Showing posts with label black banks. Show all posts
Showing posts with label black banks. Show all posts

Thursday, February 25, 2021

Banks Redouble Efforts to Aid Black-owned Businesses. By John Reosti, The American Banker Newspaper. February 24, 2021.

Banks of all sizes are continuing to direct funds to minority-owned businesses months after the social unrest that followed last year’s death of George Floyd.

JPMorgan Chase just announced plans to invest $40 million in four Black-run banks. Ally Financial, Banner, Citigroup, Texas Capital Bancshares and First Republic Bank joined JPMorgan in providing capital to help fund Broadway Financial’s pending acquisition of the $435.4 million-asset CFBanc in Washington.

Four community banks — First National in Strasburg, Va.; Fauquier Bancorp in Warrenton, Va.; Eagle Financial Services in Berryville, Va.; and Potomac Bancshares in Charles Town, W.Va. — recently created a $1 million fund to provide loans to Black-owned businesses and farms in their markets.

The latest efforts show that the banking industry is still evaluating ways to help underserved markets.

“There’s no doubt we needed to do an assessment on what more we could do as a firm,” said Brian Lamb, global head of diversity and inclusion at the $3.4 trillion-asset JPMorgan. “I think we took the opportunity in the summer of 2020 to really do that assessment internally.”

Though JPMorgan declined to disclose how much it invested in the Black-run banks, the $686 million-asset Carver Bancorp in New York said it received $6 million and the $765 million-asset Liberty Financial in New Orleans brough in $10 million.

The $481.6 million-asset Broadway in Los Angeles disclosed that it will receive $20.2 million from a group of investors that includes six banks after completing its purchase of CFBanc in Washington. The Los Angeles company raised $12.7 million in November after Bank of America, Wells Fargo and Cedars-Sinai Medical Center made an investment.

The $309 million-asset M&F Bancorp in Durham, N.C., did not disclose the size of the investment made by JPMorgan Chase.

Bank of America invested $950,000 in Carver in October.

The equity injections may signal an “inflection point” for underserved markets, Carver CEO Michael Pugh said in a Tuesday press release. “Public and private firms are recognizing the importance of investing in communities of color and institutions that support economic empowerment.”

Smaller banks are finding their own ways to support minority communities.

Discussions among the Virginia and West Virginia banks that led to the creation of the Banking on Diversity Minority Business Fund began about two years ago, spurred by a task force the Virginia Bankers Association created to focus on financial inclusion and diversity, said Scott Harvard, CEO of the $951 million-asset First National.

“We were missing out on a really broad, diverse population, so we started talking about what we could do to bridge that gap,” Harvard said. “The events this summer clearly put a spotlight on things. It got everyone’s attention.”

First National, the $867 million-asset Fauquier, the $1.1 billion-asset Eagle and the $621 million-asset Potomac will use the fund to make interest-free loans to minority-owned enterprises.

“Initially, we talked about a grant program, but we figured we could leverage more money with a loan fund,” Harvard said. Loans also provide a surer foundation for building long-term relationship with minority businesses, he added.

The fund “stands out,” said William Michael Cunningham, the CEO of Creative Investment Research in Washington and an economist who has studied Black-owned banks for three decades. “I think it’s exactly the type of thing we need to see.”

The big banks that have invested in the Black banking sector might have produced more far-reaching results if they had acted in concert, though "it’s hard to question their intentions,” Cunningham said.

JPMorgan, for its part, plans to be a passive investor in the Black-run banks whose shares it has purchased.

“In terms of governance, our intent is much more about capacity building and end-to-end solutions for minority depository institutions,” Lamb said. “It’s a lot less focused on governance.”

The goal ultimately is to give Black-run banks enough tools to serve as long-term, durable financial partners in minority neighborhoods.

“We know there’s been a contraction in this space for the past two decades,” Lamb said. “When these institutions are active in their local communities, those communities have a better chance of growing and thriving.”

