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ANNUAL REPORT 2011MONTANA CDC

2 CONTENTS

The Montana CDC’s mission is to provide business financing that can transform the lives

of individuals and strengthen community prosperity.

5 STINGER WELDING

7 BITTERROOT GYMNASTICS

9 ROCKFORD COFFEE

11 PLAIN FEATHER CONSTRUCTION

12 PERFORMANCE OvERvIEW

18 MONTANA CDC TEAM & INvESTORS

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Friends of Montana CDC,

Throughout these pages you will read about a few of the people who are building and growing great businesses in Montana. One by one, these businesses form the building blocks of community, creating a state that is as economically vibrant as it is beautiful.

Each of the Montanans in these pages has two things in common: they had the dream and drive to build a strong business, and they lacked access to the money and business assistance necessary to make it happen. We had the great fortune of working with these entrepreneurs and helping them realize their dreams.

We exist to provide business financing that transforms the lives of individuals and strengthens community prosperity, but our passion is working with people to help them reach their business goals. When I visit our clients scattered throughout Montana, I see our comments, feedback, and capital incorporated into their businesses. And I am grateful for those businesses and what they add to our communities. Our clients inspire us to work harder and introduce new programs that allow us to serve even more Montanans. This year we introduced three new guaranteed lending programs that are all focused on getting entrepre-neurs and business owners the financing they need—even when they don’t have strong personal guarantees or enough collateral. Through these new programs, we are able to help more people than ever before.

In 2011, we grew our revolving loan fund and grant offerings so that we could help more businesses grow and create new jobs. We did this by expanding our staff and geographic reach. This helped us forge new partnerships and help businesses in the most rural areas of our state. The work we did in 2011 made Montana a better place to live, work, and raise a family.

In 2012, we will continue to push further and harder every day. We are working to introduce another slate of new products developed specifically for those Montanans who reached out to us in prior years, but for whom we did not have the needed resources. We will continue to expand our reach throughout Montana to ensure that everyone has access to capital and consulting to make their business successful. And we will continue to grow our current products and services.

Our success this year was built on a collective desire to get things done, to make a measurable impact, and to do it at the highest level of professionalism. The ultimate measure of our success can be seen through the people you will meet in this report and through the hundreds more who weave the fabric of Montana’s economy.

Thank you for your continued support.

Dave Glaser, President

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The town of Libby, Montana needed new jobs. The town had a long industrial history as a center for logging and mining—two industries that all but disappeared from its economic landscape in the last two decades, leaving twenty percent of Libby’s 3,000 residents unemployed.

To compound Libby’s problems, the mining legacy also led to Libby being desig-nated as one of the country’s largest superfund sites and an environmental health hazard. Hundreds of community members have lost their lives to asbestos-related diseases from the aftermath of vermiculite mining and many more still struggle with health-related issues. Never was a community so in need of good news.

That’s what Libby got when major bridge manufacturer Stinger Welding came to town scouting for a location to build a second facility. Stinger didn’t see hardship, but

instead potential in a large, skilled, and unemployed workforce. Carl Douglas, the company’s owner, worked with state and local entities to put a financing package together to help build a new bridge manufacturing plant in Libby, but recession- related lending constraints threatened to derail the efforts. That’s when Montana CDC came to the table with New Markets Tax Credit financing to help fill the gap.

Today the 100,000+ square-foot facility is building the steel infrastructure for bridge projects throughout the Northwest. Stinger has hired over 100 workers and is well on its way to becoming the largest employer in Libby. Flathead Valley Community College has added welding classes at its Kalispell and Libby locations to meet Stinger’s workforce requirements. The people of Libby are going back to work. And that’s the best news of all.

Stinger Welding

Montana CDC Vice President Heidi DeArment was at the table when Senator Max Baucus introduced Montana CDC to Goldman Sachs at his summit in Butte. DeArment, who was one of the first people to recognize the impact that New Markets Tax Credits would have on Montana communities, jumped at the chance to convince the Urban Investment Group at Goldman Sachs that the people of Montana were a great investment. Using Montana CDC’s 2010 award of $56 million in tax credits, DeArment helped to broker a

partnership between Montana CDC, Goldman Sachs, Kootenai River Development Center, the Department of Commerce, and Stinger Welding that financed the completion of Stinger’s facility and brought a new investor into Montana. DeArment has successfully helped Montana CDC utilize the New Markets program to fund crucial projects around the state, and she continues to find ways to facilitate the flow of capital to businesses in need.

