National Convention on SUBPRIME LENDING, FORECLOSURE and RACE

1
National Convention onSUBPRIME LENDING,
FORECLOSURE and RACE

• Presented by
• Paul C. Hudson
• Chairman CEO
• Broadway Federal Bank
• October 3, 2008

2
Broadway Federal Bank

• Founded 1946 in Los Angeles by African American
  business persons community leaders
• To provide a financing vehicle for African
  Americans impacted by red lining

3
Today

• 4th largest African American bank in the nation,
  with assets in excess of 400 million
• No sub prime loans
• 5 branches serving primarily South Los Angeles
• Publicly traded on NASDAQ

4
As of June 30, 2009

• Originated 70 million in loans
• Sold approx 12 million of loans to other banks
• Net loan growth of 40 million
• Added 36 million in deposits
• 1.3 million in net earnings

5
Community Bank Impact

• Availability of Credit
• Gemini
• Minority Aids Project
• New Design Charter School
• TUG
• Community Outreach and Information
• Town Hall meeting

6
Things that Keep Me Awake

• Credit Quality
• Delinquencies
• Classifications
• Reserves
• Loan losses
• SNL Holdings- 18,000 (12mos _at_ 9) vs. 200,000
• Liquidity
• Loan to deposit ratio
• Loan sales
• Deposit growth
• Earnings
• Capital
• Regulatory requirements

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The Credit Crisis Impact

• Credit Quality
• Unemployment
• Tenants
• Churches
• Small business failures
• Commercial Real Estate
• Property values
• Loan Underwriting

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Impacts

• Liquidity
• Loan Sales
• No buyers (see slide 5 Things that Keep Me
  Awake)
• Deposit pricing
• FHLB borrowings
• Collateral
• Consumer confidence
• Safe and Sound
• FDIC Insurance

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Impacts

• Capital
• Bank Debt
• First Federal Bank Line
• Nara Bank Preferred
• Stock
• Private Placement-Public Offering
• Market value
• Investor confidence

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History

• Regulation Z
• Deposit pricing capped at 5
• 30 year fixed rate loans priced at 7
• Redlining
• Reagan
• Deregulated deposit pricing
• Disintermediation
• Savings Loan crisis
• RTC

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History

• Housing Bubble
• Fannie/Freddie
• Liquidity
• Commodity pricing
• Fed reduction of interest rates
• Economic growth
• Mortgage brokers (unregulated)

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History

• Sub prime/Foreclosure Crisis
• Sub prime loans
• Need for increased market share
• Reverse redlining
• Rebates
• Wall Street (unregulated)
• Securitization
• Globalization

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SOLUTIONS

• Goal
• Increased flow of money
• Availability of credit
• Expanding Financial Opportunity to Communities of
  Color
• Consumer protections
• Consumer/Investor confidence
• Deposits, mutual funds, foreclosures/property
  values, stock market, inflation (gas, food,
  commodities), unemployment, taxpayer liability

14
Solutions

• Dilemma - balance
• Check cashing
• Sub prime lending
• Responsible Financial Institutions
• Regulation/Legislation
• Broadway Federal Bank
• National Debate
• Bailout Banks and/or Bailout Homeowners

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SOLUTIONS

• California legislation
• Passed
• Clear understandable loan disclosures
• More and earlier default disclosures
• Renters given more time to find new home
• Vetoed
• Prohibited mortgage brokers from steering
  borrowers to expensive loans
• Limited prepayment penalties on sub prime loans
• Prevented brokers from making false and deceptive
  statements