Serving the community while protecting client funds and remaining profitable can be a delicate balance.
This can be especially true for community development financial institutions, or CDFIs, which dedicate the majority of their activities to serving economically distressed neighborhoods and those who otherwise lack access to traditional financial services.
City First Bank—a CDFI focused on supporting under-served neighborhoods in and around Washington, D.C. and Los Angeles—knows the challenge all too well.
"As far as our customers are concerned, it’s a no-brainer.”
Since its inception in 1998, City First has provided business and real estate loans for multifamily affordable housing, community facilities, and small businesses in low- and moderate-income communities. In 2021, the parent company of City First merged with Broadway Financial Corporation, the parent company of Broadway Federal Bank. The merger created the largest Black-led minority depository institution (MDI) in the U.S. with $1.2 billion in assets and approximately 100 employees.
Like many CDFIs, City First must negotiate challenges non-CDFIs don’t have to deal with.
First, because each community is different, the CDFIs that serve them have a variety of structures and business models. While necessary to meet the unique needs of local market(s), this differentiation can require additional due diligence from investors as they evaluate the risk profile of each institution.
Another challenge relates to the reliability of capital sources. Most CDFIs get loans from banks seeking to satisfy requirements for investing in low- and moderate-income areas under the Community Reinvestment Act. However, funding levels can be affected by changes to the Act or bank capital requirements, not to mention reductions in philanthropic investments, private investments, and government funding.
Finally, although one of the federal government’s responses to the pandemic included providing additional monies to CDFIs, Covid had such a devastating effect on low-income communities that a number of CDFIs still struggled to attract sufficient funding.
How City First Leveraged IntraFi
City First is no stranger to the challenges highlighted above. In fact, those challenges are some of the reasons it partnered with IntraFi.
Using IntraFi’s flagship services, ICS and CDARS, City First has been able to consistently attract large deposits from corporations, public funds, government agencies, and other sources by enabling access to millions in FDIC insurance at IntraFi network banks.
“We have over $250 million sitting in CDARS and ICS, and we’re about to add another $10 million from a top-five bank,” says City First Chief Operating Officer Ruth McCloud.1 “We wouldn't have any of those deposits otherwise.”
According to McCloud, IntraFi’s services are especially helpful during periods of financial stress.
For instance, before 2008, many large depositors didn’t prioritize FDIC insurance, she explains. They focused more on the strength of the institution. But after the crisis—when some of the biggest banks in the country began to show signs of financial stress—the importance of deposit insurance became paramount.
“Investors used to ask for our financial statements, loan portfolios, delinquency rates, and so on,” says McCloud. “Now, the first thing they mention when they come into our bank is CDARS or ICS. They know the services, and they want the insurance access. As far as our customers are concerned, it’s a no-brainer.”
“The protection is huge,” she adds. “We don’t even have to do any selling, really.”
In 2023, following the failures of several high-profile financial institutions, interest in IntraFi’s services surged again.
While the value of IntraFi’s services is well-known, McCloud believes what really sets IntraFi apart is its partnership approach. “IntraFi’s customer service is top-notch—they’re proactive, they anticipate our needs, and they do the extra leg-work to make things as seamless for us as possible. I’ve never worked with a more supportive team, much less had a negative experience.
“Without IntraFi,” she concludes, “we wouldn’t be able to compete. It’s that simple.”
Giving Back
Thanks in large part to its partnership with IntraFi and the vital access to FDIC insurance CDARS and ICS provide, City First has been able to attract more mission-critical funding, such as financing for community development, affordable housing, and construction and renovation projects for churches, schools, and other community facilities.
“IntraFi has provided a wonderful tool for us to fund the expansion of the bank,” says City First President and CEO Brian Argrett. “As we grow the scale of the bank, what we do is grow our capability, our capacity, to be able to lend back into the community. And that’s really what it’s all about.”