2,628 POPULATION OF LIBBY 19,500 POPULATION OF LINCOLN COUNTY 34 PERMANENT FULL-TIME JOBS RETAINED116 JOBS CREATED

APPROXIMATELY 60% OF CURRENT EMPLOYEES ARE LOW-INCOME 19% HIGHER WAGES THAN THE MEDIAN HOURLY RATE FOR REGION

LIBBY, MT

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Dedication. Persistence. Teamwork. David Stark teaches these qualities every day at Bitterroot Gymnastics. He bought the business in 2004 after years of learning the ropes—first as a student and then as an employee. By the time he became the owner, he knew just how to realize the gym’s potential. By applying his strong teaching principles and a well-thought-out business strategy, he was quickly able to reduce costs, improve service, and grow the gym into a successful enterprise. In fact, he grew the business so well that he was soon in need of a much larger and more costly space.

But Bitterroot Gymnastics couldn’t find the money to make the jump to the larger facility. Solid profits, great income potential, and a steady customer base weren’t enough to overcome the lack of strong collateral and guarantees needed to qualify for traditional financing. Still, David kept knocking on doors.

His timing was excellent. Montana CDC had just introduced a new lending product in Montana: the Community Advantage program from the US Small Business

Administration, which allows strong businesses and entrepreneurs who show the potential for success to borrow money with little or no collateral.

With Montana CDC’s first loan through the Community Advantage guarantee program, David was able to lease an industrial warehouse in Missoula and trans-form it into a thriving business that provides children and families throughout our community with a safe space to learn and practice. In addition, the larger space allowed David to open a movement-based preschool, expanding the options for education in Missoula.

Coupled with David’s hard work, Montana CDC’s ability to partner with government agencies to bring strong lending programs to Montana has more than proved the importance of David’s motto: Dedication. Persistence. Teamwork.

Bitterroot Gymnastics

A year before coming to Montana CDC, David had pursued multiple financing options but had been turned down because there was just not enough collateral to secure the loan. Sarah Fitzgerald, Montana CDC’s Director of Lending, had championed bringing the SBA Community Advantage Program to Montana CDC after having to turn down loans for strong businesses that lacked collateral. The SBA Community Advantage Program provides a guarantee

from the federal government that acts as collateral for strong business owners. When David met with Sarah, she knew that it was time to test the new program. Bitterroot Gymnastics was the first business in the region to receive financing through Community Advantage and has paved the way for many other businesses to use the program at Montana CDC.

7 YEARS OF OWNERSHIP109,000 POPULATION OF MISSOULA COUNTY 5,000 SQ FT EXPANSION OF FACILITY

4 JOBS CREATED

30 YEARS AS A GYMNAST

30 YEARS THE BUSINESS HAS BEEN IN MISSOULA 550 AvERAGE NUMBER OF CHILDREN SERvED AT THE FACILITY

MISSOULA, MT

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Ryan and Kristin Wilson opened a small coffee shop in Bozeman in December of 2004 and did all the right things. They started small and grew their business in ways that made sense. The popular shop on Main Street now enjoys success as a coffee roaster, coffee wholesaler, retail coffee bar, and bakery.

Ryan and Kristin also became very active in their community. They love Bozeman and Bozeman loves their business. So when a prime spot opened up in the heart of the downtown area, they knew they’d found a perfect opportunity to expand while also contributing to the vitality of their hometown.

The space was perfect, but it needed some tenant improvements and the Wilsons needed a small loan to make it happen. Under a tight deadline to commit and sign

the lease, Ryan reached out to find finance options and business resources to help Rockford make the expansion. After a bank turndown and a referral from the Bozeman Downtown Partnership, he came to Montana CDC for assistance.

Montana CDC’s consultants and lenders got Ryan an SBA microloan in less than a week and helped him open his second location. Like hundreds of other businesses across Montana, Rockford Coffee fell just outside of bankability and found help at Montana CDC. Rockford Coffee has now been successfully serving downtown Bozeman since 2011.

Rockford Coffee

As one of Montana CDC’s Loan Officers, Ryan Hansen makes sure clients like the Wilsons get help that’s tailored to their needs. Ryan works with businesses across Montana to turn dreams into reality.

For Rockford, that meant opening their downtown store on time and on target to be a big success.

