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AN INFORMED DISCUSSION: Achieving Sustainability, Scale, and Impact in Community Development Finance. April 21 and 22, 2005 Chicago, IL. THE REINVESTMENT FUND. An Informed Discussion: - PowerPoint PPT Presentation
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April 21 and 22, 2005 Chicago, IL
THE REINVESTMENT FUNDAn Informed Discussion:
Achieving Sustainability, Scale, and Impact in Community Development Finance
Presentation to the Federal Reserve Bank of Chicago and The Aspen Institute
April 21st, 2005
Mission
.
The Reinvestment Fund builds wealth and opportunity for low-wealth communities and individuals through the
promotion of socially and environmentally responsible development.
Loans, equity
Investments, and grants
Products and partnerships
that open new markets
Data and
policy analysis
Knowledge Innovation
Capital
TRF Profile
Over $400 million in cumulative investments and loans Currently manage $260 million in capital, with over 850 investors FY2004: $66 million in closed loans and investments
ResidentialReal Estate
CommercialReal Estate
CommunityFacilities
Small Business
Private EquitySustainable
Energy
Policy, Research & Assessment
Business Lines:
Capital
Total Investments:• 625 Individual• 104 Religious• 54 Civic Organizations and Corporations• 42 Banks• 29 Foundations
Number of Investors
Source of Funds, by dollars
Knowledge
We provide high quality research, information and policy ideas to government, nonprofit institutions, and private sector partners.
Innovation
Regional ChoiceHigh ValueSteady Transitional Up
TransitionalTransitional DownDistressed
ReclamationNon Residential
Transitional
Linking Private Equity
& HR Assistance
Distressed Urban
Markets Data Product
Pennsylvania Fresh
Food Financing
Initiative
Growth In Phase One
The Foundational Years (1985-1990)
• Attitude Towards Permanence • Regional Market Place as Geographical Unit• Broad Capital and Civic Expression • Not Owned by any Single Class of Investors • Flexible but Disciplined Culture
Growth In Phase Two
A Well Run Non-Profit (1991-2000)
• Movement Toward Capital Predictability • Internalizing the Lessons of Major Mistakes • Learning to Listen to the Market • Breaking the Rules of the CD Paradigm• Talent Attraction and Acquisition
Growth in Phase Three
Structuring A Business Model (2001- )
• Articulating A Sustainability Strategy• Understanding the Value of Information • Making Back Stage into Front Stage• Geographical Expansion • Broadening Capital Market Access
Sustainability Principles
Pricing Model
Smart Subsidy
Taking Advantage of Value We Create
Impact Transparency
Civic and Commercial Networks
Balance Sheet for Growth
Valued Products
TRF Sustainability
An Economic Engine
Regional Choice
High Value
Steady
Transitional
Distressed
Reclamation
Little Sales Activity*
Non Residential
* Less than 5 Sales per Block Group 1/02-7/03
Market Value Analysis Tools
Philadelphia 2003
Camden 2001
High ValueStrong ValueSteadyTransitionalDistressed Public MarketReclamation
Back Stage to Front Stage: Automation and Brand
Geographical Expansion
Capital Market AccessPriority Factors in Liquidity Options
April 21 and 22, 2005 Chicago, IL
Building a Better Business ModelBuilding a Better Business Model
Thomas Munoz, Senior Vice PresidentThomas Munoz, Senior Vice PresidentApril 18, 2005April 18, 2005
18
MB Financial SnapshotMB Financial Snapshot
2003 2004 Change
Assets $4,355 $5,254 +20.6%
Loans $2,826 $3,346 +18.4%
Deposits $3,432 $3,962 +15.4%
Net income $53.4 $64.4 +20.7%
Fully diluted EPS $1.96 $2.25 +14.8%
Return on equity 14.82% 14.88% +0.06%
Cash return on tangible equity 18.79% 20.69% +1.90%
Net interest margin 3.80% 3.79% - 0.01%
Efficiency ratio 55.70% 53.68% - 2.02%
Non- performing loan ratio 0.75% 0.71% - 0.04%
(Dollars amounts in millions, except per share data)
19
M & A HighlightsM & A Highlights2001 to 20042001 to 2004
AssetsAssets
1990 to 2000 (10 mergers and acquisitions)1990 to 2000 (10 mergers and acquisitions) $1.9 billion$1.9 billion
Acquired FSL Holdings, Inc.Acquired FSL Holdings, Inc. $222 million$222 millionApril 2001April 2001
MidCity Financial and MB Financial merge MidCity Financial and MB Financial merge MOEMOENovember 2001November 2001
Acquired Lincolnwood Financial Corp.Acquired Lincolnwood Financial Corp. $228 million$228 millionApril 2002April 2002
Acquired LaSalle Systems Leasing Acquired LaSalle Systems Leasing $92 million$92 millionAugust 2002August 2002
Acquired South Holland BancorpAcquired South Holland Bancorp $560 million$560 millionFebruary 2003February 2003
Divested Abrams Centre Bancshares Divested Abrams Centre Bancshares $98 million$98 millionMay 2003May 2003