Tuesday, July 7, 2020

Black communities need more help from the Federal Reserve Board

An estimated $7 billion in corporate pledges have been made to facilitate efforts that support racial justice, and help activities that seek immediate solutions to the crisis affecting Black people.
We are very familiar with these types of promises, having launched the first website focusing on financial support for minority communities in 1995 and a new website to monitor such corporate pledges.
Yet it appears that only $188 million of that $7 billion is money someone can reasonably expect to get their hands on. Further, in certain sections of the Black community, there is concern about the effectiveness of the traditional organizations identified as recipients of the pledges. And there appears to be less concern with newer, trending organizations.
Our recent survey of customers banking at black-owned banks suggests most consumers who do not use Black banks are concerned about their financial stability, and have not been able to leverage financial resources from these institutions.
Programs that rely on secondary institutions to provide capital to already underutilized Black-owned banks add another stumbling block to the effort to get capital where it is needed.
Certainly, more money will help. But there may be more effective methods such as creating a digital wallet and currency to get money directly to affected communities without the need for money-sapping intermediaries; or creating a large credit program at the Federal Reserve. The latter approach holds the most promise.
Recall that the Federal Reserve Board created a secondary market corporate credit facility to purchase a more diversified portfolio of corporate bonds that include supporting large employers. Regrettably, very few Black-owned firms are eligible for this program, having been locked out of the corporate-debt market largely due to discrimination, both involuntary and self-imposed.
The Fed also created the Main Street Lending Program meant to encourage cash flows to small and midsize businesses by purchasing up to $600 billion in loans. But already, the number of black-owned small businesses plummeted by 41% between February and April when the coronavirus pandemic started in the U.S., according to a working paper published by the National Bureau of Economic Research.
The financial loss to the Black-owned businesses is estimated at $23 billion due to the pandemic. Therefore, the Fed should allocate $23 billion of the $600 billion in its Main Street program to Black-owned firms, using a wide array of financial instruments and techniques.
Lastly, Black people need a truly collaborative and cooperative effort — in and by the Black community — a community often trained to be petty and cutthroat to each other given the paucity of resources at its disposal. After Creative Investment Research, in the public spirit, disseminated an estimate of corporate pledges to the Black Lives Matter cause (at $1.6 billion), several foundations made donations totaling $1.7 billion.
Now is the time to let go of bad habits for the survival of the Black community. In so doing, we can also show the world the way out of the crisis.
First published at: The American Banker Newspaper: Black communities need more help from Fed https://www.americanbanker.com/opinion/black-communities-need-more-help-from-fed 

Friday, June 26, 2020

Black Bank Survey

We are conducting a customer satisfaction survey on Black Banks

To participate, see: https://www.surveymonkey.com/r/YQZXZY7

Questions include:

1. How frequently do you utilize Black-owned Banks?
2. What is your overall satisfaction level when dealing with Black-owned banks? (5 starts - highest).
3. Have you had success in getting  loans, etc. from Black-owned Banks?
4. Are/were you worried about the financial stability of Black-owned banks?
5. Do you believe that Black-owned banks prioritize your needs?

For a list of Black banks, see: https://www.minoritybank.com/research/blackbanks.html

See: The country’s last black-owned banks are in a fight for their survival.
https://www.washingtonpost.com/news/wonk/wp/2015/02/13/the-countrys-last-black-owned-banks-are-in-a-fight-for-their-survival/

2011 - Crisis - The Current State of #BlackBanks  https://www.prlog.org/11541435-crisis-the-current-state-of-black-banking.html 

2016 - Creative Investment released an analysis of the Black banking sector, drawing on 30 years of research. Recent efforts to increase deposits in Black banks are admirable, but the number of Black banks has fallen from 55 in 1994 to 23 in 2016. - The State of #BlackBanks #BankBlack https://www.prlog.org/12579507-the-current-state-of-black-banking.html 

Thursday, June 25, 2020

Is capital haul too much of a good thing for Black-run banks? By John Reosti, American Banker Newspaper, June 24, 2020

An effort encouraging investors to buy stock in Black-run banks could create new challenges for
the leaders of those companies.


The Buying Black movement, which took root last week, led to sharp increases in the shares of
companies such as Broadway Financial in Los Angeles, Carver Bancorp in New York and M&F
Bancorp in Durham, N.C.