37,280 POPULATION OF BOZEMAN

8 YEARS IN BUSINESS 1 OF 326 ENTREPRENEURS COUNSELED BY MONTANA CDC’S SMALL BUSINESS DEvELOPMENT CENTER

1 OF 14 MICROLOANS FROM MONTANA CDC #1 RATED COFFEE SHOP IN BOZEMAN6 JOBS CREATED

BOZEMAN, MT

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Wylon and Beth Plain Feather and Walter and Sheri Duffield took a courageous leap in 2009. In the middle of a recession, they opened Plain Feather Construction (PFC), a construction and excavation business in Billings, Montana. To launch their business, the partners leveraged their talent, experience, and excellent tribal connections with a state certification as a Disadvantaged Business Enterprise, which is available to minority and disabled business owners.

The business moved along steadily until the spring of 2011, when massive flooding left much of the town of Crow Agency underwater, and PFC was called upon to repair the damage. This launched PFC’s growth and continued contracts with Crow Agency, but it also increased PFC’s heavy equipment needs. At first, rental equipment filled this need, but as demand and rental costs continued to grow, the company needed to purchase their own equipment.

As a relatively new business with few assets or collateral, PFC was not eligible for a bank or equipment loan, so they turned to the Native American Develop-ment Corporation (NADC) in Billings, a community development lender that specializes in lending to Native American-owned businesses. Montana CDC and NADC have a strong partnership, so when NADC was not able to provide all of the financing that Plain Feather needed, they turned to Montana CDC for a part-nership loan. Looking at the borrowers’ industry experience and good contracts with Crow Agency, NADC and Montana CDC were able to provide a partnership loan that allowed PFC to purchase the much-needed equipment and acquire a healthy line of credit to ensure that the business will have the means to stay agile in the face of future opportunities.

Plain Feather Construction

Kaia Peterson, Risk Manager at Montana CDC, has helped Montana CDC expand the products and services available to Native borrowers and businesses located on Montana’s reservations. In the case of PFC, her dedication to building a strong partnership with the Native American Development Corporation created a partnership

product that would have otherwise been unavailable to Native American borrowers. Her work enabled the Plain Feathers and Duffields to grow their business while also helping to rebuild critical infrastructure on the Crow Reservation.

12,865 POPULATION OF BIG HORN COUNTY

604% SALES INCREASE IN 2011 $850,000 DOLLARS LENT TO NATIvE-OWNED BUSINESSES IN 2011

1 OF 34 LOANS TO WOMEN BUSINESS OWNERS3 JOBS CREATED

BILLINGS, MT

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Performance Overview

NUMBER OF BUSINESSES FINANCED NUMBER OF LOANS TO RURAL BUSINESSES*

‘07 ‘08 ‘09 ‘10 ‘11

1620

29

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TOTALING OvER

650 JOBS CREATED OR RETAINED

TO

104 BUSINESSES…

AT THE END OF 2011,OUR LOAN PORTFOLIO INCLUDED

$9,983,300…

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15‘07

‘08 22

‘09 26

‘10 23

‘11

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FY 2011 At a Glance

INTO DISTRESSEDCOMMUNITIES USING NEW MARKETS

TAX CREDITS

$24.5M

CLIENTS COUNSELED**

322

JOBS CREATED/RETAINED

34 LOANS TOWOMEN-OWNED BUSINESSES

CONSTRUCTED OR REHABILITATED

135,000 sq f t

18FUNDED

BUSINESSSTART-UPS

IN LOANS TO MONTANA

BUSINESSES

$5.2 MILLION

1,366

LEvERAGED $5

IN OTHER DEBT

OR EQUITY

WITH EvERY

MTCDCDOLLAR

MONTANA

NEW SOURCESOF CAPITAL BROUGHT TO7

THAT CREATED & RETAINED

341 JOBS

FUNDED

44BUSINESSES

*A business may have multiple loans with Montana CDC ** Includes Procurement Technical Assistance Center (PTAC) clients

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LOAN IMPACTS ‘07 ‘08 ‘09 ‘10 ‘11

Number of loans 16 27 32 33 64

Number of businesses financed 15 22 26 23 44

New business starts n/a n/a 9 10 18

Total dollars lent $1,591,531 $2,913,366 $2,944,529 $3,461,762 $5,235,483

Number of loans to low-income people 7 13 8 12 32

Number of loans to low-income places 8 12 17 16 21

Number of loans to women business owners 11 13 24 16 34

Number of loans to rural businesses 10 16 20 29 43

Number of loans to minorities 1 1 0 4 14

Number of Native-owned businesses served 1 0 0 1 5

Total amount leveraged from other financing/equity $9,279,950 $10,906,843 $30,424,600 $23,300,945 $24,799,430

