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NCB OFFERS PROFITABLE MODEL FOR 'BOOTSTRAP BANKING' IN UNDERSERVED COMMUNITIES

 /ADVANCE/ WASHINGTON, Feb. 3 /PRNewswire/ -- Community development banking can help reverse the cycle of disinvestment in distressed communities but "no silver bullet will work to meet all credit needs or be feasible in every community," according to Margaret A. Cheap, corporate vice president of National Cooperative Bank and executive director of its affiliate, NCB Development Corporation.
 Testifying before the Subcommittee on Financial Institutions, Supervision, Regulation and Deposit Insurance of the House Banking Committee, Cheap stressed that expertise, flexibility, and patience in defining success are crucial to the creation of self-sustaining community development banks.
 "A development banker offers more than capital," she said, emphasizing the specialized knowledge by sector, industry and service that community lenders must acquire both to meet customer needs and to rate and underwrite risk appropriately. In development banking, making mistakes may be the only way to learn, she added. "If you don't have a heart, you shouldn't be in development financing. If you let your heart rule your mind, you won't be in it for long."
 Cheap also cautioned that national policy should not force development banks to be "lenders of last resort" to high risk borrowers. "Development banks must have the flexibility to balance their portfolio credit risk and to generate significant interest and fee income from growing enterprises," she said. She also said that other combinations of public and private investment may be required in communities with overwhelming credit gaps.
 The goal of sustained economic development is a long term proposition and community development banking is not a "quick fix," Cheap said. However, she concluded that the growth of community development banks is an important way of "bringing jobs, economic development and some hope back to many urban and rural centers in dire need."
 NCB Development Corporation promotes ownership opportunities nationwide by providing seed, equity and debt capital to cooperatively structured development organizations or their subsidiaries. It also offers expertise on cooperative enterprise and structure.
 NCB Development Corporation has extended more than $58 million in a full spectrum of development loans, with an average transaction size of $200,000. In its last fiscal year, it made disbursements of loans and business planning advances in the amount of $14.5 million to 80 customers. Over the past 12 years, NCB and NCB Development Corporation have financed over 20,000 affordable housing units. Thirty-five percent of NCB's portfolio and 50 percent of Development Corporation transactions benefit low- to moderate-income persons.
 Cheap cited the following examples of projects financed by NCB and NCB Development Corporation:
 -- In the South Bronx, helping 100 paraprofessional home health care workers join together to market their services and create a career path through salary and benefits. The cooperative's worker- owners are almost entirely females, Afro-American and Hispanic.
 -- In South Central Los Angeles, financing the building acquisition for a community health care center that serves both the uninsured and the under-insured.
 -- In Middlesboro, Ky., helping to prevent a plant shutdown of the Cumberland Gap Company, saving 175 jobs. Employees purchased a majority of the company through a recapitalization loan.
 -0- 2/3/93/1000
 /CONTACT: Jane DeMarines, 202-336-7651, or Louise Grant, 202-336-7652, both for National Cooperative Bank/


CO: National Cooperative Bank; NCB Development Corporation ST: District of Columbia IN: FIN SU:

TW -- DC035 -- 2114 02/02/93 17:48 EST
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Publication:PR Newswire
Date:Feb 2, 1993
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