CEO Letter to Shareholders

Dear Shareholders and Friends:

 
It is hard to imagine a more difficult and challenging year than 2020. The worldwide pandemic changed the business and economic climate for everyone. Clearinghouse CDFI was not spared the impact of this crisis. It is often said that “greatness is measured by how one responds to adversity”. I am extremely proud of our team’s 2020 response – continuing our mission of providing impactful loans, as well as finishing the year with sustained asset size growth while maintaining profitability.

Managing our CDFI during this historic pandemic was a central focus for our management team in 2020. Approximately 35% of our borrowers were directly and immediately impacted by the economic shut down. All these borrowers were given a three-month payment deferral allowing them time to navigate their own survival. This action resulted in a significant reduction of income and recognition of a large, but appropriate, reserve against our income statement. The first quarter finished with unprecedented losses, and problems for which we did not have any answers.

Instead of giving up or retreating, we rolled up our sleeves, and got to work. First, we committed $10 million for emergency loans to nonprofit organizations facing extreme hardships. This initiative resulted in Clearinghouse CDFI making our first emergency loan to the Aquarium of the Bay in San Francisco. Thousands of aquatic animals needing food and care were in jeopardy because of a stop in the nonprofit’s revenue. Our emergency loan, completed in just three weeks, saved the animals and the nonprofit organization by providing them precious time to re-organize.

Next, we moved swiftly to obtain approval to offer Payroll Protection Program (PPP) loans to help those small businesses most in need of immediate assistance. This was not an easy process given regulations that initially precluded us from participating. With much tenacity we were approved and gained access to the “Fed PPP window” thorough a correspondent relationship with Wells Fargo Bank. Our dedicated staff shifted from their existing responsibilities to begin the arduous task of processing hundreds of applications from small businesses needing assistance. Many on our team worked around the clock to assist those facing economic hardship.

Our first round PPP effort assisted 245 small businesses for a total of $7.49 million funded. Our involvement in the second round of PPP in 2021 was equally impressive. To date we have funded a total of 460 PPP loans in both rounds for $21.24 million. We were particularly helpful to very small businesses that did not have a strong existing banking relationship. Our average loan size to date for both PPP rounds was $46,173 while the national average was $93,791. Minority- or women-owned businesses accounted for 63% of our total PPP originations.

In spite of the economic environment in 2020, we also funded 39 projects for a total of $93.6 million in new core loans. Our ability to continue our core business was central toward forging our continued growth and impact in low- and moderate-income communities in 2020.

Another highlight in 2020 was our award of $65 million in New Markets Tax Credits (NMTC). In another heroic staff effort, we were able to deploy a total of $52.25 million in Federal NMTCs and $2.94 million in Nevada State tax credits prior to year-end. Two of these projects, totaling $30.25 million were for Native American sponsored projects or benefiting Indian Country.

Lastly, I’m proud to announce our newest initiative, FVLCRUM Fund. This unique, private equity fund is dedicated to reducing the minority wealth gap in this country. FVLCRUM is the only fund endorsed by the United States Minority Wealth Commission. Each equity investment will assist minority business owners as well as benefit low– and moderate-income populations through a Community Benefits Agreement. Ten percent of the fund will be set aside for direct loans to small and family-owned minority businesses.

The culmination of our hard work in 2020 resulted in another strong year for Clearinghouse CDFI. Our total asset size grew to slightly over $600 million, a 10.6% increase over the prior year. Additionally, we attained our 21st consecutive year of profitability with a total pre-tax profit of $6.9 million, and a net income of $5.1 million. We are most proud of all these accomplishments and our successful response to this adversity. We are excited about several new endeavors, including our recapitalization effort, continued asset growth, minority wealth creation, and addressing unmet credit needs for low-income communities and populations.

As we continue navigating COVID-19 and economic challenges going forward in 2021, I am encouraged and optimistic. Because of your strong support and assistance, Clearinghouse CDFI is still standing strong.

Sincerely,

Doug Bystry
Douglas J. Bystry
President / CEO