In our last trend report based on December 31, 2024 data, we discussed the numerous ways that CDFIs and their borrowers are exposed to changes in federal policy and programs as well as macroeconomic factors – such as tariffs and their effect on small businesses. As of June 30, 2025, having operated in the new environment for nearly six months, CDFIs were beginning to experience the effects of the execution of policy and program changes as well as the significant cuts to staff administering these federal programs, with the ripple effects on program recipients. Philanthropy cannot meet the vacuum created by the elimination or diminishment of government programs and must make difficult choices. Nonetheless, CDFIs and their borrowers continued to be resilient. Critically, capital foundations remained strong and were sufficient to absorb future challenges. Most CDFIs continued to earn a surplus, although a relatively large number of CDFIs were experiencing interim losses. Most peer group portfolio metrics were within historic norms but greater than 30-day delinquencies for both the BML and HDL peer groups were at or near review period highs. Both the higher incidence of losses and growing 30-day delinquencies may portend a broader weakening trend. CDFI leaders remain dedicated to their mission but are planning for financial challenges.  

METHODOLOGY

This Aeris analysis draws on data from 130 CDFIs representing $23.3 billion in total assets on balance sheet. To avoid distortions in the median and quartile metrics, we excluded CDFIs that had not yet submitted complete data sets for June 30, 2025. As always, we are adding new CDFIs to the database and updating peer groups to capture shifting lending patterns. Please note that many CDFIs engage in more than one type of lending activity, as well as other lines of business, including managing assets held in nonconsolidated affiliates or other structures.

Peer groups:¹

• Small Business and Micro Lenders, “BML” – 71 CDFIs with total assets of $4.9 billion and a median of $46.2 million.
• Housing Development Lenders, “HDL” – 43 CDFIs with total assets of $9.2 billion and a median of $153.8 million.
• Community Facility and Commercial Real Estate Development Lenders, “CFL” – 16 CDFIs with total assets of $9.2 billion and a median of $257.7 million. The CDFIs with the largest asset sizes are in this peer group. The peer group has had stable membership since 2021; changes in membership given the small group size can affect the quartile calculations.

Most of the graphs in this report show point-in-time data at calendar year-ends (CYEs) from 2016 through 2024 and then at June 30, 2025. Only the graphs on operating surplus, gross charge offs, and self-sufficiency show fiscal year (FY) data, with the operating surplus and gross charge off amounts annualized for FY 2025.

Note that data for 2020 and 2021 show pandemic effects which lessened thereafter.

¹ The Home Financing peer group and Consumer Financing CDFIs were not included in this analysis due to the small membership and small total asset size at this time, but as Aeris adds more CDFIs in these groups, we hope to include them in the future.

LOAN GROWTH AND LENDING CAPACITY

What comes first, the chicken or the egg – that is, loan growth? Or capital? For CDFIs, capital in the forms of debt and net assets are needed to support loans. CDFIs typically maintain relatively stable deployment levels, a simple measure reflecting the use of capital to make loans i.e., capital liquidity. At June 30, 2025, portfolios were growing and deployment was at historic norms, indicating the need for capital if norms of deployment levels are not to be exceeded. However, while CDFIs typically have ambitious growth plans, it is unclear whether demand in their markets, given the challenging operating environment, will continue to support significant growth.

CDFIs have also proven their ability to pivot, as during the Covid pandemic, to tighten credit standards and focus more on portfolio management to manage increasing risk. The data does not indicate a clear path forward, reflecting the complexity of different peer group factors and individual CDFI circumstances. In looking at the data, it is useful to keep in mind the relative scale and membership size of each peer group.

Core Loan Portfolios, Median

Note 1: Core loan portfolios exclude loans made under the Paycheck Protection Program (PPP) during the pandemic years.

Note 2: The sharp decrease in CFL median at CYE 2021 was due to the addition of a CDFI to the peer group.

Core Loan Portfolios, Annual Growth in Median Portfolio Size

The core loan portfolios of CDFIs in all peer groups grew post-Covid through June 30, 2025, although the pace and patterns of growth have varied.

