The Community Development Financial Institutions (CDFI) Fund is offering monetary incentives through its Bank Enterprise Award Program to certain eligible FDIC-insured institutions that comply with the program's requirements and submit an application for consideration. Applications must be received by February 25, 2004.

The CDFI Fund will award $8 million in 2004 in financial incentives through its Bank Enterprise Award (BEA) Program to certain eligible FDIC-insured institutions that comply with the program's requirements and submit an application for consideration. The program will consider qualified activities that occurred in 2003. The CDFI Fund program encourages eligible FDIC-insured financial institutions to increase levels of lending, investment, services and technical assistance to distressed communities and community development financial institutions. Further information about the BEA Program is available on the CDFI Fund's Web site at www.CDFIFund.gov

In addition to CRA consideration as community development activities, investments in and loans to a CDFI may make an FDIC-insured institution eligible for monetary incentives under the BEA Program. The program complements the community development activities of traditional banks and thrifts by providing financial incentives to expand investments in CDFIs and to increase lending, investment and services activities within economically distressed communities. The BEA Program provides awards to eligible institutions based on a prioritized ranking of the type of investment or activity, with equity investments and deposits receiving primary consideration. Awards are provided on an annual basis, and eligible institutions must comply with the requirements of the program and submit an application for consideration. Every eligible institution is not guaranteed an award.

For more information about whether a CDFI-related activity qualifies for CRA consideration, consult the CRA regulation and the Federal Financial Institutions Examination Council's CRA Questions and Answers located on the FDIC's Web site at:

http://www.fdic.gov/regulations/community/community/index.html.

So Don...what's your opinion on the program?

I for one...have a strong opinion based on experience with the program. It's a GREAT DEAL of work to get through this applicaton and document the program per it's guidelines. Do you see folks who find it worth the effort?

Let me see....$8Million dollars, 50 states in the U.S - so we're talking an average of $160,000 per state (and that's leaving out U.S. Territories), and how many institutions will be submitting per state....

So either everyone who applies gets about $5,000, or only a few applicants get the majority.

It's your second choice Bonnie. I was actually CALLED and asked to apply (they don't give goober to Alaska). I worked weeks on the application (it's very detailed as it should be but on things you don't normally track). I put procedures in place to track the information necessary, preformed as much as I could of my goals (you set your own) and while I won two national awards for the program I ended up doing...I didn't get squat from BEA. I was very disapointed after the time I put into it. If the stuff I'm doing (totally original work that costs a FORTUNE to get to completely unserved low-income people) isn't going to qualify...what does?

Huge amounts go to CDFI banks and the three top banks. Those of us in the middle of the road, no matter how much we do, won't see much if anything. I'd highly suggest that a CDFI bank try for funds. Beyond that, it's too costly for a very low chance at funds.

While many who read this might think "oh another dork who thinks she's helping the world, but really doing nothing of value whining about not getting paid" well...I suppose I could be, but I'm danged proud of the work we do to serve very low income folks who have no other banks even trying. If those programs (all in eligible areas) won't garner a nickle in BEA funds, then what is the program all about?

Oh dear I'm ranting

Really honestly, I did hope to hear someone else loved the program, but I'd qualify that with...someone at a midsized financial institution. Anyone ever see some bucks for this????

Dawnie,
I've heard your experience (and bitter "whining") repeated dozens of times from other folks who've tried.

I had enough of an experience trying for CDFI funds the first year they came out. All I wanted was $25,000 for a MicroEnterprise Loan program. I spent weeks working on the application, and sent in a coffeetable sized package, and I heard......NOTHING!

When the awards were publicized, you can imagine my pleasure at knowing that about 3 organizations got 90% of the money.

So when I received the announcement, I filed it in the most appropriate (round) filing cabinet. Then I went back to data scrubbing.

Is this the partial return of money already invested by a bank ? We were told to expect about 15% of a return on the initial investment to establish a CDFI and we received the 15% within 90 days of applying. It is the only return we have seen on our investment so I was glad to get it. Whew, I am usually the one rating about the difficulty on getting Investment credit but this is one where we got real money back. I am not going to complain about that.

Don - this award would be separate from any ROI from a CDFI. The BEA is sort of like "frosting on the cake" money to reward banks that have done good deeds with their activities and investments.

Okay, so it's a little bit more complicated than that, and I wish I had better insight as to who won these things and why, but $8Million spread across the entire country seems like a very small pie to be slicing.

