Banking on Reform: Are We Entering an Era of Sustainable Banking? SRI in the Rockies, 2010 San Antonio

1. DESIGNATED Banking on Reform: Are We Entering an Era of Sustainable Banking?SRI in the Rockies, 2010San Antonio

2. Outline • Community Development Banking Institutions – The Context • IRR of CDBI Banking • New Regulations and Trends • So what does this all mean? • About National Community Investment Fund W WW . N C I F . O R G

3. Community Development Banking Institution (CDBI)The Context DESIGNATED CDBIs are certified CDFI banks and those banks that are not yet CDFI certified, but have a mission of community development and "walk, talk and act" like CDFIs. NCIF expects that over a period of time they will become certified CDFIs. • Circa 8000 banks • 204 Minority Depository Institutions • 65 certified CDFI Banks (recently increased to 81) • Estimated 300-500 other CDBIs due to their work in low-and moderate-income communities. W W W . N C I F . O R G

4. The IRR of CDBI Banking Impact Risk Return W WW . N C I F . O R G

5. Impact: Outstanding and Consistent CDFI Banks have consistently operated in low – and moderate – income (LMI) communities: Median Development Lending Intensity – HMDA has remained between 50-60%; 4-times the All Bank Peer; Median Development Deposit Intensity has remained between 70-90%; 5-times the All Bank Peer Consistently outperformed all peers over 15 years. Apart from lending, they are often the only source of financial services in LMI areas. Development Lending Intensity – HMDA % Development Deposit Intensity % W W W . N C I F . O R G

6. Risk: Elevated • Natural concentrations in geography, product and industry; • Work in the toughest markets and communities most vulnerable to unemployment, decline in home equity, reduction in economic activity; • Historically and due to ‘good old fashioned relationship banking’ CDFI Banks had managed charge-offs/delinquencies comparable to peers; • Increase in capital requirements when capital markets are effectively shut, increasing the cost of capital; • On the positive side, momentum among SRI and mainstream depositors is increasing to support community development but regulatory oversight on out of service area and wholesale deposits is increasing. These are unusual times and it needs unusually strong and supportive risk management for asset quality, capital & liquidity risk and risk diversification. W W W . N C I F . O R G

7. Total Return = Financial Return + Social Return • Financial Return • Social Return/Impact • Quantitative Measures • Qualitative Measures Investors and stakeholders need to explicitly reward Social Return. W WW . N C I F . O R G

8. New Regulations and Trends • Dodd-Frank Bill • Approximately 500 pages of legislation, 250 new rules to be written over the next 12 months • Increase in rules, complexity and costs • Bureau of Consumer Finance Protection • Merger of Office of Thrift Supervision with Office of Comptroller of Currency • Changes in Deposit Insurance • Permanent increase in insurance limit to $250,000 • Unlimited insurance for all non-interest bearing transaction accounts extended • Change in the methodology for calculation of deposit insurance premiums will be beneficial to small banks • Modernization of Community Reinvestment Act • Four CRA hearings many changes proposed – some legislative and some regulatory • Recognition of work being done by CDFIs • CDFI Fund and the term “CDFI” is getting increased recognition • Administration, Treasury, Socially Responsible Investors • Small Business Loan Fund • Equity into CDFIs for 10 years; rate declines if small business lending increases W WW . N C I F . O R G

9. New Regulations and Trends So what does this all mean for Sustainable Banking, Community Development Banking Institutions, Community Development Financial Institutions? W WW . N C I F . O R G

10. About NCIF NCIF is a non-profit private equity trust that has a mission of investing capital in and growing the asset class of CDBI banks. It has total assets under management of $150 million including $128 million of New Markets Tax Credits. W W W . N C I F . O R G