Bridges - Summer 2010

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T h e F e d e r a l r e s e r v e B a k F s T . l s : C e T r a l T a e r C a s e C

PUBLISHED QUARTERLY

BY THE COMMUNITY

DEvELOPMENT

DEPARTMENT OF

THE FEDERAL RESERvE

BANK OF ST. LOUIS

L k L e d e s A d C m m u e s summe 2010

Brds w w w . s t l o u i s f e d . o r g

By Yvonne S. Sparks

What does the futureof community devel-opment hold when

staff and funding capacities arestretched to seemingly all-timehighs? According to national

policy experts who spoke at theSt. Louis Feds recent Explor-ing Innovation in CommunityDevelopment Week event,success in community develop-ment efforts can be achievedwith a re-emphasis on thefundamentalscommunityorganizing at the grassroots

level, respecting the intrinsicvalues of our communities anda return to relationship banking.

The message was given at therst of three policy dialogues,

Restructuring and Retoolingfor the Future, a videocon-

ference in St. Louis that wasbroadcast April 20 to LittleRock, Memphis, Evansville andKansas City. Regional break-out sessions followed in most

locations to allow attendees todiscuss and apply the policy

lessons at a local level.Among the days key take-aways, community develop-ment professionals wereencouraged to turn away from

current trends toward nationalfranchised models, in which aprogram design is replicatednationwide, instead beingreminded that it is the local,grassroots network model thatcontinues to produce success-ful community development

activities today.In that model, you have

community-based organiza-tions that are linked centrallyin at least one network, andmaybe multiple networks,explained Ruth McCam-bridge, editor-in-chief ofTheNonprot Quarterly, a national

panelist. (See Page 4 for afollow-up Q&A with McCam-bridge.) That network that

Community dopmnt Pofion rtoo:exploring nnovation W Bring w Voic

to th Ftr of Conity dvlopnt

continued on Page 2

4 Hav YoHar?th mcCabrig n-on-n:

An ntrviw with eitor-in-Chif

of The Nonprofit Quarterly

St. Louis conerence participants gather at the close o the morning policy dialogue video-conerence session April 20. Aternoon sessions in each location allowed participants toexplore specifc topics on a regional level and network with local peers.

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l k G l e d e r s a d C T e s#

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links them helps them to sharetheir practices they considerto be particularly promising,helps research to be done inthe entire network, surfacesresources that allow the entirenetwork to work in moreproductive ways. It allowspeople to sit with one anotherand spark ideas, she said.McCambridge added thatsome such local networks have

produced incredible results,stating that, the local relation-ships between us geographi-cally are very, very important,because that provides usthe same thing we get at thenational level, which is localintelligence.

A local networking model

also helps to inuence policythat affects an organizationsviability and that of the com-munities it serves, she said,which creates a powerful politi-cal base and groundedness inissues. She added the impor-tance of providing researchand results within the sector,

and the need to make knownthe sectors success stories tobecome effective in garneringneeded resources and inuenc-ing policy decision at all levels.

We may not be able to dothat [research] in our indi-vidual organizations, but weabsolutely have to participate

in making sure that it getsdone. Then we have to cite thechapter and verse about theresearch were basing our workon and make others under-

stand the framework wereworking from.

Gary Logan, president ofKansas City-based SynagoConsulting, echoed the fun-damental tenets of grassrootsorganizing by stressing theimportance of truly knowingour communitiestheir hopes,dreams, fears, customs and rit-ualsstating that such factorsbond members of a communityand uniquely dene them. Toeffect real change, he says, weas community development

professionals must learn suchdistinguishing characteristics,respect these value systems andearn a communitys trust, thuscreating a culture that goesbeyond engineering entitle-ment programs and fosteringnot self-reliance, but depen-dency. When this happens,

Logan says, it leads not only tosuccesses in business and inno-vation, but a stronger culture,better equipped to articulateand generate the resources tomeet its own needs, as well.

