Advancing Your Community Reinvestment Act (CRA) Business Development Opportunities

ShaDonte Butler, Community Business Development ManagerSeptember 24, 2015Tampa, Florida

DisclaimerThis presentation is being furnished to you solely for your information and may not be reproduced, redistributed, or published, in whole or in part, without the express prior written consent of FHLBank Atlanta. Certain information contained herein has been prepared by FHLBank Atlanta from third-party and market data and using analytical tools it believes to be accurate and reliable. No warranty, expressed or implied, however, is made concerning the completeness or accuracy of such information. The analysis and applications contained herein are provided for illustrative purposes only and are based on certain assumptions that FHLBank Atlanta believes to be reasonable. Different assumptions, however, may lead to materially different results. Additionally, past performance and experience with respect to similar financial products may not necessarily be indicative of actual results.

The information, analysis, and applications contained herein should not be relied upon as a substitute for your own business judgment and independent review. You should consult your own regulatory, tax, business, investment, financial, and accounting advisors, and should perform your own suitability analysis, before entering into any transaction or structure described herein. Sophisticated financial products are risky and are not appropriate for all persons. FHLBank Atlanta is not a registered investment advisor and does not advise persons on the advisability of investing in, purchasing, or selling sophisticated financial products or the means by which any such product may be utilized.

Nothing in the information herein should be considered an offer to sell or a solicitation of an offer to buy any securities or derivative products. FHLBank Atlanta is not obligated to update or keep current the information or applications contained herein. FHLBank Atlanta may own or have a position relative to certain securities or other financial instruments discussed in this information or used in this analysis. Neither FHLBank Atlanta nor any of its directors, officers, employees, agents, attorneys, or representatives shall have any liability for any loss or damage arising out of the use of all or any part of this information.

All information is indicative of the time this presentation was written.

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• FHLBank Atlanta Overview

• Advancing Your Business Development and CRA Objectives • Connecting the Dots – Scale and Impact• CRA Business Development Rental and Ownership Products• CRA Business Development Services • Success Stories; Business and CRA Value and Benefits

• How Can We Help You Succeed?

Our Discussion Today

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What Have We Learned from the Regulators?

• Housing affordability• Limited stock of affordable housing• Lack of capital for small businesses• Spurring economic development to create

permanent jobs with a livable wage• Lack of capacity and resources for communities

and organizations working to meet the needs of constituents

The Challenges

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• Clearly illustrate how your bank’s CRAphilosophy is integrated into the culture

• Commitment from management and the board

• Shared accountability

Start with a Plan

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• Understand CRA performance evaluation criteria• Conduct a self-assessment

• Develop Performance Context• Assess community needs• Match bank products and services with

community credit needs• Develop performance and rating goals and

objectives• Track and monitor performance

Develop an Effective Strategic Plan

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• Performance Context is a bank’s“CRA Fingerprint”

• Framing Performance Context• Description of institution• Description of assessment area(s)• Other considerations

What is Performance Context?

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• Develop a community profile for each assessment area (AA)• Bank capacity and business strategy• Operating changes since the prior CRA exam• Geographic footprint• Demographic data• Economic conditions• Competitive environment

* Highlight what you do well!

Performance Context

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• Identify Sources for Needs Assessment• Review demographic data• Interview local government officials• Interview staff of nonprofit organizations• Contact community partners• Assess community needs

Community Needs

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Community Partners

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• Public Entities • Agencies or affiliates of federal, state and local

government• Economic and community development• Small Business Administration• Housing Authorities

• Private Entities• Community Development Financial Institutions (CDFIs)• For profit and nonprofit housing developers• Community Development Credit Unions• Community Housing Development Organizations

(CHDOs)• Minority and Women-Owned Financial Institutions

Assess Opportunities

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• Review Performance Context and Needs• Analyze your strategy and capacity• Analyze lending practices and loan products• Analyze retail banking products/services• Analyze your bank’s position in the market

(competition)• Are there any gaps between community needs

and the types of credit and services available at your bank?

