning to rise and lending short), to ensuring enough liquidity on hand for its 94% of deposits that were not insured by the FDIC, according to S&P Global Market Intelligence data as of year-end 2022. This cocktail, along with the tight knit fintech community grapevine, was more than the balance sheet could bear as unrealized losses became realized. Conversely, given nearly 91% of deposits in federally insured credit unions are insured by the NCUA, a run on credit unions is unlikely. We also don’t see the same types of concentration risk, particularly since the crash of the taxi medallions that pummeled a handful of credit unions. The regulators have decided they learned their lesson on that one. Foreseeing some of these challenges, the NCUA highlighted two of the three risks listed above (interest rate risk and liquidity) as supervisory priorities for 2023. Credit Union Difference Shines This is where the credit union difference really shines. It’s not just that we’re people helping people, although credit unions certainly are unlocking opportunities in and for their communities. A credit union’s structure is different, and while a member may not see or care about that, they do see the benefits of that structure which enables credit unions to support members with products and services tailored to their unique needs and at better rates. Credit unions aren’t chasing the highest possible returns – and riskiest bets – to appease stockholders. Without the trappings of certain for-profit incentives, credit unions make decisions for the best interest of their members. At the same time, the Silicon Valley Bank crisis demonstrates the importance of small businesses as an underserved market. It wasn’t the fact SVB was serving small businesses that took it down – it was poor Asset-Liaiblity Management (ALM). We shouldn’t give up on the small business market, particularly in economically distressed communities. Consider serving small businesses, ensuring your credit union has the right expertise, to diversify your portfolio. CDFI Credit Unions Particularly in the world of Community Development Financial Institution-certified credit unions, risk management is crucial to provide services to the most economically vulnerable. Treasury’s CDFI Fund has made new programs available to help mitigate risk as CDFI credit unions expand further into distressed communities. According to the CDFI Fund, 222 CDFI Credit Unions (47% of all certified CDFI credit unions) applied for its Equitable Recovery Program (ERP). Credit unions accounted for 31.9% of all ERP applicants. Recipients are to be named in 2023. ALM is a slow, methodical process of making decisions several months in advance, including all aspects of diversification, from geographic to investment and loan types to socio-economic demographics, of your field of membership. Strong ALM is very broad-based, involving liquidity management, contingency planning, marketing strategies, pricing and more. Even when outsourcing ALM, credit unions cannot outsource the risk. As a regular part of vendor management, credit unions should ensure their auditors are seasoned and look at switching auditors every five years or so to further mitigate exposure. CU Strategic Planning works with hundreds of credit unions, and just the two of us have a combined half century of experience in ALM, compliance and credit union experience. Know that the NCUA is paying attention to these things on a regular basis. It may be a headache sometimes, but the bottom line is, we won’t see anything like the Silicon Valley Bank meltdown in credit unions. Our first line of defense, however, is credit unions leaders’ fiduciary responsibility to their members.