A third presenter in thedialogue, Ray Boshara, vicepresident and senior research

fellow at New America Founda-tion, underscored the urgencypursuing change and innova-tion within the communitydevelopment eld, explainingthat we are in the next pro-gressive era, a historical periodmarked by income inequalityand zero job creation, among

other economic indicators. Headvocated a turn away fromconsumption and toward pro-duction, an environment thatfavors entrepreneurism and

exploring nnovationcontinued from Page 1

n thi ...By Allen North

Recently, I had

the pleasure o

meeting or the frst time with our

Community Development Advisory

Council (CDAC) in Memphis. This

group o community development

practitioners rom a variety o

disciplines meets twice a year and

helps to inorm our communitydevelopment sta about the

challenges and opportunities the

current climate brings to the

community development industry.

At every meeting, the Council

highlights a member so others learn

more about specifc work in an

individual sector or region. Emily

Trenholm, executive director o the

Community Development Council o

Greater Memphis, gave an insightul

presentation beore the topical

discussion o the day began. Her

organization, a trade association or

community development corpora-

tions (CDCs), oers capacity-building

programs and public policy advocacy.

She shared with the group the state o

Memphis CDCs and the local response

to the current climate. Her experience

is consistent with themes we see

on the national level. Essentially:

The current crisis has required us

to rethink community development,

resulting in a trend toward holistic

approaches, which involves all

aspects o sustainable community

development, such as housing,transportation, education and

workorce planning.

Nonprofts are evaluating their

missions, programs and the waythey do business, identiying

what works and what doesnt.

Nonprofts are looking to

innovation and technology or

new successes, and are taking

steps to improve their business

models by enhancing risk

management and looking or

ways to look more attractive topotential partners.

I appreciated Emilys insight, and

what a timely message she brought.

Recognizing the huge role the

nonproft community has played and

continues to play in the community

development industry, this issue o

Bridges ocuses on nonproft capacity

building. The cover story provides

highlights o the recent Restructuring

and Retooling or the Future video-

conerence our district held in April.

Also in this issue, you will read how

several nonproft organizations have

used various strategies to not only

survive, but sometimes thrive,

including pursuing collaborations

and mergers, strengthening business

practices, and employing social

media and technology. Finally, we

oer some new trends in capacity

building training and training

opportunities across the district.

Allen North is vice president in the

Federal Reserve Bank of St. Louis

Banking Supervision and RegulationDivision, with responsibilities for

Consumer and Community Affairs.


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th mcCabrig n-on-n:

Tcing Toy Cnging Community dopmnt u

Ruth McCambridge iseditor-in-chief ofTheNonprot Quarterly, an

innovative journal for non-prot leaders. Its overarchingeditorial goal is to strengthenthe role of nonprot organiza-

tions to activate democracy.In 1999, she transformed thepublication into a national

journal. McCambridge hasmore than 35 years of experi-ence in nonprots, primar-ily in organizations that mixgrassroots community workwith policy change. Beginning

in the late 1990s, she spent adecade at the Boston Founda-tion developing and imple-menting its diverse capacitybuilding programs.

Bridges: Thank you, Ruth,for participating in the rst ofour series of videoconferencesand dialogues on the future ofcommunity development andfor granting us the benet ofyour thoughts in this inter-view. As a former communityorganizer, what do you see as

the three most challengingissues, other than funding, thatlocal community developmentorganizations face in todayscurrent economic climate?

rM: I am assuming that youare using the word challeng-ing not only to indicate the

problems that may be inherentin this time but also to denoteopportunity. I think there isenormous opportunity rightnow for organizers to workwith communities to help themto envision their best possiblefuture. What is the businessmix they would prefer? How do

they want nancial institutionsand public entities to invest tocreate that future and how willthey, themselves invest theirtime, energy and hope in it soothers cannot deny the visionthey are pursuing?

If you want to know what

I think stands in the way ofthat, I believe that the recentpast has been a time of enor-mous personal stress on manyfamilies. People are worried

about their jobs, their homes,their childrens educationsand they may be attracted toways of zoning out in theirrare moments where they donot have a mandatory activity.This could crowd out involve-ment in community building ifyou let it. I think that provid-

ing a positive alternative thatenergizes and restores hopeand vision is what organiz-ing has to be about right now,and that takes appearing onpeoples doorsteps, in the hairsalons and churches to askpeople What do you want inthis community? What could

it be?