An influx of new investors could increase pressure to improve shareholder returns, while any
strategic effort designed to generate higher profits could also draw a backlash. At the same time,
markets are fickle — most shares in Black-run banks have fallen significantly in recent days as
some existing shareholders cashed out.

Indeed, Broadway's biggest investor — who had been pushing for the company's sale —
abruptly sold all of its stock after the value of its holdings soared.

Leaders of Black-run banks contend that what they need more than capital is more partnerships
with bigger banks to extend their reach to underserved customers.

Broadway has faced all of those challenges since Capital Corps bought a nearly 10% stake from
the Treasury Department in May 2019.

Capital Corps, a mortgage lender founded by former Banc of California CEO Steven Sugarman,
briefly mounted a proxy challenge after offering to buy Broadway. Sugarman claimed that the
$504 million-asset company had strayed from its mission of lending to minority communities.
After facing stiff resistance from Broadway’s management and board, Sugarman opted to sell
the shares. Capital Corps liquidated its stock at roughly $2.62 a share, or nearly double what it
paid the Treasury.

The saga at Broadway serves to illustrate why minority-run banks are often reluctant to court
new investors.

Black-run banks “like the status quo,” said William Michael Cunningham, CEO of Creative
Investment Research in Washington and a longtime proponent of Black-owned banks.
“They don’t necessarily want a lot of attention, and they’re super-conservative, in part because
they don’t have a sufficient asset base" to grow aggressively, Cunningham added. "They really
have to guard every penny.” (As the links below show, we forecast the decline in Black Banks.)


See: Crisis - The Current State of Black Banking. By: Creative Investment Research, Inc. June 14, 2011. 

The Current State of Black Banking. Aug. 12, 2016 

William Michael Cunningham announces support for USBC/Liberty Bank #BankBlack Credit Card. Jan. 23, 2017

See our Black Bank Survey. https://www.surveymonkey.com/r/YQZXZY7


 For a list of Black banks, see: https://www.minoritybank.com/research/blackbanks.html.

Instead, Black-run banks are eager to strike partnerships to access more customers, said Kenneth Kelly, CEO of First Independence Bank, a $265 million-asset Black-owned bank in Detroit. The bank's $102 million portfolio is split between commercial real estate and one- to four-family mortgages.

Establishing partnerships between African American banks and larger institutions has been a
priority for the Treasury Department. It established a mentor-protégé program that has helped
several Black-owned banks, including First Independence and the $108 million-asset Unity
National Bank in Houston, gain a share of fee income tied to processing financial transactions.
“We’re open to partnerships with larger banks that could allow us to deliver” more retail products,
Kelly said. “But that’s not where our business model is right now.”

Broadway, like First Independence, is limited by its lack of scale.

Balance sheet constraints, exacerbated by rising home prices around Los Angeles, have
influenced Broadway's business model. The company focuses more on lending to multifamily
developers than residential mortgages, said CEO Wayne-Kent Bradshaw.

More than three-fourths of Broadway’s $430 million loan portfolio was concentrated in
multifamily lending at March 31, according to the Federal Deposit Insurance Corp. Mortgages
made up less than 15% of total loans.

“Working poor people don’t have the opportunity to buy houses,” Bradshaw said in response to
Sugarman’s criticism.

Funding five- to 25-unit apartment buildings in minority communities “is damn near God’s work,”
Bradshaw added. “We’re very committed to the low- and middle-income community.”

Previous efforts designed to help Black-owned banks have delivered fleeting benefits.

The 2016 Black Money Matters movement, led by the rapper Michael Render, led to an initial
uptick in deposits. The lift was short-lived; deposits at Black-owned banks have fallen steadily in
recent years, according to FDIC data.

Total assets held by Black-owned banks have fallen by nearly 30% since peaking at $6.8 billion in
2008.

Capital Corps said in a letter included with Tuesday’s regulatory filing that it had offered to
provide Broadway with “at least $1 million in pro bono services and technical assistance” to help
the bank make more mortgage, consumer and small-business loans.