CRA Opportunities

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Lending Opportunities Investment Opportunities

Service Opportunities

Multi-Bank loan pools Deposits or grants to CDFIs, CDCs, CDEs, Minority and women-owned financial institutions

Technical assistance to nonprofits, CDFIs and CDCs

Loans to CDFIs or CDCs for housing or small business lending

LIHTC or NMTCprojects

Financial education (Homebuyer, Youth, Small Business)

Loans for affordable rental housing

Contributions to local CD organizations

Foreclosure prevention counseling

How Can FHLBank Atlanta Help Advance Your CRA Success Story?

Converting Challenges into Opportunities

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Achieving Your CRA Compliance Objectives Value of Products

• Assist you in achieving your lending and services objectives in your CRA exam

• Borrowers’ incomes must be less than or equal to 80% of AMI

Value of Services

• CRA consultations

• CRA Success Roadmap

• CRA business development forums with regulators

Loan Growth

Value of Products

• Key points of differentiation

• Relationships with gatekeepers

• Getting the phones to ring

Value of Services

• Connecting with business drivers

• Advancing your brand through media

Products • Homeownership products• Rental products

Services• Connecting you with potential customers/business

drivers in your market area• Realtors, developers, local government, HFAs, and

nonprofits• Connecting you to the military community • Marketing assistance • Webinars, training, joint events • Advancing your brand through media• Structured partnerships• CRA consultations• CRA Success Roadmap

PRODUCTS AND SERVICES

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Purchase Products

Foreclosure Recovery Product

(FRP)

Community Partners Product

(CPP)

Veterans Purchase Product (VPP)

First-time Homebuyer

Product (FHP)

Returning Veterans Purchase Product

(RVPP)

Rehabilitation Products

Veterans Rehabilitation Product

(VRP)

Returning Veterans Rehabilitation Product

(RVRP)

Products: 2015 Homeownership Suite (AHP Set-aside)

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THE PRODUCTS

Structured Partnership Products

Expanding Your Eligible Customer BaseNew! FHLBank Atlanta AHP Income Limit Methodology and Calculator

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FHLBank Atlanta Income Calculator Tool https://cis.fhlbatl.com/ahp/utilities.portal

• Selects the greatest of four calculation methodologies

• Point-and-click Calculator automatically provides the highest income limit

• 548 of 599 counties in the Bank’s district (91%) now have a higher income limit!

Old Methodology Highest of New Methodology % Higher than Old Methodology

$38,150 $46,150 21%

Highlands County, FL – Example, 4-person household

Home Sales Price $85,000

Member First Mortgage $69,336

AHP Grant funds $15,000

Homebuyers Matching funds (4 to 1) $3,500

Sellers contribution $0

Closing Costs $2,836

Member LTV (First Mortgage/Sales Price)

81.6%

Member LTV without AHP Grant Funds(First Mortgage/Sales Price)

99.2%

Business Value: Reduce Loan Risk in Transactions Ownership Example - Transactional Level

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Foreclosure Recovery Product (FRP)

Home Sales Price $128,000

Member First Mortgage $117,687

AHP Grant funds $10,000

Homebuyers Matching funds ($0) $0

Sellers Contribution $0

Closing Costs $7,680

Member LTV (First Mortgage/Sales Price)

91.9%

Member LTV without Grant funds (First Mortgage/Sales Price)

99.8%

Returning Veterans Purchase Product (RVPP)

THE PRODUCTS

AHP Competitive Program (Rental)

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• Rental transactions• Types

• Low-Income Housing Tax Credit (LIHTC)