Bridges: Your print and onlinemagazine, The Nonprot Quarterly,closely monitors public policyaffecting the nonprot sector,including nonprot communitydevelopment. What recentpublic policy decisions or

trends have you and your staffobserved that impact the futureof community development?

rM:NPQ has tracked thefunding owing to foreclosureprevention and rehab prettycarefully. It has been impres-sive to watch the CDC networks

take this on, in terms ofdeveloping frameworks foraction, ltering money tolocalities and getting the jobdone. Of course, intense time

requirements for spending themoney and doing the workhave strained the capacity ofmany local groups, but thenetwork as a whole seems tohave functioned well. Theweatherization money, ofcourse, was not deployed aseffectively, but that money was

more often owing throughother types of organizations.

Bridges: You have spenta signicant portion of yourcareer as a staff member of alarge philanthropic organiza-tion. Have you observed anymovement in the philanthropic

community toward shiftingresources to support commu-nity development organiza-tions? If so, can you give usa couple of examples? If not,why, in your opinion, have theynot moved in this directiongiven the deteriorating condi-tions in many communities?

rM: If it werent for the fore-closure crisis and the response ofsome leadership organizationsin the philanthropic sector, wecouldnt say that there has beena shift of philanthropic supporttoward community development.However, some examples of major

foundation support, particularlythe signicant commitment ofthe MacArthur Foundation inChicago to an ambitious, multi-year program of community

Ruth McCambridge was a eatured

speaker at the April 20 event Restructur-

ing and Retooling or the Future. Ater

the days event, she continued the dialogue

with us and shared her insight on the state

and uture o community development.


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development, is noteworthy.Nonetheless, the proportion oftop foundation grant-makinggoing to broadly dened com-munity improvement hasntbudged signicantly over theyears. Hopefully, the progressthat community developmentis making in its response to theforeclosure program, taking thelead in a number of Neighbor-hood Stabilization Programefforts around the nation, willmove the philanthropic needlehigher for community develop-

ment. CDCs that relied on thephilanthropic support of banksobviously are having a toughergo with the nancial and bank-ing crisis.

Bridges: Community devel-opment as a eld is matureafter nearly 40 years. What do

you see as the positive implica-tions of this maturity?

rM: The maturity of thesector is clearly reected inthe development of a system of3,500 to 4,000 operating CDCsin urban and rural neighbor-hoods and an infrastructure of

national and regional nancialintermediaries supporting theirwork. Their development ofnancial products to supportincreasingly complex com-munity development proj-ects, including in the areas ofhuman services facilities andcharter schools, is a notewor-

thy expansion beyond housing.The expansion of their nanc-ing of brick and mortar projectsreects an evolution of com-munity development toward a

broader, more inclusive deni-tion that incorporates housing,economic development, humanservices, education and com-munity policing as elements ofwhat adds up to a sustainablecommunity.

Bridges: Some have sug-gested that this maturity maybe hindering new thinking andfresh ideas for the eld. Haveyou observed a stiing effect onnew ideas due to the maturityof existing community develop-

ment leadership and practices?

rM: If there is anythingstiing new ideas, it is theproblem of young people in theeld having few opportunitiesfor moving up into leadershippositions. Some years ago,there was a problem in com-

munity development with highrates of top-level turnover. Wehave been told that one of thechallenges now is not enoughemerging opportunities foryoung people in the commu-nity development movement tomove into leadership positionsand bring with them their fresh

thinking about new directionsfor the sector.

Bridges: What is your adviceto young people who desire toenter our eld in terms of theireducational choices and jobopportunities?

rM:Community develop-ment is now much more than

bricks and mortar. Young peoplein community developmenthave to think of developing

skills not only in nance andconstruction, but broaderconcepts of communitybuilding. Equally important isdeveloping an understandingand analysis of communitychange. CDCs began in ourcountry as change agentspromoting social and economicequity and progress. Brick andmortar development was meantto be a visible indicator ofprogress toward that goal, notan end in itself. The holisticdevelopment of a community

was the original purpose ofCDCs, a purpose that is moreimportant now than ever.

Bridges: Finally, what is yourvision of the future of commu-nity development? What arethe three to ve ideas or ele-ments that would comprise the

rise of a thriving and sustain-able community developmentindustry in the U.S.?

rM: First, despite the largenumber of CDCs in the nation,there are many urban and ruralcommunities that do not haveindigenous, effective CDCs.