While he did not address Sugarman's offer, Bradshaw said he "was very glad" Capital Corps
cashed out. “They bought at a discount and sold for quite a premium.”

Shares of Black-owned banks are typically thinly traded and subject to wild fluctuations. While
they can shoot up quickly with an influx of investors, they can also plummet if shareholders like
Capital Corps decide to sell.

Carver’s stock, which rose sixfold last week to reach $12.20 a share on Friday, is down 28% this
week, ending Tuesday at $8.78 a share. While M&F’s shares increased by 57% last week, ending
Friday at $5.10, they closed at $3.50 on Tuesday.

Broadway’s stock got as high as $7.23 a share on Friday. It ended Tuesday at $2.56.
To be sure, some stocks have continued to rise, including IBW Financial, the parent of Industrial
Bank in Washington, which is up 9.3% this week after rising by 35% a week earlier. Shares of
Harbor Bankshares in Baltimore have quadrupled since June 12, closing at $2 a share on Tuesday.
Lenders need reliable long-term investment, said Kelly, who chairs the National Bankers
Association, the trade group representing African American banks.

“We really don’t need episodic support as much as we need systemic support,” Kelly said.
“I hope what we’re seeing in the high level of interest is something that is sustainable and is
systemic moving forward," he added. "We do serve a unique population, and it should be part of
the American Dream.”

John Reosti, Reporter, American Banker Newspaper.

Thursday, February 28, 2019

New Bill Could Help Black Banks Raise Capital, Cut Costs, and Attract Black Investors

Article by Jeff McKinney in Black Enterprise describes HR 41, "the Rescue Act for Black and Community Banks. The bill–initiated in January 2019–aims to, along with other measures, bring regulatory relief for black banks from Congress, boost wealth-building for black consumers and businesses, and help save black banks from failing."

See: https://www.blackenterprise.com/new-bill-black-banks-black-investors/

Friday, February 22, 2019

Bill to Support Black and Community Banks

New federal banking legislation,"H.R.41 - RESCUE Act for Black and Community Banks" was introduced by Congressman Bobby Rush (D-Il) on January 3, 2019.

We worked, along with the Financial Services Innovation Coalition (FSIC), to draft this new legislation, which contains many of the ideas we have been working on for some time. Recently, FSIC sponsored a letter of support. To add your name, please see: https://lnkd.in/ejv9Ef6
  hashtag The bill is designed to take a focused approach to saving and expanding the number of Black-owned banks operating in the US. This legislation is designed to meet the needs of the Black community, not just serve bankers. Our contributions were part of a collaborative effort in the overall national interest.

The bill, which has just started the legislative approval process, contains the following provisions:

1. Establishes in the Office of the Comptroller of the Currency the "Office of Black and Community Banks".

2. Seeks to partially or completely exempt Black banks and community banks from Federal banking statutes and regulations, to the extent the Comptroller determines it appropriate without endangering the safety and soundness of such banks.

3. Seeks to have the Securities and Exchange Commission issue regulations to reduce the regulatory burden applicable to Black banks and community banks—
(i) under the amendments made by the Jumpstart Our Business Startups Act;
(ii) issuing mortgage-backed securities; and
(iii) issuing securities backed by loans guaranteed by the Small Business Act.

4. Provides a crowdfunding exemption for Black and Community Banks under the JOBS Act.

5. Reestablishes the federal Minority Bank Deposit Program.

6. Expands federal agency use of Black and community banks.

7. Gives specific consideration under the Community Reinvestment Act (CRA) for majority institutions that partner with Black and community banks.

8. Calls for a study on the use of New Markets Tax Credits by Black an community banks.

Community banks in general and black banks in particular, have suffered in the decade since the great recession. Black banks have almost become extinct with barely 20 banks left. These declines have had especially devastating effects on black communities. Black home-ownership is less now than it was in 1968, and black wealth is unchanged over that same period of time, with some predicting black wealth will be zero by 2053.