• HDL – Growth post-Covid has varied year to year but remained above 10%; this peer group had the highest annualized median growth for 2025 of 29.4%.
• BML – Growth post-Covid has been slowing with increases in CY 2022, 2023 and 2024 as follows: 33.1%, 18.9%, and 15.9%, respectively. Annualized growth for 2025 was 11.6%.
• CFL – Growth post-Covid was flat in CY 2022, 4.7% in CY 2023, and 12.0% in CY 2024. While it was only 0.8% when annualized for 2025, it is worth noting that the top quartile, which has some of the data set’s largest CDFIs, had an annualized increase of 6.7%.

Deployment: Loans/(Net Assets + Debt for Financing), Median

As noted, deployment is a simple measure of capital liquidity, calculated using on-balance-sheet data. CDFIs use a variety of tools to manage capital liquidity, such as debt with draws, lines of credit, and selling loans and loan participations, none of which is captured in the simple deployment calculation. Nonetheless, deployment is a relevant measure to assess the field’s relative liquidity and capacity to lend over time.

All peer groups have managed deployment within a stable, approximately 5% range, except during the pandemic period, when CDFIs received historically high levels of grants to support activities and boost lending capacity. Post-pandemic, deployment returned to historical norms as lending caught up with increased resources. At June 30, 2025, CDFIs will need to grow financing resources, either through increased net assets or increased debt, to continue to grow loan portfolios and maintain deployment at historically stable levels.

CAPITAL STRUCTURE, MEDIAN: STRONG NET ASSETS AND LOW COST OF DEBT

Unrestricted Net Asset Ratio: UNA/Total Assets, Median

The Median UNA ratios are at or near review period highs at June 30, 2025.

Leverage: Total Debt/Net Assets, Median

Please note the leverage ratio is based on total net assets, which includes donor restricted net assets for both lending and program expenses.

The leverage ratio mostly follows an inverse pattern to that of the peer group UNA ratios, shown in the previous graph. The exception is the CFL median leverage, which dropped significantly at QE2 2025 while its UNA ratio was relatively flat. The membership of the CFL group is small and therefore a significant change in one CDFI can greatly affect the median, as was the case at QE2 2025. One small CDFI (in the bottom quartile for CFL total asset size) grew its restricted net assets significantly and lowered its leverage from 2.2 to 1.4, driving the change in median from 1.9 to 1.4. As the rest of the peer group membership had much smaller changes, both increases and decreases, lower leverage should not be interpreted as a trend for this peer group.

Average Cost of Debt: Interest Expense/Average Total Debt, Median

CDFIs’ mixed sources of debt, including mission-driven debt that is less sensitive to market pressure, have enabled CDFIs to control average cost of debt despite high market rates in CY 2024 and CY 2025. The CFL and HDL peer groups, with larger CDFIs and a need for larger amounts of debt, had review period highs at June 30, 2025, but within 40 basis points of CYE 2019, pre-pandemic rates. These peer groups include CDFIs that have accessed public markets for large capital infusions that they deemed cost effective. The Federal Reserve’s recent action to lower its benchmark interest rate by a quarter point should also help CDFIs control their interest costs going forward.

CDFIs also use their net assets to lend. If net assets for financing were assumed to have a cost of 0.0%, the blended cost of capital for all CDFI peer groups would be even lower. Since the cost of net assets is debatable, given resources necessary to raise capital grants and grow net assets, Aeris does not calculate a blended cost of capital.

PORTFOLIO PERFORMANCE, BOTTOM QUARTILE: PORTFOLIOS ARE HOLDING

To gain a more conservative perspective on portfolio performance, we examined performance metrics of the bottom quartile for all four groups. Allowance for credit losses were influenced by the adoption of the Current Expected Credit Losses GAAP standard in CY 2024, which had varying effects for individual CDFIs, but overall small effects on peer group median levels. Overall, performance at June 30, 2025 was holding, with slight deterioration in some metrics that may signal the early stages of a weakening trend.

