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April 21 and 22, 2005 Chicago, IL

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:

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April 21 and 22, 2005 Chicago, IL

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  1. AN INFORMED DISCUSSION: Achieving Sustainability, Scale, and Impact in Community Development Finance April 21 and 22, 2005 Chicago, IL

  2. THE REINVESTMENT FUND An 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

  3. Mission The Reinvestment Fund builds wealth and opportunity for low-wealth communities and individuals through the promotion of socially and environmentally responsible development. . Capital Knowledge Innovation

  4. TRF Profile Residential Real Estate Commercial Real Estate Community Facilities Policy, Research & Assessment Small Business Sustainable Energy Private Equity • Over $400 million in cumulative investments and loans • Currently manage $260 million in capital, with over850 investors • FY2004: $66 million in closed loans and investments Business Lines:

  5. Capital Number of Investors • Total Investments: • 625 Individual • 104 Religious • 54 Civic Organizations and Corporations • 42 Banks • 29 Foundations Source of Funds, by dollars

  6. Knowledge We provide high quality research, information and policy ideas to government, nonprofit institutions, and private sector partners.

  7. Innovation Pennsylvania Fresh Food Financing Initiative Linking Private Equity & HR Assistance Distressed Urban Markets Data Product

  8. 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

  9. 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

  10. 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

  11. Sustainability Principles Valued Products Pricing Model Smart Subsidy Balance Sheet for Growth Taking Advantage of Value We Create An Economic Engine Impact Transparency Civic and Commercial Networks TRF Sustainability

  12. Market Value Analysis Tools Philadelphia 2003 Camden 2001 Regional Choice High Value Steady Transitional Distressed Reclamation Little Sales Activity* Non Residential * Less than 5 Sales per Block Group 1/02-7/03 High Value Strong Value Steady Transitional Distressed Public Market Reclamation

  13. Back Stage to Front Stage: Automation and Brand

  14. Geographical Expansion

  15. Capital Market Access Priority Factors in Liquidity Options

  16. AN INFORMED DISCUSSION: Achieving Sustainability, Scale, and Impact in Community Development Finance April 21 and 22, 2005 Chicago, IL

  17. Building a Better Business Model Thomas Munoz, Senior Vice President April 18, 2005

  18. MB Financial Snapshot (Dollars amounts in millions, except per share data)

  19. Assets 1990 to 2000 (10 mergers and acquisitions) $1.9 billion Acquired FSL Holdings, Inc.$222 million April 2001 MidCity Financial and MB Financial merge MOE November 2001 Acquired Lincolnwood Financial Corp. $228 million April 2002 Acquired LaSalle Systems Leasing $92 million August 2002 Acquired South Holland Bancorp $560 million February 2003 Divested Abrams Centre Bancshares $98 million May 2003 Acquired First SecurityFed Financial $567 million May 2004 M & A Highlights2001 to 2004

  20. Chicagoland Locations

  21. Customer 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 Focused • We speak many languages • Automated voice response system speaks five languages • Marketing messages and materials in multiple languages

  23. “Bank within the Bank” • Korean Bank • Ukrainian Division • Hispanic Banking Initiative

  24. Community Oriented • “Outstanding” CRA rating from OCC • Lending test Outstanding • Service test Outstanding • Investment test Outstanding

  25. Community Oriented Community development investments and loans generated by MB Financial Community Development Corporation 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

  26. Strategic 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

  27. Small 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

  28. Small 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

  29. Small 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

  30. Small 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

  31. Small 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

  32. Building a Better Business Model Thomas Munoz, Senior Vice President April 18, 2005

  33. AN INFORMED DISCUSSION: Achieving Sustainability, Scale, and Impact in Community Development Finance April 21 and 22, 2005 Chicago, IL

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