Bonnie:
I can give you an amen on that, one minor detail I left out was that the CDFI had to hire a consultant to complete the paperwork for the 5 owner/banks to get some of our money back. As far as a return on our investment in the CDFI, you are right there also, we got a 15% return the first year and zero in years two and three and ditto for year to date for year four. But, as I always tell the folks around here, it is the cost for having our deposits insured by our friends in Washington.

Actually a CDFI Financial Institution can double dip into BEA as well as the CDFI Fund. Banks who invest in CDFI's can receive a return (up to 15%) on certain investments (basically grants) and then there are a whole host of other opportunities to not get funding from.

When asked to apply (because Alaska is had no participating banks) I discussed the opportunities for reimbursement and went for the most complicated, highest priorities. I did my part...BEA did not. Then they had the nerve to ask if we'd apply again. I'm glad to hear someone got a couple of pennies from them, but I have to admit, the Treasury department has been a huge dispointment more than once (lets talk New Market Tax Credits now!) and I'm not falling for it again.

I'm sure there's something better I can fall for this year

Dawnie:
You are going to pull your hair out on my next comment. The CDFI we partially own also submitted a request for funding office and technical assistance. It received $75,000 for technical assistance and the US Treasury also through in another $150,000 for non-voting stock. It was like taking candy from a baby. Oops, ah, no further commments.

LMAO Don you're a brat!

How much New Market money did you get? Heh heh

Actually the small payouts (yours is small in comparison to say BofA) are what I would like to see BEA do. It's the multi million dollar payouts that use up all the funds that get to me.

Quinkidink...CEO just this second brought me the BEA Fed announcement. I had to stop myself from rolling my eyes!

Have you tried to get funding through the FHLB AHP ? Now that is difficult for our bank. All the grants go to the same dominant banks year after year. What is that old phrase, "them that gots the gold, makes the rules" or something like that.

OK now this subject I can jump into

I am the number one user in Alaska of FHLB AHP funds. I'm not sure I could give you an exact figure, but I've taken about $3.5MM over the last four years from our region.

Here's my secrets Don.

1) I write the applications for my clients!

2) While I interview many applicants, I only submit the top scoring applications (minimum score of 73).

3) I keep abreast of what FHLB has on their hot list every year, before they publish it. This way I can line up the applications in advance that fit their goals.

4) I suck up like crazy

I've been reading on the BEA requirements - must the CDFI be involved with a distressed community? If a bank loans to or invests in a CDFI, is this the "partner" CDFI?

Anon:
yes, with your bank as the investor or lender, the partner is the Community Development Financial Institution. CDFI's typically have as the mission or strategy to meet the needs of the "unbanked" or primarily low to moderate income individuals or geographies, so if that means the same as "distressed" community then the CDFI should be involved in distressed communities. That is their purpose in life. A CDFI for high income individuals or wealthy communities is known as a venture capital fund or something like that, and moreover, wouldn't get you any CRA credit.

Thanks Don - I wasn't signed in there - Regarding the "Distressed Communities" - I was reading in the Eligibility section of the BEA 2003 NOFA "..For purposes of CDFI Support Activities, the CDFI partner must demonstrate that it is integrally involved in an eligible Distressed Community.." this leads to the list of Distressed Communities which has a column for BEA Qualification for the area. In our state, no areas qualify in this column.

There are a variety of programs you can participate in partnerships with CDFI's that garner funds from BEA but only if the CDFI's designates a distressed community (which might be different from your distressed community, but must meet CDFI guidelines). The distressed community guidelines are more difficult to meet than a normal CDFI investment area, so, all CDFI's don't meet the standards that you need for BEA awards, with one exception.

An equity investment to a CDFI does not need to have a designated distressed community attached to it. You can take full credit purely because the CDFI is a CDFI

Great! I assume that the investment area would have to qualify - under the IA column in the area qualifications list. It looks like the IAs are generally low-mod tracts.

Would an equity-like loan also qualify, then?

The equity like loan has to be structured very specifically to qualify, (Basically you GIVE them the money with no allowed repayment for a period of either ten or fifteen years, subordinate your position to everyone in the world, and then accept repayment after the end of the period IF they can afford it). Then yes It would qualify (check the NOFA and see if there are any changes to that in 2004 but that's been the basic structure of the requirements for some time).

The CDFI IA's are pretty much low and mod tracts as well as some regeneration type zones in some communities. If you're going to do the application it's nice to get some credit back (if you're lucky) for any donations you make to local CDFI's even if they aren't in a high focus area.