African Americans are excluded, with the exception of token representation, from owning regulated institutions in the financial services industry, without access to the prosperous and dynamic activities of banking, venture capital and investing. The combined assets of all black banks were less than $6 billion as of 10/31/18 according to the Federal Reserve Board. It is well known that less than 1% of VC money finds its way to minorities and women. This is evident by the small size of black banks as compared to their non-minority counterparts. Wells Fargo has $11 trillion in assets. In fact, the 600th richest person in the world is worth over $5 billion and the 10th richest venture capital (VC) firm is worth roughly $5 trillion.

Remedial action is clearly a necessity and we are glad someone with Congressman Bobby Rush's stature and history is leading this fight. Contact us for more information. To see the full text of the bill, visit: https://www.congress.gov/bill/116th-congress/house-bill/41

Saturday, April 1, 2017

The Problem with OneUnited and #BankBlack


Image result for bankblack


 According to the New York Times,

"WASHINGTON — Top banking regulators were taken aback..when a California congresswoman helped set up a meeting in which the chief executive of a bank with financial ties to her family asked them for up to $50 million in special bailout funds, Treasury officials said.

Representative Maxine Waters, Democrat of California, requested the September meeting on behalf of executives at OneUnited, one of the nation’s largest black-owned banks. Ms. Water’s husband, Sidney Williams, had served on the bank’s board of directors until early last year and has owned at least $250,000 in stock in the institution. Treasury officials said the session with nearly a dozen senior banking regulators had been intended to allow minority-owned banks and their trade association to discuss the losses they had incurred from the federal takeover of Fannie Mae and Freddie Mac. But Kevin Cohee, OneUnited’s chief executive, instead seized the opportunity to plead for special assistance for his bank, federal officials said."

And then, there's this:

OneUnited “bought or leased luxury real estate the CEO used and, until federal regulators complained in 2008, paid for his Porsche. Cohee's East Coast spread was an $880,000 condominium on Miami Beach's Ocean Drive, and out west the bank leased a $26,500-a-month mansion for him on Palisades Beach Road in Santa Monica, Calif…he was twice arrested, on sexual assault and drug charges.”

Carver Federal, another Black owned bank, decided to attempt to help African Americans victimized by fraudulent subprime lending, something OneUnited failed to do. In addition, OneUnited went from making 74 multifamily loans in 2006 to making only 2 in 2007.

The Black community needs black banks, and no one argues with the material success of OneUnited's owners, but if they are going to be involved in the #BankBlack movement using service to low and moderate income communities as justification, OneUnited should be required to prove that they are, in fact, lending in low and moderate income communities. The record above shows otherwise.

A better option.

We suggest the following:

Focus on other Black Banks like Liberty Bank in New Orleans, Citizens in Atlanta or Illinois Federal Savings and Loan. Based on an analysis of social impact, any black bank but OneUnited.

Thursday, August 11, 2016

Crisis - The Current State of Black Banking

Our Webinar will cover:

1. History: Black Banking in the 80's, 90's and 00's.
2. Rationale: Why Black banks?
3. Customers: The Demographics of Black Banking.
4. Market: The Market for Black Banks.
5. Crisis: The Financial Crisis and Black Banks.
6. Opportunities: The OMWI initiative and Black Banks.
7. What to do now: Why campaigns to get minorities and other consumers in the urban areas to bank with minority banks have not worked. What will work.
8. Future: Which Black Banks will survive and why?
9. Next Steps.
WHEN
Wednesday, August 24, 2016 from 4:00 PM to 6:00 PM (EDT

To RSVP: Crisis: State of Black Banking

Friday, May 10, 2013

On Black Banks

I saw an article recently on Black banks in the US that was filled with inaccuracies. It was a public relations piece for the banking industry, so I thought I would post something based on my 20 years of research experience in the sector.

1. What is the historical significance of Black banks?

They were created at a time when discrimination against Black people was legal in the US. They served as the only financial service providers to the community.