The build-out of CDCs is farfrom completed. Secondly,there are some municipalitiesand counties that view non-prot community developerswith some degree of mistrust,rather than seeing them aspartners in the implementationof community redevelopment

goals. We still have to workon changing the hearts andminds of government ofcialsto see CDCs for the skill andcompetence they can bring

to community developmentgoals. Third, the sector is stillunder-resourced, made moreso by the sectors reliance onphilanthropic support frombanks and from the GSEs.Foundations have to step up tothe plate to provide more coresupport for CDCs. And fourth,there has to be a mechanismdeveloped to recruit youngpeople into the eld and offerreal opportunities for leader-ship. Those opportunities haveto be racially and ethnically

inclusive, as still too much ofthe nonprot sector in general,not just CDCs, that servesracial-ethnic communities isled by people who dont reectthe demographics of the com-munities they serve.

Thank you again, Ruth, for

sharing your wisdom and visionwith us. To our readersyoucan visit The Nonprot Quarterlyat www.nonprotquarterly.org.


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siderably, since they had notbeen doing direct volunteering.He has since reduced this costby 30 to 40 percent by shop-ping around.

In addition, he says, organi-zations that merge should notexpect to get funded at the col-lective level. Funders do notsay, Okay, I was giving you athousand and you a thousand,so now Im going to give youtwo thousand.

While the merger may havehelped to position Volunteer

Mid-South for the future, Deansays the biggest thing they havedone to survive is keep a lid onexpenses. When he rst cameon board, he looked at all oftheir expenses because theywere hurting nancially. Hediscovered telephone lines theywere paying for belonging to a

former tenant who had neverbeen disconnected. Dean gotrid of the postal meter becausethey were not sending out vol-umes of mail. He reduced theirrent by 60 percent and elimi-nated parking costs by secur-ing less expensive ofce spacewith free parking. He put a

freeze on salaries and electednot to rehire for one position.He paid down a line of creditthat had been maxed out.

Through watching our pen-nies, we were able to create arainy-day fund. So last yearwhen the economy went sour, wewere in a much better position,Dean says. He credits havinginitiated these actions prior tothe recession as the reason hisorganization has been able thusfar to weather the storm.

Ironically, some funders donot appreciate this frugality.Dean explains, One funderhurt my feelings when he saidthey were looking to helpnonprots that were downto their last dime and had noresources. I thought, I havesaved and made my employ-ees do without. I have beencareful and you do not wantto fund me but you will helpsomebody else who has notprepared. Nonetheless, Deanbelieves, You need to have a

rainy-day fund. You need tokeep your expenses low, evenwhen times are good.

You can learn moreabout this organization atwww.VolunteerMidSouth.org.

Strategic Collaborations Bring

Credibility and Productivity

By Lisa J. Locke

Many individuals andfamilies are facing challengesrequiring them to seek assis-

tance from local community-based organizations for thevery rst time. Yet, commu-nity-based organizations andthe nonprot sector typicallyoperate with limited capacityand resources. Even thoughthe nonprot sector is continu-ally challenged to devise waysto increase and strengthenits capacity, many organiza-tions have been able to riseto the challenge, such as theLawrence and Augusta Hager

Educational Foundation inOwensboro, Ky. Much of theorganizations success can beattributed to collaborating withother entities to leverage avail-able resources, thus enabling

the Foundation to accomplishits mission.

Larry and Frankie Hagerestablished The Hager Founda-tion in 1990 in honor of Larrysparents. According to KeithSanders, executive director,the Foundations mission is toimprove the opportunities ofchildren, especially those whoare economically marginal-

ized. In Owensboro, locatedin western Kentucky with apopulation of about 56,000people, about 30 percent ofthe households have chil-dren under the age of 18, andapproximately 16 percent ofthe households live below thepoverty level. One of the major

focuses of the Foundation is inthe investment of early child-hood education and in raisingpublic awareness to the costbenets of this investment.

The Owensboro communityrecognized the leadership andmany efforts of Larry Hagerby naming a preschool in hishonor. The preschool is a col-laboration between the publicschool system and the HeadStart program, serving about400 children. In November

2009, the Hager Preschool wasdesignated as a Kentucky EarlyChildhood Center of Excel-lence. As a Center of Excel-lence, the Hager Preschoolserves as a model for other

districts. Staff members pro-vide on-site consultation and

present their model of successat state, regional and nationallevels. Only two preschoolsin Kentucky have received theCenter of Excellence designation.