• Non-LIHTC multi-family• Mixed-Use

• Reduces project debt service • Which thereby permits a reduction in

project rents to enable affordability• Use of Funds

• Acquisition • Rehabilitation• New Construction and/ or • Permanent funding

• Supportive Housing transactions • Social service residential facilities

THE PRODUCTS

La Joya Villages, Lake Worth, FLCommunity & Southern Bank

$500,000 AHP Subsidy55 rental units

Waterfront Rescue Mission – Pensacola, FL$500,000 AHP Subsidy

100 rental units

Total Costs AHP Shareholder Other

Acquisition $590,000 $590,000

Construction $9,160,282 $0 $134,988 $9,025,294

Soft Costs $1,716,414 $65,000 $106,161 $2,063,862

Other Costs $2,143,311 $547,815 $858,851 $3,014,288

Total Development Budget $13,610,007 $612,815 $1,100,000 $11,897,192 Total Debt – First Mortgage $1,100,000

Member Loan-to-value (LTV/Cost) 8.1%

AHP Competitive $612,815

Total Debt if AHP converted to Debt $1,712,815

Member LTV/Cost if AHP converted to Debt

12.6%

DCR 1.36

DCR if AHP converted to Debt (7% for 15 years) 0.71

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Multi-family Rental, New ConstructionWinter Haven, FL 84 units

Rental Example:Extend Credit and Reduce Loan Risk

“AHP has the ability to fill funding gaps.” – FHLBank Atlanta Shareholder

THE PRODUCTS

CRA Value: Rental Example - Assessment Potential Impact

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• Provided shareholder a $1,100,000 extension of credit • CRA-eligible Lending Opportunity

• Shareholder sponsored the AHP Competitive application for the direct subsidy • Which could be CRA-eligible Service Opportunity

• Tenants in project are all at 80% or below of area median income • Which would position project as a CRA-eligible activity

THE PRODUCTS

Services• Connections to Business Drivers: FHLBank Atlanta has a

database of more than 4,000 developers, realtors, contractors, nonprofits, etc. that can be shared with shareholders

• Can be sorted by local market

• Marketing: FHLBank Atlanta provides templates homeownership product marketing

• Templates available at www.fhlbatl.com• Direct assistance with shareholders

• Education and Outreach: FHLBank Atlanta partners with shareholders to lead webinars, host business development events, and conduct other outreach to grow their business

THE SERVICES

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Success Stories:Leveraging AHP to Grow Business and Meet CRA Objectives

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Florida Community Bank“While not everyone qualifies for the program, we get inquiries into an array of products which means the phones are ringing more often for more reasons. We have been able to close an additional 10 loans last year with this product attached which could not have been facilitated without the DPA. We are able to use this suite of products to expand our reach in the market and hit key demographics in our CRA development that enable us to broaden our business and CRA goals…”

Taylor McLaughlin, Affordable Housing Specialist

VALUE AND BENEFITS

Success Stories – Business Development:Magnet for New Relationships with “Gatekeepers”

• Who are the “gatekeepers” of your potential new customers?

• Use products to open previously closed doors

• Direct value proposition for public unit relationships• Local governments

• Connect to real estate professionals in a different manner

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VALUE AND BENEFITS

March 2014 - FHLBank Atlanta member hosted a “Real Estate Professional Networking Event” - Over 40 real estate professionals attended!

“Everyone here feels like it was a huge success in reaching our realtors and really getting through to them on the value and importance of these programs. We couldn’t

have done it without you! ”

- Lesley Graham, Georgia Banking Company

Advancing Your CRA Business Development Opportunities

ShaDonte Butler, Community Business Development ManagerSeptember 24, 2015Tampa, Florida

Contact Us for More Information(800) 536-9650, Option 3, Option 1, Option 3Visit our website at www.fhlbatl.com

BUSINESS DEVELOPMENT ShaDonte Butler– Community Investment Business Development Managersbutler@fhlbatl.com

RENTAL TEAMJoel Brockmann – Rental Production ManagerDon BillingsleyJames MonaghanGlenn StewartClarissa Weaver

OWNERSHIP TEAMMaxima Sims – Ownership Production ManagerMichael ThimsenRichard MauneyPearlie Jackson Cassandra MaddenGreta HollimonLinda Johnson