ShoreBank's shareholders and employees believe that a banking corporation can earn competitive profits by helping its customers build their own wealth and invest in their communities, and by working to create a healthier environment. Therefore, we measure our success against three bottom lines of profitability, community development and conservation.

Profitability

In 2003, ShoreBank had its most profitable year yet, in large part because of its increased community development and conservation activities. Our strong financial performance allows us to create more services that meet our three bottom lines.

A deep understanding of local markets is critical to our ability to innovate successfully. Our programs are tailored to the needs of the regions and communities we serve. Some examples include:

• In Chicago, Detroit and Cleveland, we are partnering with faith-based organizations to provide financial education and employment services to their members.
• In the Pacific Northwest, ShoreBank works closely with locally owned businesses, many of which rely on the region's natural resources, to help them grow their businesses without depleting those resources.
• In Michigan's Upper Peninsula, we successfully fund start-up businesses that contribute to the region's economy.
• ShoreBank Advisory Services (SAS) researches and develops new ways to provide financial services to people and businesses around the world that are not served by mainstream financial institutions. For example, in partnership with the Ford Foundation, it recently created the Center for Financial Services Innovations to help financial service providers create more products that benefit lower income households.
• MetroEdge, an SAS business, uses unique market intelligence to support major retailers and financial services institutions that want to expand in urban communities.

Innovative business practices like these help ShoreBank accomplish its community development and conservation goals, and generate profits so it can create more programs and services to help its customers succeed.

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Community Development

ShoreBank builds strong, thriving communities by providing loans and advisory services to individuals, businesses, faith-based and nonprofit organizations in neighborhoods where the median income and housing values are lower than the regional median. More than 70 percent of all loans made by ShoreBank companies in 2003 were made in communities that meet this description. These loans totaled $279 million, 20 percent more than in any previous year. New community development lending in 2003 was 3.14 times ShoreBank's total capital.

In its urban markets, ShoreBank focuses on lending for real estate renovation because it makes communities more attractive; creates quality, affordable housing; and helps individuals build their assets through home ownership. In 2003, more than 60 percent of ShoreBank's development lending was for real estate projects, which included financing for more than 4,300 homes and apartments. Throughout its history, ShoreBank has financed the purchase and renovation of more than 42,000 apartments.

Business lending is another important part of our community development strategy. Businesses generate jobs, increase tax revenues, provide more options for residents, build the owner's wealth, add community stakeholders and change the physical appearance of communities. In 2003, ShoreBank made $51 million in loans to businesses in priority communities or to minority-owned businesses, the highest in our history.

For example, ShoreBank helped finance the construction of a Save-A-Lot grocery store that will contribute to revitalizing a Detroit community.

Faith-based institutions also help anchor urban neighborhoods by redeveloping property, creating community centers, and providing advocacy and social services. ShoreBank is one of the first financial institutions to establish faith-based banking services; it also provides financing to other nonprofit organizations.

Lending alone is not enough to change communities. Therefore, ShoreBank provides complementary services in all of its locations to meet other needs. A few examples include:

• In Chicago, ShoreBank's Individual Development Account (IDA) matched savings program is one of the strongest IDA programs in the country. Since it began in 1998, it has helped customers make a total of more than $2.4 million in direct purchases of assets such as office equipment, cars, homes and college education.
• In the Pacific Northwest, we help local businesses increase their access to markets, and provide technical advice to customers on ways to reduce waste, improve energy use and limit the use of toxic materials.
• ShoreBank Enterprise in Cleveland offers business training and networking for small contractors to help them expand their companies and create jobs for local residents. This program also provides direct workforce development and financing to help contractors' businesses grow.

Conservation

In 2000, ShoreBank expanded its focus to include conservation services in all of its markets because we believe long-term community prosperity is linked to environmental well-being. We have made rapid progress in a short time; $71 million in conservation loans were made in 2003, which is five times the amount of conservation loans made in 2000.

Conservation loans help customers make energy efficient choices, produce green or organic products, incorporate green elements into buildings or production processes, and restore vacant or underused properties to extend their useful life. As with other aspects of our mission, we use our understanding of local markets to tailor our approach to conservation to specific regional concerns.

In urban areas such as Chicago, Cleveland and Detroit, conservation activities are oriented around real estate. We encourage potential customers to bring neglected buildings back into productive use, remove toxins from buildings and vacant land, adopt "green" building techniques, and make rehab decisions that have long-term environmental and economic benefits.

For example, installing energy-conserving features into buildings saves money for property owners by reducing the amount spent on wasted resources. Over the years, it also improves air quality and reduces pollution and pollution-related diseases such as asthma, which are prevalent in large cities.

ShoreBank's nonprofit affiliate in the Pacific Northwest, ShoreBank Enterprise Pacific, primarily serves rural communities where the economies are tied to natural resources. For example, a new initiative provides low-cost loans and technical assistance to property owners to replace or repair failing septic systems that impact water quality in the area around Willapa Bay in southwest Washington. A significant portion of the local economy depends on oyster production, and oysters need clean water. This loan program helps Enterprise Pacific address both economic and environmental issues.

ShoreBank provides information services to complement its conservation lending, such as seminars and workshops for individuals, real estate investors and business owners on ways to increase the energy efficiency of their buildings. We also offer individual services: ShoreBank Pacific's staff scientist connects customers to experts who can guide them in making environmentally friendly choices in their business practices.

In Michigan's Upper Peninsula, ShoreBank's nonprofit affiliate, Northern Initiatives (NI), helps manufacturers streamline their processes and reduce waste. NI is also developing profitable ways to reuse the plentiful wood and fish waste as a soil additive for landscapers and greenhouses.

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Triple bottom line

ShoreBank strives to simultaneously build the assets of its customers and their communities, promote environmental health and achieve a competitive financial return. Communities cannot achieve economic prosperity if they have a disproportionate amount of contaminated land and pollution, or if their residents and businesses consume natural resources faster than they can be replaced.

In 2003, 18 percent of our community development loans also had conservation benefits. Our goal is to further increase this percentage as we encourage more of our customers to adopt environmentally friendly practices. Following are just a few examples of how ShoreBank meets all three bottom lines in specific projects:

• In Chicago, the bank is financing the construction of a 40,000-square-foot facility for Little Black Pearl, a nonprofit organization that teaches art and business to at-risk youth. The new building not only is revitalizing the commercial street on which it is located, but it also incorporates energy efficient features, such as maximizing natural light. In time, these features will allow Little Black Pearl to allocate more of its income to programs rather than operating expenses.
• In Cleveland, ShoreBank was the first lender to publicly commit to financing a project that converted a historic, abandoned bank building into a vibrant center for environmental nonprofits and businesses, fueling growth among local businesses. The renovations incorporated many "green" building technologies, such as a solar paneled roof.
• In the Pacific Northwest, loans from both the bank and nonprofit helped Holmgren Dairy, an organic dairy farm in Oregon's Coquille Valley, expand its production to meet a growing demand for organic milk and help revitalize the local dairy industry.

ShoreBank measures its success by how well it meets the triple bottom line goals of profitability, community development and conservation. As ShoreBank commemorates its first 30 years, it plans for a future of growth in which all three areas of its mission can increasingly work hand in hand.

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