In 1992, the Foundationsought an innovation partner-ship with the Green River Dis-trict Health Department and

the United Way to fund twofull-time nurses in two of thelocal elementary schools, whereroughly 90 percent of thestudents qualify for reduced orfree lunch. The nurses providea variety of services, such aswell-child exams, immuniza-tions, health education and

rst aid. Today the healthschool clinics are still operatingand are self-sustaining.

As the Hager Foundationforged ahead with its missionto improve opportunities forchildren, it also realized that itcould not ignore the needs ofthe parents. Sanders states thatto improve the well being ofchildren, you cant be blind tothe plight of their parents.

The Founation miion i to impove

the oppotunitie of chilen, epecially

thoe who ae economically maginalize.

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Improving family nancialself-sufciency enhances familyfunctioning. Focusing on theneeds of the parents, the HagerFoundation has been instrumentalin forming the Green River AssetBuilding Coalition (GRABC) andBank on Owensboro throughdiverse collaborations andfunding efforts.

As part of their EarnedIncome Tax Credit campaign,GRABC opened its rst ve

Volunteer Income Tax Assis-tance (VITA) sites in January

2005 and completed just over300 returns. This past taxseason, it operated 12 VITAsites and completed more than2,800 returns. The Founda-tion has been able to tap into avariety of resources to sustainits Earned Income Tax Creditcampaign. Some of the fund-

ing sources include the city ofOwensboro, the county court,Internal Revenue Service,Kentucky Domestic Violence

Association, several nancialinstitutions and other localcommunity foundations.

Staying abreast of trends andbest practices, Sanders learnedabout the Bank On initiativelast summer and modeled theconcept in Owensboro. BankOn is a program that is typi-cally a city- or state-led coali-

tion that brings together localgovernment, nancial institu-tions and community organi-zations to help improve thenancial futures of unbankedfamilies. Bank On campaignshave been started in more than60 cities and states and havethe nancial support of thepartnering nancial institu-tions. In Owensboro, due tothe additional support of the

Fifth Third Foundation and theProgency Fund, the initiativelaunched in May 2010.

The Hager Foundation hasbuilt a reputation that includes

program credibility and pro-ductivity. That has played avital role in its ability to attractdiverse funding sources tosustain the various programsit supports. But equally asimportant as fundraising, theHager Foundation has dem-onstrated the importance of

friend raising. Since itsinception, The Hager Founda-tion has worked with col-laborations and partnershipsto help create a communityin Owensboro where peoplework, live, play and developpotential, proving that non-prots can not only surviveduring challenging times, butultimately thrive.

To learn more about TheHager Foundation, contactKeith Sanders at 270-685-5707.

Mobile Giving is Leveraging

Technology or Good

By Amy B. Simpkins

When an earthquake registering7.0 on the Richter scale devastatedHaiti, the world responded tothe critical need for aid andemergency relief. The William

J. Clinton Foundation, whichfocuses on worldwide issues ofurgent need, is one of theleading organizations using oneof the hottest tools available to

fundraisers todaymobilegivingto coordinate reliefefforts and call on the globalcommunity to assist thosefacing unimaginable disaster.

Just one example of hownonprots are turning totechnology and innovativetools, the Clinton Foundations

campaign, launched withinhours of the quake, providedan immediate opportunity forcitizens of every walk of life tobecome philanthropists andcontribute monetary donationsto a common, timely cause.

Angel Urena, deputy direc-tor of communications for the

Clinton Foundation, describesthe necessity of their mobilegiving campaign. It was veryimportant for the ClintonFoundation to make engage-ment easy and accessible. At atime of crisis, the last thing anorganization wants to face is aseries of obstacles that couldpotentially stymie support,whether in providing informa-tion or securing donations.Mobile giving helped in thatregard enormously because it

takes away some of the stepsassociated with putting a dona-tion in the mail or logging ontoa web site to nd the appropri-ate donation location. It is aseasy as typing a few charactersinto your phone.