Acquired First SecurityFed Financial Acquired First SecurityFed Financial $567 million$567 millionMay 2004May 2004
20
Chicagoland LocationsChicagoland Locations
21
Customer FocusedCustomer Focused
We have always been Chicago based
Better convenience through convenient branch network
Great products
Third in Cook County in small loans to businesses; 58th in U.S. (according to American Banker)
22
Customer FocusedCustomer Focused
We speak many languagesWe speak many languages
Automated voice response system speaks five languagesAutomated voice response system speaks five languages
Marketing messages and materials in multiple languagesMarketing messages and materials in multiple languages
Arabic Hindi Serbo-Croatian
Assyrian Italian Slovenian
Bulgarian Kannada Spanish
Croatian Korean Tagalog
Egyptian Pilipino Tamil
French Polish Ukrainian
German Portuguese Urdu
Greek Romanian Yiddish
Gujrati Russian Yoruba
Hebrew Serbian Yugoslavian
23
Korean Bank
Ukrainian Division
Hispanic Banking Initiative
““Bank within the Bank”Bank within the Bank”
24
25
““Outstanding” CRA rating from OCCOutstanding” CRA rating from OCC
Lending testLending test OutstandingOutstanding
Service testService test OutstandingOutstanding
Investment testInvestment test OutstandingOutstanding
Community Oriented Community Oriented
26
Community OrientedCommunity Oriented
Community development investments and loans Community development investments and loans generated by MB Financial Community Development generated by MB Financial Community Development Corporation in 2004Corporation in 2004
Lending: Disbursements $ 50,132,000 Lending: Commitments 7,875,000 Investments: Grants 215,744 Investments: Direct 10,986,900 Federal Home Loan Bank 2,993,326
AHP Approved Grants 431 units
27
Strategic Allies and PartnershipsStrategic Allies and Partnerships
“Renting” the Bank Platform Housing
Neighborhood Housing Services Loan Servicing by the bank Investor Remittances by the bank Loan Origination in partnership with bank Development of Investment vehicles to generate capital
Small and Micro-enterprise Financing ACCION Chicago
Loan Servicing by the bank Housed in bank office Partnership Lending with bank products Joint marketing and training for customers
Adds Efficiency NHS saved $600,000.00 plus ACCION Chicago saved $80,000.00 plus
28
Small Business Lending – Retail Platform DeliverySmall Business Lending – Retail Platform Delivery
Competency development Constant Training of Retail sales staff
Cultural Shift management New employees and merger partners
Incentive-based compensation Part of the overall sales and service-delivery
Product Orientation Suite of Credit and Deposit Services Marketed through individual sales actions
Supported by Commercial Loan Officers
29
Small Business Lending – Retail Platform DeliverySmall Business Lending – Retail Platform Delivery
Centralized Underwriting and Processing Within Retail Oversight and control Staffed with Commercial Credit expertise Remote documentation production
Transparent to the customer
Credit Limits Loans up to $1 million All Collateral types Credit Policy segmentation and review
30
Small Business Lending – Retail Platform DeliverySmall Business Lending – Retail Platform Delivery
Delivery Differentiation Enables true Commercial Credit to be handled
within the Commercial Department Subjective Credit review
No Credit Scoring “models” Allows for more flexibility
Expands the deposit services growth Deposit services, cash management tools, etc. as
first offer 80% are non-borrowers
Provides further “granularity” to the bank’s overall commercial credit balances Enhances returns Spreads risk among variety of types
31
Small Business Lending – Retail Platform DeliverySmall Business Lending – Retail Platform Delivery
Challenges No “instant answer”
Average 3-day decision Capacity demands Staff Confidence
Creating Small Business Sales Motivation Internal Acceptance
New/expanded Credit Authority Performance benefit
Lower than industry charge-off/losses
32
Small Business Lending – Retail Platform DeliverySmall Business Lending – Retail Platform Delivery
Outcomes Grew platform performance
Expanded Deposit relationships (stickiness) Added fee revenue
Grew outstanding credits 200 to more than 1000 in four years $10 million to $70 million in credits in four years
Added franchise value to the Retail platform Added 4,000 net new small business demand deposit
accounts in four years Grew Treasury Management Revenue 64% in four
years
Building a Better Business ModelBuilding a Better Business Model
Thomas Munoz, Senior Vice PresidentThomas Munoz, Senior Vice PresidentApril 18, 2005April 18, 2005
April 21 and 22, 2005 Chicago, IL