March 14, 2008 Saurabh Narain | NCIF Social Performance Metrics A step towards quantifying social impact and increasing the asset class of CDFIs

W W W. N C I F. O R G 1 Outline  NCIF Social Performance Metrics  Raising Deposits using NCIF Social Performance Metrics  Increasing the Asset Class of CDFIs  Next Steps

W W W. N C I F. O R G 2 Four Key Metrics using public data – HMDA, FDIC data 1.Development Lending Intensity (DLI – HMDA ) DLI (HMDA) = % of HMDA loans originated in investment areas/total HMDA loans originated A proxy for lending test 2.Adjusted Development Lending Intensity (DLI - HMDA) Adjusted DLI (HMDA) = DLI minus percentage of ‘high rate’ loans High rate loans = 3% over index Adjusted DLI eliminates one kind of predatory loans 3.DLI – Low Income People: % of HMDA loans to low income people 4.Development Deposit Intensity (DDI) DDI = % of branches in CDFI investment areas/total branches A proxy for services test NCIF Social Performance Metrics

W W W. N C I F. O R G 3 Recommendation Identify banks in quadrants (1), (2) and (3) for support since they are likely to have a community development mission NCIF Social Performance Metrics

W W W. N C I F. O R G 4 Quadrant #1 Quadrant #2 Quadrant #3 Quadrant #4 CDFI MDI Threshold

W W W. N C I F. O R G 5 Raising Deposits using NCIF Social Performance Metrics

W W W. N C I F. O R G 6 Example 1 Depositor Wants to place $3 million in deposits in a certified CDFI, located anywhere in the country, that meet the following criteria:  Bank must be a certified CDFI  Development Lending Intensity (DLI) > 40%  Development Deposit Intensity (DDI) > 50%  Located in California, New York or Illinois Check Depositor allocates deposits among the resulting list of banks after qualitative due diligence.

W W W. N C I F. O R G 7 Example 2 Depositor Wants to place $2 million in deposits in Minority Depository Institutions (per FDIC), located in LA, NY, FL, IL, TX and CA that meet the following criteria:  Institution must be an MDI, per FDIC  DLI greater than 40%  DDI greater than 40%  ROE greater than 10%  Assets greater than $250 million Check Depositor allocates deposits among the resulting list of banks after qualitative due diligence.

W W W. N C I F. O R G 8 Increasing Asset Class of CDFIs Using NCIF Social Performance Metrics

W W W. N C I F. O R G 9 Increasing Asset Class of CDFIs DLI screen of 40% applied; DDI screen of 50% applied Likely to be between 375 (Quadrant 1) and 1,424 (Quadrants 1, 2, 3) CDBIs

W W W. N C I F. O R G 10 Does bank focus on housing (SF&MF>40% loans)? DLI (HMDA)CRE SME YesNo DLI (CRA)DLI (CRE) DDI (SOD) What % of branches in investment areas? DDI (SOD) NCIF Social Performance Metrics – the Future

W W W. N C I F. O R G 11 Next Steps  Pilot Programs: NCIF is in the final stages of:  Foundation Deposits: Working with a foundation that has adopted NCIF Social Performance Metrics to place up to $25 million in deposits as reward for their social impact.  NMTC dollars: A major bank may invest its NMTC dollars through banks that meet the NCIF Social Performance Metrics screens.  Private Equity: NCIF has identified 2 banks for placing private equity due to the fact that they meet the initial social performance criteria. Other co-investors may join.  Expansion of the NCIF Social Performance Metrics to other classes of loans  Given that these metrics are more predictive for housing oriented banks, NCIF seeks ONLY ONE data point from the other banks – so that they can distinguish themselves from the other banks.  Loans originated or purchased during the year with their address (excluding any identifying information to protect privacy).  NCIF will geocode to create other DLIs and help enhance the visibility among stakeholders of the reporting institution. A special thanks to the F.B. Heron Foundation for having supported this work

W W W. N C I F. O R G 12 National Community Investment Fund  National Community Investment Fund (NCIF) – since 1996  Nonprofit trust, private equity fund, certified Community Development Financial Institution ( “ CDFI ” )  Only private equity fund of its kind in the US  Mission: NCIF invests private capital in, and facilitates knowledge transfer to, depository institutions that increase access to financial services in underserved communities.  Cumulatively invested $24.9 million in 37 institutions in equities/debt  84% of institutions are minority-focused, 65% of dollars are in minority-owned institutions.  81% of institutions in urban markets, 31% in rural and reservation markets  $2 billion in more than 56,000 development loans; CDFIs leverage capital times.  NCIF Social Performance Metrics created to increase asset class of community development banks.  CDBI Exchange Network  Best practices in valuation, risk management, governance and development impact; partner with trade associations, regulators, investors and funders  Commemorating the impact of CDFIs in distressed communities  Advised by ShoreBank Corporation – largest and oldest CDFI with $2.0 billion assets

W W W. N C I F. O R G 13 Contacts Saurabh Narain Chief Fund Advisor National Community Investment Fund 2230 South Michigan Avenue, Suite 200, Chicago, IL (312) 881