The world today is inter-connected due in large partto advances in technology.Nonprots and fundraiserscan make the most of this newreality, as Urena explains. Inthe past, responses to catastro-phes were often much slower,

due largely to a lack of rapidcommunication. Today, thanksto the internet and mobile giv-ing campaigns, we have new,dynamic, and effective ways toreach out to people.

According to Experian Sim-mans, a marketing researchrm, 90 percent of adults in

the United States use at leastone mobile device. Mobilegiving allows anyone withaccess to texting services (orshort message services = SMS)to become a charitable donor.Nonprots tapping into thisexpansive market are able toencourage immediate response

to topical issues from peoplewho are typically outside ofthe traditional giving base.Mobile giving engages youngerpeople in philanthropy and thework of nonprot organiza-tions in a new and unique way.The benets of mobile givingare immediacy, affordabilityand accessibility, which enablepeople to quickly transformtheir compassion into action.

A typical donation from asingle text message is either $5

qually a impotant a funaiing, the

Hage Founation ha emontate the

impotance of fien aiing.

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CdF pon to th econoic Crii

By Nancy O. AndrewsPresident, CEO Low IncomeInvestment Fund

How are CommunityDevelopment FinancialInstitutions (CDFIs)

faring in light of the economiccrisis? What steps are CDFIstaking to respond? To answerthese questions and to learnfrom our CDFI peers, we con-

ducted a series of 11 interviewswith leading CDFIs across thecountry in the fall of 2009. Thebottom line: CDFIs can sur-vive this economic crisis anddeepen their mission, despitethe extraordinary difculty ofthe current period. Heres abrief summary of the ndings.

The Impact o the Crisis

on Community Finance

Heightened RiskAllCDFIs reported heightened riskin their portfolios, particularlyin housing loans. Eight of the10 CDFIs with sizable housingportfolios saw homeownership

projects as a primary source ofincreased risk; in particular,unsubsidized homeownershiploans were experiencing thegreatest weakness. Heightenedrisk was evident in increaseddelinquency rates, or anincrease in loan extensions, orincreases in loan loss reserves,and occasionally in all three.The second most frequentcause of growing risk wasdependency on fundraising orpublic subsidy.

Need for PatienceMostCDFIs (nine of 11) called forgreater patience as borrowersscrambled to put resourcestogether to make deals work.Borrowers are going multiplerounds to get nancing andsubsidy, at the state and citylevel. One CDFI reportedextending 80 percent of itshousing loans (up from 50 per-cent in more normal times).

Serious Liquidity Prob-lemsLiquidity shortageswere felt broadly, but largeCDFIs were particularlyaffected. Respondents alsonoted the need for extensions,the lack of new capital com-ing into the eld and concernabout capital renewals. Some

indicated that the liquidityproblems were being offset byreduced demand.

Housing Loans Are Hard-est HitMost CDFI leadersreported that increased riskand reduced demand camemainly from the housingportion of their portfolios,

particularly from for-salehousing. The reasons givenfor slower volume included:housing developers remain-ing on the sidelines, waitingfor property values to bottomout; housing developers arenancially weaker, becausethey are paying the carryingcosts of unnished projects;lack of capital supply is forcingdemand to contract; lack ofpublic subsidy to fund newprojects; and homeowners

remaining on the sidelinesbecause of job uncertainty.Generally, community facilitiesseemed to be performing well,particularly if the nancingwas long-term and for a facilityalready in service.

How Are CDFIs Responding?

CDFIs are managing height-ened risk through a combina-tion of extra vigilance toward

late payments, bulking up lossreserves and, in a few cases,performing stress tests on port-folios and corporate budgets.Many CDFIs are scrutinizingdeals more closely, along withasset valuations, and occasion-ally, reappraisals of portfoliocollateral. Most reported

higher scrutiny of transactionsat the front end.

The most common riskmanagement strategy is payinggreater attention to late pay-ments, including making callsto customers within days of thedue date, and escalating ifpayments are not received.

CDFIs are also paying extraattention to borrowers nan-cial condition and scrubbingof asset valuation, performingstress tests on borrowerprojections and looking atlevels of borrower liquidity todetermine size of loans, as wellas imposing tighter termsand conditions.

