2025 was a difficult year for CDFIs and the communities they serve. While the entire economy suffered from higher prices, continued higher interest rates, and a great deal of turbulence, CDFIs and their communities faced, in addition, defunding and dismantling of federal programs that directly support CDFIs or indirectly support their broader mission. At the same time, many of these factors have increased the need for CDFI services.

Despite the challenges, CDFIs achieved solid operating results for 2025 — among the highest since 2016. Earnings and capital foundations were strong at year-end 2025. Although contributed revenue played a significant role, self-sufficiency measures for all lending peer groups stood higher than they had since 2021. This does not mean that CDFIs are immune to the significant challenges in the operating environment. While loan growth continued in the real estate and housing lending groups, loan portfolios in the business lending group stagnated in 2025. Portfolio performance for all three peer groups showed differing signs of weakening — the CFL and HDL groups showed higher loan delinquencies and the BML group showed higher charge offs.

CDFIs are well acquainted with challenging times, having experienced both the Great Recession and the pandemic over the span of 20 years. The odds are, for the great majority of the industry, CDFIs will continue to succeed in balancing financial responsibility with pursuit of mission until the return of a more favorable operating environment.

METHODOLOGY

This Aeris analysis draws on data from 139 CDFIs representing $23.8 billion in total on-balance- sheet assets. To avoid distortions in the median and quartile metrics, we excluded a few CDFIs that had not yet submitted data for calendar year end (CYE) 2025. As always, we are adding new CDFIs to the database and updating peer groups to capture better representations for 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. In this analysis,

• The Small Business and Micro Lenders, “BML” group consists of 77 CDFIs with total assets of $4.8 billion and a median of $41.6 million.
• The Community Facility and Commercial Real Estate Development Lenders, “CFL” group consists of 19 CDFIs with total assets of $9.8 billion and a median of $270.2 million. This peer group has CDFIs with the largest asset sizes.
• The Housing Development Lenders, “HDL” group consists of 43 CDFIs with total assets of $9.3 billion and a median of $157.2 million.

Most of the graphs in this analysis show point-in-time data at calendar year-ends (CYEs) for 2016 through 2025. However, the graphs and table on operating surplus, contributed revenue, and self-sufficiency show fiscal year (FY) data to capture a full year of activity.

2020 and 2021 data reflect most of the effects of the pandemic on CDFIs; these effects lessened thereafter.

EARNINGS: SOLID RESULTS

Operating Surplus, Median

The median 2025 operating surpluses for the CFL and HDL peer groups are the highest and second highest, respectively, over the review period. Similarly, although not as dramatic, the median 2025 operating surplus for the BML group was also near the peer group’s highest profit levels (roughly $1.0 million). The operating surpluses of all groups were boosted by high levels of contributed revenue (see related discussion on Contributed Revenue in this analysis). In FYs 2021 and 2022, many CDFIs in the BML group received exceptionally high contract and contributed revenue for providing Paycheck Protection Program (PPP) lending and other business supports to off-set pandemic challenges. CFL and HDL CDFIs also received strong contributed revenues and increased contract earnings — but not to the same extent as the BML peer group.

Percentage of Peer Group with Operating Losses

The incidence of operating losses historically has been variable in all peer groups, with the BML peer group generally experiencing the highest incidence of operating losses. Incidence of operating losses in FY 2025 are within historical ranges and do not indicate a clear trend of increased losses. It is also worth noting that if operating results for the last three fiscal years are aggregated, smoothing out irregular recognition of large unrestricted grants, the incidence of losses decreases significantly to 5.3%, 7.0% and 11.7% for the CFL, HDL and BML peer groups, respectively.

Self-Sufficiency, Median

Aeris has heard that in response to the current operating environment, many CDFIs are focusing on operating efficiencies and improving self-sufficiency. While one year does not prove a trend, all three peer groups had their highest level of self-sufficiency since FY 2021, during which CDFIs benefited from pandemic-related contract revenue.

PORTFOLIO PERFORMANCE: SIGNS OF DECLINE

CFL Portfolio Performance

HDL Portfolio Performance

Gross charge-offs for the CFL and HDL peer groups continued to be near 0%. However, for both peer groups, > 90-day and > 30-day delinquencies increased at CYE 2025. Although the delinquency levels are still manageable for mission driven lenders, it appears to reflect growing challenges, such as increased costs and scarcer construction project subsidies.

BML Portfolio Performance

Delinquencies and charge-offs for the BML group have been steadily increasing since the pandemic, when borrowers were receiving extraordinary supports. Delinquencies dipped slightly in FY 2025, but gross charge-offs reached a review period high of 4.7%, reflecting challenges in the small business operating environment such as inflation and immigrant market disruption.

CAPITAL STRUCTURE: CONTINUED STRENGTH

UNA Ratio: Unrestricted Net Assets / Total Assets, Median

Leverage: Total Debt / Net Assets, Median

Relative to the BML peer group, CFL and HDL business models are able to operate with lower unrestricted net asset ratios and higher leverage because of their higher self-sufficiency, lower risk loan portfolios, and real estate collateral. At CYE 2025, all three peer groups were near the strongest level of their historical ranges, preparing them to weather challenges in the operating environment.

