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“Community Development Banking”Presentation for Professor & Dean of the Faculty Ashish Vaidya’s

MBA Class on Social Business & Social Entrepreneurship Cal State University Channel Island

Jeffrey CheungFebruary 24, 2010

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Traditional Bank vs. Community Bank vs. Community Development Bank

Mission

Focus & target market…impact on access to fair banking services

Structure

Financial Metrics & Outcome Metrics

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Our Beliefs Best means to help communities to become sustainable is to

provide access to robust commercial banking services to business and non profits.

Provide open access to loans and depository services

Provide fair and transparent banking services to the employees of the businesses and organizations we bank

Promote financial education / literacy when and wherever we can

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Banking Services & Products

Depository: Consumer & Business Loans: Consumer & Business Cash Management Bankers How you operate Strategic Partnerships

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OneCalifornia Bank-THE IDEA…a hybrid model for more effective and efficient community development

Social EntrepreneurismSocial Philanthropy

Active Social Business

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OneCalifornia Bank-KEY INFULENCES

Community DevelopmentFinancial Institution (CDFI)Tom Steyer & Kat Taylor

OneCalifornia Bank

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THE MODEL: What We Have Today…an open sourced model

Senior Holding Company 501 c 3 non profit Federal Thrift Holding Company Owns Economic Rights of Bank

Mid Tier Holding Company

Federal Savings Bank CDFI Certified by US Treasury Business & Non Profits Triple Bottom Line

OneCalifornia Foundation

OneCalifornia Bancorp

OneCalifornia Bank

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How This Works & How It Maintains Socially Responsible Focus

Our Model...One of a few nationally chartered financially institutions with a non profit senior holding company

Role of OneCalifornia Foundation

Role of OneCalifornia Bank

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Dispelling Popular Myth: No Break on Credit Standards

5 C’s: The five key elements a borrower should have to obtain credit: character (integrity), capacity (sufficient cash flow to service the obligation), capital (net worth), collateral (assets to secure the debt), and conditions (of the borrower and the overall economy).

Added 6th element: Community

Added 7th element: “Conditioning”…Dr. Phil

No Break from Banking Regulators

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Bicycle

Front Wheel: Mission...however defined

Back Wheel: Financial Sustainability: earnings trend & risk management

What type of bike do you want: old fashion two wheeler or a Lance Armstrong time trail bike

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OneCal Bank

Opened September 2007 Today:

$106MM Total Assets $95MM Total Deposits $50MM Loans Outstanding Well Capitalized & Operating in Safe & Sound Manner Highly Liquid

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Outcome Measure

Mission Ratio: Loans outstanding to:

Women & Minority Owned Businesses Non Profits Businesses located in low-moderate income census

tracts Modifying to track jobs sustained, jobs created, green-

renewable-sustainable lending

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Outcome Measure Results 2008

Mission ratio of 73% based upon $15MM in new loans

2009 Increased dollar amount of new loans outstanding to

$25MM Increased mission ratio to 78%

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Certifications

Small Business Administration: 2009 Certified and Preferred Lender

2009 Green Business Certification CDFI Fund (Department of US Treasury):

2009 CDFI Bank Certification 2009 Technical Assistance, Bank Enterprise Award and

Financial Assistance Award

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What is the secret sauce?

Mission implementation through out bank Strategic Partnerships Full Service Bank Bankers: commercially focused / cash flow

oriented / great at developing mitigants for risk Innovation: use of “social capital”

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Strategic Collaboration

Example of collaboration with Community Based Organizations for Economic Development & Financial Literacy

OneCal Bank + Inner Cities Advisors + Imprint Capital + OneCal Foundation

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Inner City Advisors

Inner City Advisors Focus on Inner City Businesses-Oakland Superior Business Advisory Services Hybrid Financing: New Model

Co-lending Subordinated Debt Guaranty Equity

Example of Collaboration & Innovation

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Imprint Capital Advisors

Leveraging Capital for Social Impact & Social Return

Directing Mission Related Investments to key on the ground level organizations

Leading edge application of funds from programs, deposits to lending

Working with OneCal & other partners to “strategically connect the dots”

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Hybrid Finance Model-Moving Grants, PRIs, Mission Related Deposits, Equity into the Communities

Key Success Factor: Proper Feet on the Street to Execute

Needs: Advisory Partners Financial Service Provider Deal Flow Crisp Execution Reporting: Output, Outcomes and Financial Impact

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Why More Effective Vehicles than PRIs

(Program Related Investments) Mission-related Deposits Subordinated-Debt Lease Finance / Guaranties Equity Stakes Collaborative Consulting Services

Need those on street who can source, underwrite and monitor these types of investments

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“Connecting the Dots: Examples”

Foundations “lending” & Bank leveraging the lending

Strategic Collaboration: Inner City Advisors sources a deal & provides consulting

services to business owners OneCalBank underwrites lending needs & provides banking

services Imprint Capital brokers “capital / participating loans” Team plans for Growth Trajectory Not giving control for expensive VC capital OneCal Foundation: Financial Education & Literacy

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Implications Progressive Practices-But business discipline always

That may mean collaboration and consolidation, especially for Non-Profits, who need to have business discipline too.

Investors need to insist on financial sustainability as well as social/environmental outcomes And they need to plan an exit

Also, what is scale? Is it different for different strategies? Organic growth, large capital infusion, networks of like-minded entities, etc.

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You Run the Bank

Possible solution to your problem single family mortgages

You have the first: $400,000 A second mortgage exists: $100,000 House is underwater Homeowner struggling to make payments What do you do…and you have a lot of these!

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OneCal Solution

Action on 2nd

Action on 1st

Financial Literacy San Francisco Federal Home Loan Bank Do you do the right thing for your shareholders? Intended and Un-intended Consequences

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Socially Responsible Banking…Banking Your Values.. Join The Movement

Working collaboratively How to Participate:

“Bank your values” Both personally & organizationally

What do you get out of it Conscious Consumerism Don’t “Green Wash” Yourself Become part of the Change