Jobs created 27.5 82 78 55.5 211

Jobs retained 101 39.5 138.5 39 130

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MONTANA CDC’S LOAN PORTFOLIO REPRESENTS BORROWERS FROM LIBBY TO GLENDIvE

Lending All Across Montana

DRIvING FROM LIBBY TO BROADUS IS SIMILAR TO DRIvING FROM CHICAGO TO WASHINGTON, DC

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NEW MARKETS TAX CREDIT IMPACTS ‘09 ‘10 ‘11

NMTC project $ into highly distressed MT communities $22.3 million $17.7 million $24.5 million

Permanent jobs created or retained 285 98 234

Square footage constructed or rehabilitated 92,267 sq ft 139,159 sq ft 135,000 sq ft

Total wages (10 yr) – construction and operations $15,978,572 $6,080,104 $11,445,399

Total economic impact direct /indirect (10 yr) $48,821,839 $22,988,359 $42,982,391

CONSULTING IMPACTS ‘07 ‘08 ‘09 ‘10 ‘11

New business starts 7 19 27 29 27

Jobs created or retained 140 391 431 381 322

Total capital infusion to businesses receiving consulting services

$11,653,881 $17,358,673 $20,369,261 $34,651,070 $20,170,073

Clients counseled 119 171 275 252 326

Attendees at business trainings 429 598 677 551 528

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ASSETS FY11

CURRENT ASSETS

Cash and cash equivalents $ 9,254,179 Receivables from federal programs 339,597 Loans receivable – current portion 844,821 Prepaid expenses 20,985 Total current assets $ 10,459,582 INvESTMENT IN lIMITEd lIAbIlITY CoMPANIES 6,425loANS RECEIvAblE, NoNCURRENT PoRTIoN 9,231,854 AllowANCE FoR loAN loSSES (998,279)EqUIPMENT (net of accumulated depreciation of $75,092) 90,490 PRoPERTY ACqUIREd ThRoUgh FoRECloSURE 365,244 Total assets $ 19,155,316

lIAbIlITIES ANd NET ASSETS

CURRENT lIAbIlITIES

Accounts payable $ 56,414 Accrued liabilities 71,249 Due to other agencies 250,544 Current portion of long-term debt 2,144,185 Total current liabilities 2,522,392 loNg-TERM lIAbIlITIES

Advance 26,218 Long-term debt, net of current portion 5,934,581 Total liabilities $ 8,483,191 NET ASSETS

Unrestricted Designated for lending 7,121,611 Noncontrolling interests in TMF 70,457 Undesignated 2,461,768 Total unrestricted net assets 9,653,836 Temporarily restricted funds 761,374 Permanently restricted for lending 256,915 Total net assets 10,672,125 Total liabilities and net assets $ 19,155,316

SUPPoRT ANd REvENUES FY11

Grants and contracts Federal $ 3,381,481 Private 366,996 Total Grants 3,748,477 Interest earnings 729,330 Revenue participation 253 Contributions 19,500 Loan fees 81,303 NMTC fees 894,841 Special projects and contracts 65,775 Other 52,945 Total support and revenues $ 5,592,424

EXPENSES Program services Business loans 1,728,229 Business consulting 478,430 Administration 707,945 Total expenses 2,914,604 Change in net assets before capital activity $ 2,677,820

CONSOLIDATED STATEMENT OF FINANCIAL POSITION* STATEMENT OF ACTIvITIES*

*The Statement of Activities and Consolidated Financial Position presented as of June 30, 2012 were audited by Anderson Zurmuehlen & Co, P.C. These have been derived from the complete financial statements. Available upon request to: Steve Klimkie-wicz, CFO, Montana CDC, 229 E. Main St. Missoula, MT 59802.

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loan Fund Contributors And Investors

AnonymousBig Foot and Baldy Living TrustCalvert Social Investment FoundationClients of Trillium Asset Management Corporation (2) Clients of Sustainability Group (2) David and Sandra Burner Charitable TrustFirst Interstate BankFirst Nation Oweesta CorporationFirst Security BankHigh Stakes FoundationMarian CoulterMontana Board of InvestmentsMontana Childcare Resource and Referral NetworkMontana Department of Commerce / Community Development Block Grant ProgramMontana Department of Commerce/Microfinance ProgramOpportunity Finance NetworkSandra and John RoeSisters of St. BenedictSister of St. DominicSuzanna J. McDougal Revocable Living TrustSuzanne LaFetra Trust The Dennis and Phyllis Washington FoundationUS Bancorp CDCUS Administration for Children and Families – Community Economic Development Program

