1 “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 Cheung February 24, 2010
Sep 06, 2014
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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