2. Do Black banks have the same level of significance to the Black community today? Why or why not?

No. They are too small to serve the community in any meaningful way. For example, they cannot serve as a line of defense against predatory lending. The result: banks like Wells Fargo are free to target black communities for shoddy loanshttp://www.washingtonpost.com/business/economy/former-wells-fargo-loan-officer-testifies-in-baltimore-mortgage-lawsuit/2012/06/12/gJQA6EGtXV_story.html

Some Black banks were trying to help: See:
http://twisri.blogspot.com/2008/03/racial-divide-in-mortgage-mess-carver.html

But most were not. See:
http://twisri.blogspot.com/2009/04/black-owned-bank-has-few-urban-loans.html

This is contrary to their original mission. See:
http://www.creativeinvest.com/research/mlkoninvesting.html

3. What factors contributed to the dwindling in the number of Black-owned banks?

Several factors, but the main one is a lack of vision. Let's face it, though. Greed is a factor, too: "Regulators in October (2008) concluded in a cease-and-desist order that one Black bank had poor standards for qualifying and documenting loans, and gave top executives excessive pay and perks. Two of the perks regulators targeted were a $6.4 million beachfront Santa Monica mansion Cohee used while in California and a Porsche SUV..." 

Really?

4. How would you characterize the experience of Black banks in America throughout their history?

They once served a critical role in Black economic development, but they were sidetracked by the factors listed above. 

5. How did the recent Great Recession impact Black banks?

Decimated most of them.

6. Do you believe Black banking institutions were given a fair shake with regards to the TARP program?

Perhaps, but one Black bank got the most: http://www.washingtonpost.com/wp-dyn/content/article/2010/08/11/AR2010081105561.html

7. What is the forecast for Black banks moving forward?

We will see the number fall to low single digits within 10 years.
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Friday, March 12, 2010

Federal agency orders Ideal Federal Bank to find a buyer

From the Baltimore Sun, March 11, 2010 by Jamie Smith Hopkins

"Ideal Federal Savings Bank has until March 31 to find a buyer, a deadline set by the Office of Thrift Supervision after the federal agency determined the small Baltimore institution was undercapitalized.

The bank — which opened in 1920 to combat rampant discrimination in lending — is one of the oldest continuously operated black-owned businesses in the country, according to Creative Investment Research, an analyst of minority and women-owned banks."

See: http://articles.baltimoresun.com/2010-03-11/business/bal-idea-bank-0311_1_federal-agency-women-owned-creative-investment-research

Thursday, August 27, 2009

FDIC revises rules on private equity investments

According to the New York Times, "The Federal Insurance Deposit Corporation imposed(new rules governing investments by) private equity firms seeking to buy failed institutions, although they eased more onerous proposals in hopes of luring them to the table." The new rules are designed to address concerns that "private equity buyers might engage in aggressive practices that could put its deposit insurance fund at risk."

"The rules..require private equity-controlled banks to pour enough capital into a failed bank so that it has a cushion of at least 10 percent of its assets for three years. The F.D.I.C. dropped a requirement that private equity firms supply additional capital in the event of a severe downturn, required private equity firms not sell an acquired bank for at least three years, imposed restrictions barring the acquired bank from lending to companies affiliated with the private equity buyer, and exempted private equity firms from complying with the higher capital standards if they joined forces with a traditional bank buyer."

The new rules apply "only to future deals, and (will be reviewed) in six months."

The article stated that "Private equity firms said the new rules would make them less likely to buy a failed institution on their own."

But another article in the same paper noted that:

"Billionaire investor Wilbur L. Ross..said he plans to invest further in banks under the new regulations.

'We will now be able to be a bidder,' Mr. Ross said. 'We’ll be in the game..' "

Thus, concern that these new federal rules would reduce the number of private equity firms buying banks can be seen as a private equity industry negotiating tactic used to minimize the application of common sense public interest risk controls.

For minority banks, this means that investors will be encouraged. We continue to believe that value in this sector is growing, and note new interest in our website http://www.mbflp.com/.

We also note several new black banking initiatives:
a. The Black Bank Initiative. www.blackownedbank.com
b. “National Community Reinvestment Day” on September 4, 2009. Urging individuals to open accounts at black owned banks.
c. Atlanta Black Banking Initiative. Sponsored by the Overground Railroad.

Wednesday, June 10, 2009

Black Banks Are Feeling the Pinch

Black Banks Are Feeling the Pinch