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Pooling, Aggregation and Integration: Strategies for Small Issuers to Increase Their Volume

Pooling, Aggregation and Integration: Strategies for Small Issuers to Increase Their Volume. Presented by: Steven Brookner NCB, FSB May 22, 2006 New York. National Cooperative Bank, NCBDC & NCB, FSB – Mission Activities - 2005. Community Development Loans - $230,556,094

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Pooling, Aggregation and Integration: Strategies for Small Issuers to Increase Their Volume

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  1. Pooling, Aggregation and Integration:Strategies for Small Issuers to Increase Their Volume Presented by: Steven Brookner NCB, FSB May 22, 2006 New York

  2. National Cooperative Bank, NCBDC & NCB, FSB – Mission Activities - 2005 • Community Development Loans - $230,556,094 • Affordable Housing - $92,753,015 • Community Healthcare - $36,106,372 • Commercial Real Estate - $28,200,000 • Education/Charter Schools - $23,374,961 • Alaska/Native Tribes - $21,875,761 • Small Business - $13,732,027 • ESOPs - $11,383,958 • Community-Based Organizations - $3,130,000 • Arranged Transactions - $115,027,783 • SF Low/Moderate Mortgage Loans - $54,647,000 • Other - $19,460,427 • TOTAL - $419,691,304

  3. Current Strategy • Judicious Use of Balance Sheet • Challenges Include: • Overall Capacity • Nationwide Presence • Managing Risk Profile • Managing Diverse Portfolio of Community Development Loans • Regulatory Environment at NCB, FSB • Successes Include: • Growing Capacity • Superior Risk-Adjusted Returns Exceeding Some Market Rate Lending

  4. Current Strategy - Continued • CMBS & Agency Delivery – Over $150 Million in 2005 • Challenges Include: • Seeding Pools with Appropriate Levels of Community Development Loans • Educating Investors, Rating Agencies and Others • Successes Include: • Standardized Underwriting and Documentation • Superior Execution Resulting in Lower Pricing to Borrowers • Leveraging NCB’s Securitization Experience and Origination Reputation • Maintaining Servicing of Loans – Master, Primary and Special

  5. Current Strategy - Continued • Arranged Transactions • New Markets Tax Credits • Enhancement Fund – Charter Schools • CCAP – Charter Schools • Healthy California – Health Clinics • Challenges Include: • Narrowly Defined • Geographic Constraints • The Investor Market is Not Particularly Deep • Success Include: • Strong Loan Performance • Leveraging Other People’s Money • Lower Cost of Funds • Slicing of the Capital Structure to Create Enhancement

  6. Looking Ahead – Items Necessary to Take Aggregation to the Next Level • Homogeneity • Loans Require Common Structures – Some Differentiation is Acceptable • Prepayment, Fixed/Floating, Asset Class, Amortization, Term, Insurance Requirements, etc. • Standardization of Documentation to Meet Secondary Market Requirements • Common Servicing Platform/Capabilities • Primary Servicing • Master Servicing • Investor Reporting Capability • Special Servicing Capability • Partnering • Representations and Warranties • Performance History

  7. FUND & CDO Structure Loans Sold CDF Collateral Mgr Trustee AAA CDF FUND Warehouse Aggregator Securitizer CDFIs CBOs Banks Etc. Originator & Seller Investment Grade Investors AA CDO Securities Assets A CDO P & I BBB CDF FUND Equity Investor CDF Servicer Rated BB Proceeds Proceeds B Hedge Counterparty Preferred Share Loan Proceeds

  8. Advantages of Structure • Cost of Funds • Attractive Warehouse Advance Rates • CDO Effective Rate – Superior to Other Structures • Resulting Lower Cost to Borrowers • Flexibility • Ability to Mix Community Development Loans • Ramp Up • CDO^2 • Unregulated Environment • Maximized Leverage Created by Foundation, Investment Firm, and Socially Responsible Investors’ Monies

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