How Theyll Weather the Storm

To get through this crisis, theeld will need to pull together

more closely than in the past.Many called for new ways ofcommunicating and sharing,and for creating united frontsendorsing common positionson critical issues, especiallycapital requirements. Thewatchwords for the next severalyears will be: learn, share andhelp. Navigating the worsteconomy in a century willrequire members to take a

number of proactive steps:Batten Down the

HatchesAlthough someCDFIs are reporting no dra-matic increases in delinquencyrates, they are anticipatingproblems and are rescoringtheir portfolios, increasing theirrisk reserves and scrutiniz-

ing new requests. Now is thetime to begin stress-testing atthe organizational level. Howmuch of a revenue decrease canthe organization withstand?

What happens if 10 percent ofthe organizations portfolio isnonperforming? The goal is toidentify potential problems and

to develop responses now.Workouts and Foreclo-suresFor many CDFIs, loanworkouts are rare, and feworganizations can afford thespecialized skills of assetmanagers to handle goodworkouts and restructuring.However, the ability to be patientand responsive to borrowerrequests has often been the mainingredient for a successfulworkout, and with conditions

continued on back page


11/12# T h e T e r e T a T w w w . s T l s F e d . r G

CANdAr

USDA Grants AvailableThe USDA just announced a $45.1million initiative to make direct loans and

grants to microenterprise development

organizations (MDOs) to support the

development and ongoing success o

rural microenterprises. The Rural

Microentrepreneurs Assistance Program

(RMAP) will lend unds to microlenders

to make fxed-interest rate microloans o

not more than $50,000 at terms not to

exceed 20 years to microentrepreneurs

or startup and growing rural microenter-

prises, as well as annual technical

assistance grants to MDOs that are not

participating as microlenders. RMAP will

accept applications on a rolling basis and

award quarterly. Deadlines are July 16

and Sept. 30, 2010. For inormation, go

to www.rurdev.usda.gov/recd_map.html.

$200MM Small Business Funds

The Opportunity Finance Network (OFN)is partnering with Citi and the Calvert

Foundation on a $200 million und to help

uel small business lending in low-income

communities in the United States. The

Communities at Work Fund will deliver

critical fnancing through CDFIs. The loans

to CDFIs are structured as 5-year loans at

a fxed 4.3% rate. CDFIs are encouraged

to visit www.communitiesatworkund.com

or more inormation and to express their

interest in becoming a borrower.

Call or Research PapersThe Community Aairs Ofcers o the

Federal Reserve System invite paper

submissions or the seventh annual

Federal Reserve Community Aairs

Research Conerence, to be held April

28-29, 2011, in Arlington, Va. The

conerence will highlight new research

that can directly inorm community

development policy and practice in thewake o the deepest recession since the

pre-War period. We invite researchers

rom a wide variety o disciplines to

submit papers that present new and

innovative research under the ollowing

fve broad topic areas: Understanding

Community Change, The Future o

Consumer Credit, Bridging the Divide

between People and Place, Measuring

the Impact o Community Development,

and Community Development Finance.Deadline to submit a paper or extended

abstract is Sept. 15, 2010. For inorma-

tion, visit www.rbs.org/community/

2011ResearchConerence/.

Have you

HArd

BrdsBridges is a publication of the Commu-nity Development Ofce of the FederalReserve Bank of St. Louis. It is intendedto inform bankers, community develop-ment organizations, representatives of

state and local government agencies andothers in the Eighth District about cur-rent issues and initiatives in communityand economic development. The EighthDistrict includes the state of Arkansasand parts of Illinois, Indiana, Kentucky,Mississippi, Missouri and Tennessee.

Glenda WilsonAssistant Vice Presidentand Managing Editor314-444-8317

Yvonne SparksSenior Manager314-444-8650

Kathy Moore CowanJeanne C. MarraSpecial edition editors

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AUUsT

12-13NALCAB 2010 Summit on Building Wealth

in American CommunitiesSan Antonio, Tx.

Sponsor: National Association or LatinoCommunity Asset Builders

www.nalcab.org

26Public Policy Dialogue on Human and

Social CapitalSt. Louis, Little Rock,

Louisville and Memphis

Sponsor: Federal Reserve Bank o St. Louis

www.stlouised.org/community_development

sPTMBr

8Second Annual Business Conerence or

Women and MinoritiesCleveland, Miss.