• The CFL peer group operated with UNA ratios of 20%-25% over the review period and performed within that range at CYE 2025. Leverage primarily ranged between 1.5 and 2.0.
• The HDL had been operating with UNA ratios around 25% for the pre-pandemic period but strong operating surpluses have pushed up their level to 30%. However, the leverage calculation for this group, which includes both unrestricted and restricted net assets, has been very stable at roughly 1.2.
• The median UNA ratio for the BML peer group, with its business model requiring the strongest net asset ratio, has moved from a historical norm of 30% to 35%, with leverage decreasing to roughly 1.0. This group consists of smaller CDFIs that carry higher risk loan portfolios, and show lower self-sufficiency than CDFIs in the CFL and HDL groups. Accordingly, they are more vulnerable to the current operating environment. A stronger net asset base in the current operating environment is especially valuable for the BML peer group.

GROWTH: CDFIs GREW DESPITE OPERATING ENVIRONMENT CHALLENGES

Capital: Total Assets, Median

In 2025, CDFIs in all three peer groups grew their capital. It is difficult to see the percentage growth of each group in the graph, given the different scale of the median total assets. For comparison purposes, the three-year compound annual growth rates of median total assets from CYE 2021 to CYE 2024 for the CFL, HDL, and BML were 4.9%, 15.7% and 10.5%, respectively; the annual growth rates for 2025 were 7.5%, 13.3%, and 6.2%, respectively, potentially indicating a trend of slower growth for the BML sector.

Total Operating Expenses, Median

Although self-sufficiency was higher, CDFIs continued to invest in their operating capacity, the largest components being personnel and professional services.

Core Loan Portfolios*, Median

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

Note: The number of CDFIs in the CFL peer group increased from 15 in 2019 to 19 in 2021, which caused a significant change in median portfolio size and many median data points.

The portfolios of all three peer groups grew at compound annual growth rates (CAGRs) of over 20% between CYE 2021 and CYE 2024. While the portfolios of the CFL and HDL peer groups continued to grow in 2025, by 12.6% and 21.5%, respectively, the BML portfolio was essentially flat with only 0.8% growth in CY 2025. This lack of growth may be due to decreased demand and/or a shift in focus from loan deployment to portfolio management by BML CDFIs given increases in charge-offs.

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

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.

The BML, CFL, and HDL peer groups have managed deployment around a relatively stable norm, excluding the period following the pandemic period, at CYEs 2021 and 2022, when CDFIs received historically high levels of grants to support activities and boost lending capacity, with a predictable lag in deploying resources into loans. Deployment largely returned to historical levels post-pandemic as lending caught up with increased resources.

• The CFL peer group seems to have somewhat more on balance-sheet capacity than in the past, with deployment of 78.0% at CYE 2025. This peer group includes many large, sophisticated CDFIs with off-balance sheet facilities to draw on for additional liquidity if needed.
• The HDL peer group has had very stable on-balance sheet deployment in the 75% range with deployment of 76.8% at CYE 2025. Like the CFL peer group, the HDL peer group includes many large, sophisticated CDFIs with off-balance sheet facilities to draw on for additional liquidity.
• The BML peer group typically has the lowest on-balance sheet deployment, at around 70%, and experienced the greatest pandemic effect. Some of these CDFIs participate in SBA programs and can sell guaranteed portions of qualifying loans. While the market for such sales is healthy and established, recent changes at the SBA (such as reduced staffing, more restrictive rules for eligibility to participate, etc.) may be curtailing CDFIs use of these programs.

CHALLENGES TO GROWTH

Contributed Revenue, Median

CDFIs’ operating results rarely provide meaningful surpluses; for the majority of CDFIs, contributed revenues are critical to covering expenses and to building net assets, which then support additional debt. The CDFI Fund, with its multiple capital grant programs, has historically been a key driver of net asset growth. Under the current administration, the Fund is a target of budget cuts that will likely slow industry growth.

A multitude of important private donors have traditionally supported the CDFI industry and significantly contributed to its growth for the past 20 years. Since 2020, a single donor, Yield Giving – MacKenzie Scott’s foundation, has stepped up on a scale much larger than seen before. In 2024, CDFIs that received grants for Yield Giving included

• 10 of the 19 CDFIs (52.6%) in the CFL peer group,
• 19 of the 43 CDFIs (44.2%) in the HDL peer group, and
• 20 of the 77 CDFIs (26.0%) in the BML peer group.

Due to timing of receipt, these grants likely elevated the median levels of contributed revenue for the CDFIs in this analysis in both 2024 and 2025. These grants ranged from $5.0 million to $60.0 million and their unrestricted nature provided valuable flexibility supporting CDFIs’ growth and strength. While not a replacement for federal programs that support community development and not yet a consistent source, these grants are supporting recipient CDFIs in the current challenging operating environment.

Average Cost of Debt, Median

CDFIs have historically operated within a narrow range of average low-cost debt. Some of the larger CDFIs in the CFL and HDL peer groups have accessed public markets, which provide large amounts of capital at market-rate interest levels, leading to an increase in the average median cost of debt for these peer groups. In 2024 and 2025, new debt from bank investors, the industry’s largest creditor sector, also began to carry higher pricing. The result is that in CYE 2025, the average cost of debt for all peer groups was the highest of the review period: 3.3% for CFL, 2.8% for HDL, and 2.3% for BML. However, this is still significantly below market rates because CDFIs’ debt sources include philanthropic institutions and impact investors which are less sensitive to market rates.

Over time, increased debt rates will put pressure on CDFIs’ loan pricing. Higher pricing may affect the feasibility of the projects CDFIs wish to fund. Given the already challenging operating environment, any increase in CDFI loan pricing could dampen loan demand.