Note that gross charge-offs have been annualized for June 30, 2025. Actual charges-off can be lumpy, therefore the annualized data may not be indicative of the full fiscal year charge-off rate, which may end up being higher or lower. The percentage of CDFIs with non-CYE fiscal year ends is roughly 40%.

BML, Portfolio Performance Metrics, Bottom Quartile

During the pandemic, allowance levels for the BML peer group were elevated in the face of uncertainty, but actual delinquencies and charge-offs held at a low level with federal, state, and local government support and philanthropic support of CDFIs and small businesses. As most of these ended in CY 2022,  charge-offs and delinquencies subsequently increased. Charge-offs and delinquencies > 90 days were at or near review period highs at FYE / CYE 2024, but improved slightly at June 30, 2025, ending at roughly 4.5%. The largest area of concern is delinquencies > 30 days, which has risen steadily to a review period high of 8.5% at June 30, 2025.

HDL, Portfolio Performance Metrics, Bottom Quartile

Allowances for the HDL group have been relatively stable between 6.0% and 6.8%, with the exception of 5.8% at CYE 2024. Charge-offs have remained below 1.0% over the review period. Delinquencies > 90 days have risen since CYE 2023 but are still below review period highs. Delinquencies > 30 days seem to be rising steadily and have reached a review period high of 6.6%, potentially a sign of weakening HDL portfolios.

CFL, Portfolio Performance Metrics, Bottom Quartile

At June 30, 2025, allowances for the CFL group were at the second highest level of the review period, at 6.6%. Delinquencies >30 days were somewhat volatile, and delinquencies >90 days were elevated post pandemic compared with historical norms, but both still low at 2.9% and 1.7%, respectively. Charge-offs continued to be low, ranging from 0.1% to 1.0% over the review period and were at 0.9% at June 30, 2025.

EARNINGS, MEDIAN: CONTINUING SURPLUSES BUT…

Operating Surplus, Median

Scale affects the general size of operating surplus, as reflected in the graph, with the largest CDFIs in the CFL and HDL peer groups earning the largest median surpluses, which grew as their total asset sizes have grown.

Earnings can be variable influenced by large grants. For example, CDFIs in the CFL peer group benefited from receiving Yield Giving philanthropic grants — nine of the 16 CDFIs were awarded significant Yield Giving grants in 2024, explaining the spike in median operating surplus. HDL CDFIs have also benefited from Yield Giving grants. New Market Tax Credits closing fees can also contribute to the overall variability of earnings and have mostly benefited the real estate peer groups.

BML CDFIs, typically much smaller CDFIs, have had more modest and comparatively flatter surpluses.

Percentage of Peer Group with Operating Losses

For another perspective on performance, and possibly an early sign of a weakening trend in earnings, we looked at the percentage of CDFIs that had fiscal year operating losses during the review period. Peer group performance is highly variable. Nonetheless, at- or near- review period, high numbers of CDFIs in every peer group experienced operating losses for the Q2 fiscal year 2025. While interim performance is not necessarily predictive of full fiscal year performance, this could be another early sign of a broader weakening trend.

Self Sufficiency: Earned Revenue / Expenses

The self-sufficiency ratios shown in this table relate to the organizations as a whole, and many CDFIs do far more than lend. Some of the non-lending activity is supported by earned revenue but other activities, such as research and policy work, are purely grant-supported. Such grant-supported activities lower the overall organizational self-sufficiency.

• BML CDFIs typically require grants to support their lending, and many have robust technical assistance activities, also supported by grants. The BML peer group generally has lower self-sufficiency, but the median has been stable around 60% and reached 64.3% at June 30, 2025.
• As large-project real estate lenders, CDFIs in the CFL and HDL peer groups may be able to achieve near-full or 100% self-sufficiency for their lending operations through economies of scale. However, many also engage in non-lending activities, which may be supported through grants, reducing organizational self-sufficiency. Overall, these two peer groups have achieved higher median organizational self-sufficiency than the BML peer group. At June 30, 2025, both CFL and HDL were near review period highs of 88.6% and 92.1%, respectively.