Sponsor: Center or Community & Economic

DevelopmentDelta State University

662-846-4339

www.deltastate.edu

9-10Economic Development in Underserved

Communities: Where Research and

Practice MeetKansas City, Mo.

Sponsor: Federal Reserve Bank o Kansas City

www.kansascityed.org

15-1752nd Annual Governors Conerence on

Economic DevelopmentKansas City, Mo.

Sponsor: Missouri Department o Economic

Development

www.ded.mo.gov

21-22

6th Annual Indiana Statewide Conerenceon Housing and Community Economic

DevelopmentIndianapolis, Ind.

Sponsors: The Indiana Housing and

Community Development Authority (IHCDA)

and the Indiana Association or Community

Economic Development (IACED)

www.in.gov/ihcda

22-23The 2010 Kentucky Aordable Housing

ConerenceLouisville, Ky.Sponsor: Kentucky Housing Corporation

www.kyhousing.org

22-24The 2010 Assets Learning Conerence

Washington, DC

Sponsor: Corporation or Enterprise

Development (CFED)

www.assetsconerence.org

30Fed FocusLittle Rock

Sponsor: Federal Reserve Bank o St. Louis,

Little Rock Branch

www.stlouised.org/community_development

OCTOBr

5-6Fith Annual Conerence: Nonproft

Management InstitutePalo Alto, Ca.

Sponsors: Stanord Social Innovation

Review and the Association o Fundraising

Proessionals

www.ssireview.org/npinstitute


12/12

PRSRT STD

U.S. PoSTage

paid

ST. LoUiS, Mo

PeRMiT No. 444

today different than in recentpast, all CDFI lending staff canlearn the skills of a workoutsituation. Some of the aspects to

consider is whether to exercisespeedy and decisive action orpatience, as well as how to bestcommunicate with the customer.In any event, it is worth consid-ering whether an industry-wideresponse is warranted.

The Network Solution:Sharing Our Way through

ThisCDFIs form a nationalnetwork dedicated to a com-mon vision of communitydevelopment and povertyalleviation. On a daily basis,however, the eld operatesseparately, with little sharing ofservices, operations, orexpertise across organizations.The result is increased over-head and inefciency. Theelds survival and futurehealth depends on greaterefciency and cost savings.

CDFI leaders identied vepressing needs for the future:

1) Equity support. This couldtake the form of equity grants,

loan loss reserve grants, possiblyeven equity equivalent loans.

2) Liquidity relief. Althoughthe need is for additionalliquidity, many stated that theprice must be reasonable sothat CDFIs could earn spreadincome. The strategy for thismay well be joint advocacy for

additional resources for theCDFI Fund, for renewed capitalcommitments from bankingpartners and foundations orincreased capital commitmentsthrough the current regulatoryreform discussions.

3) Workout/troubled assetrelief. Several organizationsasked for a centralized workoutservice that they could call uponin dealing with the troubledloans in their portfolios. Thiscould take the form of a bad

bank to purchase troubledloans and recapitalize CDFIs.

A second approach would be toprovide expertise that CDFIs

could call upon for help withtheir most troubled loans.

4) A forum for self-help.Organizations called foradditional opportunities tolearn from one another,increased communication andsharing of best practices,resources, and information.

5) Policies for newresources. Central to CDFI-specic policy work are theCDFI Fund appropriationsdebate, funding the CapitalMagnet Fundincluded withan $80 million allocation inPresident Obamas budgetand funding of the NewMarkets Tax Credit program.In addition, the importance ofthe upcoming CommunityReinvestment Act debatecannot be overstated.

This article was adapted withpermission from CommunityInvestments, Winter 2009/2010,Federal Reserve Bank of San

Francisco. To read the full report,see www.frbsf.org/publications/community/investments/0912/winter_2009ci.pdf.

In addition to the print version,each issue oBridges oers articlesthat are exclusively online. These

articles expand on topics in thecurrent issue. Online articles or thesummer issue oBridges are relatedto capacity building. They are:

NeighborWorks Training InstituteTeaches Others How to WorkStrategically to Build Capacity

Learning to GrowTrainingOpportunities and BuildingCapacity

Sharing the BurdenNon-tradi-tional Sources o Funding MayBe Key to Building NonproftCapacity

ONN ONY

Bridges - Summer 2010

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