US Small Business Administration Microloan FundUS Treasury CDFI FundUS Treasury Small Business Lending FundUSDA Rural Development Intermediary Relending ProgramWayne Chamberlain

Montana CdC External loan Committee

Kevin Arnot, Flanagan MotorsTim Christensen, Vann’s Inc.Bradley Colberg, First Interstate BankJason Erickson, Treasure State BankPri Fernando, US BankKori Johnson, First Security Bank of MissoulaChristine Littig, Bernice’s BakeryDawn McGee, Good Works Ventures, LLCSpider McKnight, Six Pony HitchTod Petersen, Wells Fargo BankHale Williams, Retired BusinesspersonTravis Wright, Stockman Bank

operating Funders

Ford FoundationGoldman Sachs Urban Investment GroupMissoula CountyMontana Department of Labor Incumbent Worker TrainingMontana Department of Commerce SBDC Program – Small Business Administration

Montana Procurement Technical Assistance Center (PTAC) – US Department of DefenseMJ Murdock Charitable TrustNick Babson, NCB Ventures, LLCNorthwest Area FoundationStarbucks/OFN Create Jobs for USAStranahan FoundationThe Dennis and Phyllis Washington FoundationTitcomb FoundationUS Administration for Children and Families – Community Economic Development Program US Small Business AdministrationUS Treasury CDFI FundUSDA RMAP Program

New Markets Tax Credit Advisory board

Mary Caferro, Montana Senate, Helena, MT

Janice Copeland, Headwaters Resource Conservation and Development Area, Butte, MTCarolyn Keller, Montana Business Assistance Connection, Helena, MTMary Stranahan, High Stakes Foundation, Arlee, MT Lillian Sunwall, Great Falls Development Authority, Great Falls, MTMartin DeWitt, Great Northern Development Corporation, Wolf Point, MTLorene Hintz, Great Northern Development Corporation, Wolf Point, MT

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Jim Atchinson, Southeastern Montana Development Corporation, Colstrip, MTRebecca Helvik, Big Sky Economic Development Authority, Billings, MTPaul Tuss, Bearpaw Development Corporation, Havre, MT

Montana CdC board of directors

Nick Babson, Chair. NCB Ventures, LLCNicole Hagerman Miller, Vice Chair. Project Manager, Montana World Trade Center; Co-Owner, House Design StudioColleen Rudio, Secretary. Rudio Performance Management GroupCraig Birgenheier, Treasurer. CFO, Big Sky BreweryKevin Arnot, Director. Co-Owner, Flanagan MotorsBruce Bugbee, Director. Founder and President, American Public Land Exchange Co.Tim Christensen, Director. Media and Technology, Vann’s Inc.Dave Glaser, Director. President, Montana CDCJennifer Knoetgen, Director. Partner, Boyle, Deveny and MeyerHarry Poett III, Director. Retired CEO, Wilsey Bennett Co. Mary Stranahan, Director. Founder, High Stakes Foundation and Montana Good Works FoundationGermaine White, Director. Information and Educational Specialist, Confederated Salish and Kootenai Tribes

Montana CdC Staff

Sean Becker, SBDC Business Advisor (Bozeman)Denis Blackstun, Accounting AdvisorDoug Bolender, PTAC Subcenter Manager (Kalispell)Patty Cox, Business Services AdvisorLynn Dankowski, Communications AdvisorHeidi DeArment, Vice PresidentPaulette Drozda, PTAC Subcenter Manager, MissoulaJulie Ehlers, Marketing ManagerSarah Fitzgerald, Director of Lending (Bozeman)Dave Glaser, PresidentRachel Golden, Loan Officer Amita Patel Greer, SBDC DirectorRyan Hansen, Loan OfficerMichael Hermsmeyer, Lending AnalystCarey James, Lending AssistantShawna Kleven, AccountantSteve Klimkiewicz, Chief Financial OfficerMica Lindsey, Compliance OfficerKaia Peterson, Risk ManagerJessica Zieg, Executive Assistant

PhotographyTom Robertson Photography (www.tomrobertsonphoto.com)

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229 E. Main St. | Missoula, MT 59802

222 E. Main St. Suite 202 | Bozeman, MT 59715

15 Depot Park | Kalispell, MT 59901

T 406.728.9234 F 406.542.6671 mtcdc.org

Montana CDC is an equal opportunity provider and employer.

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