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Federal Register / Vol. 86, No. 41 / Thursday, March 4, 2021 / Notices description of proposed uses of funds, including the extent to which Bond Loans will serve Low-Income Areas or Underserved Rural Areas, and the extent to which Bond Loan proceeds will be used i to make the first monthly installment of a Bond Loan payment, ii pay Issuance Fees up to 1% of the Bond Loan, and iii finance Loan Loss Reserves related to Secondary Loans; 2
attest that 100% of Bond Loan proceeds designated for Secondary Loans will be used to finance or refinance Secondary Loans that meet Secondary Loan Requirements; 3 describe a plan for financing, disbursing, servicing, and monitoring Secondary Loans; 4
indicate the expected asset classes to which it will lend under the Secondary Loan Requirements; 5 indicate examples of previous lending and years of experience lending to a specific asset class, especially with regards to the number and dollar volume of loans made in the five years prior to application submission to the specific asset classes to which an Eligible CDFI
is proposing to lend Bond Loan proceeds; 6 provide a table detailing specific uses and timing of disbursements, including terms and relending plans if applicable; and 7 a community impact analysis, including how the proposed Secondary Loans will address financing needs that the private market is not adequately serving and specific community benefit metrics;
B Eligible CDFI cash flow model:
Each Eligible CDFI must provide a cash flow model of the proposed Bond Loan which: 1 Matches each Eligible CDFIs portion of the Qualified Issuers cash flow model; and 2 tracks the flow of funds through the term of the Bond Issue and demonstrates disbursement and repayment of the Bond Loan, Secondary Loans, and any utilization of the Relending Fund, if applicable. Such information must describe: the expected distribution of asset classes to which each Eligible CDFI expects to disburse funds, the proposed disbursement schedule, quarterly or semi-annual amortization schedules, interest-only periods, maturity date of each advance of funds, and the assumed net interest margin on Secondary Loans above the assumed Bond Loan rate;
C Organizational capacity: Each Eligible CDFI must provide documentation indicating the ability of the Eligible CDFI to manage its Bond Loan including, but not limited to: 1
Organizational ownership and a chart of affiliates; 2 organizational documents, including policies and procedures related to loan underwriting and asset management; 3 management or operating agreement, if applicable; 4

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an analysis by management of its ability to manage the funding, monitoring, and collection of loans being contemplated with the proceeds of the Bond Loan; 5
information about its board of directors;
6 a governance narrative; 7
description of senior management and employee base; 8 independent reports, if available; 9 strategic plan or related progress reports; and 10 a discussion of the management and information systems used by the Eligible CDFI;
D Policies and procedures: Each Eligible CDFI must provide relevant policies and procedures including, but not limited to: A copy of the assetliability matching policy, if applicable;
and loan policies and procedures which address topics including, but not limited to: Origination, underwriting, credit approval, interest rates, closing, documentation, asset management, and portfolio monitoring, risk-rating definitions, charge-offs, and loan loss reserve methodology;
E Financial statements: Each Eligible CDFI must provide information about the Eligible CDFIs current and future financial position, including but not limited to: 1 Audited financial statements for the prior three 3 most recent Fiscal Years; 2 current year-todate or interim financial statement for the immediately prior quarter end of the Fiscal Year; 3 a copy of the current years approved budget or projected budget if the entitys Board has not yet approved such budget; and 4 a three 3 year pro forma projection of the statement of financial position or balance sheet, statement of activities or income statement, and statement of cash flows in the standardized template provided by the CDFI Fund;
F Loan portfolio information: Each Eligible CDFI must provide information including, but not limited to: 1 Loan portfolio quality report; 2 pipeline report; 3 portfolio listing; 4 a description of other loan assets under management; 5 loan products; 6
independent loan review report; 7
impact report case studies; and 8 a loan portfolio by risk rating and loan loss reserves; and G Funding sources and financial activity information: Each Eligible CDFI
must provide information including, but not limited to: 1 Current grant information; 2 funding projections; 3
credit enhancements; 4 historical investor renewal rates; 5 covenant compliance; 6 off-balance sheet contingencies; 7 earned revenues; and 8 debt capital statistics.
vii. Assurances and certifications that not less than 100% of the principal amount of Bonds will be used to make Bond Loans for Eligible Purposes
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beginning on the Bond Issue Date, and that Secondary Loans shall be made as set forth in subsection 1808.307b; and viii. Such other information that the Guarantor, the CDFI Fund and/or the Bond Purchaser may deem necessary and appropriate.
c. The CDFI Fund will use the information described in the Capital Distribution Plan and Secondary Capital Distribution Plans to evaluate the feasibility of the proposed Bond Issue, with specific attention paid to each Eligible CDFIs financial strength and organizational capacity. For each proposed Eligible CDFI relying, for CDFI
certification purposes, on the financing entity activity of a Controlling CDFI, the CDFI Fund will pay specific attention to the Controlling CDFIs financial strength and organizational capacity as well as the operating agreement between the proposed Eligible CDFI and the Controlling CDFI. All materials provided in the Guarantee Application will be used to evaluate the proposed Bond Issue. In total, there are more than 100 individual criteria or sub-criteria used to evaluate each Eligible CDFI.
Specific criteria used to evaluate each Eligible CDFI shall include, but not be limited to, the following criteria below.
For each proposed Eligible CDFI relying, for CDFI certification purposes, on the financing entity activity of a Controlling CDFI, the following specific criteria will also be used to evaluate both the proposed Eligible CDFI and the Controlling CDFI:
i. Historical financial ratios: Ratios which together have been shown to be predictive of possible future default will be used as an initial screening tool, including total asset size, net asset or Tier 1 Core Capital ratio, self-sufficiency ratio, non-performing asset ratio, liquidity ratio, reserve over nonperforming assets, and yield cost spread;
ii. Quantitative and qualitative attributes under the CAMELS
framework: After initial screening, the CDFI Fund will utilize a more detailed analysis under the CAMELS
framework, including but not limited to:
A Capital Adequacy: Attributes such as the debt-to-equity ratio, status, and significance of off-balance sheet liabilities or contingencies, magnitude, and consistency of cash flow performance, exposure to affiliates for financial and operating support, trends in changes to capitalization, and other relevant attributes;
B Asset Quality: Attributes such as the charge-off ratio, adequacy of loan loss reserves, sector concentration, borrower concentration, asset composition, security and
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