News
Sunrise Banks fought to buy American Bank of St. Paul in federal bankruptcy court Tuesday. American Bank's holding company, American Bancorporation, filed Chapter 11 bankruptcy in May after creditors said they were owed $48 million due to missed payments on investor securities. American Bancorporation subsequently auctioned both its subsidiaries, American Bank and community development organization AmeriNational Community Services Inc. (ACS). The auctions generated a $17 million offer from Deerwood Bank for the bank's assets and a $15.2 million offer for ACS from investment firm OSP Group. But Sunrise Banks wants the court to consider its combined bid. Sunrise argues their bid is $100,000 less than the winning bids, but would be cheaper than two separate deals and more likely to win approval from regulators.
CBW (formerly The Citizens Bank of Weir) has been rebuilt to offer high-tech services not available at even the largest banks. Former Google employee Suresh Ramamurthi and his wife, Suchitra Padmanabhan, bought the tiny bank in 2009. Working with a team of software engineers, they have used it as a testing ground for a range of innovative financial services. Most promising is an instant payment system similar to wire payments — but much cheaper. The transfers rely on a custom built back-end that instantly rates the risk of transactions using 20 to 40 factors, including a customer’s transaction history and location. The fees from this service and others dwarfs the money that CBW makes in Weir; in the last quarter, the bank earned $60,000 from its loans and $720,000 from the rest of its business.
Albina Community Bank provided financing for a new 4-story, 57-unit apartment building in Portland, Oregon's Kenton neighborhood. The new building is a transit oriented development project with solar electric panels on the roof and bike parking on the first floor. The building was designed to reflect the historic nature of Oakland's Kenton neighborhood and will feature art and architectural features created by local businesses. “This project aligns perfectly with our mission and focus as a [CDFI]. We look forward to supporting this new development in the Kenton community,” said Cheryl Cebula, president and CEO of Albina Community Bank.
A new study finds strong revenue growth among payday lenders, auto lenders and other providers of alternative financial services to underserved customers. The financially underserved market revenues increased from $96 billion in 2012 to $103 billion in 2013, based on consumer usage volume of $1.3 trillion in financial products and services. Among the products examined, revenue growth was highest among subprime auto leases, prepaid cards and title loans. The results are a continuation of revenue growth trends in the industry, which has seen an average annual growth rate of 6% since 2009. The market is projected to have grown by 4.6% in 2014 to reach a total revenue of $107 billion.
The House last night narrowly passed the FY 2015 "CRomnibus" bill, a $1.1 trillon funding bill that will keep the government open through the end of the Federal FY 2015 (September 30, 2015). The Senate subsequently passed a stopgap measure which will continue to fund the agencies for two days while senators debate the legislation. The omnibus bill provides $230.5 million for the CDFI Fund, an increase over FY 2014 at $224.9 million. BEA Program funding will remain at $18 million. The bill includes $152.4 million for the financial and technical assistance programs, $15 million for Native American technical assistance, $22 million for the Healthy Food Financing Initiative and $23.1 million for administrative expenses. Total loan principal for the Bond Guarantee program will be limited to $750 million.
Fannie Mae and Freddie Mac will start making payments that could total hundreds of millions of dollars annually into a fund for affordable housing. Under the new policy announced by Federal Housing Finance Agency Director Melvin L. Watt, the GSEs will set aside a portion of their revenue for the National Affordable Housing Trust Fund. The fund is the only source of U.S. housing money earmarked for the lowest-income families and has been empty since Congress created it in 2008. Watt’s predecessors said the precarious financial condition of the companies prevented them from making payments. Now, “[c]ircumstances have changed” and the suspension of payments into the fund “is no longer justified,” Watt said.
New CDFI Fund Director Annie Donovan urged further progress in serving distressed communities in her first director's message. "We have built a strong foundation. Yet, despite all that we have accomplished, much more remains to be done," Donovan said. "As those who work in low-income communities every day know all too well, our work will not be complete until economic opportunity is a reality for all. So this is our challenge for the next decade—to create ways not only to protect the precious asset that we have created but also to leverage it for further progress. As the Director of the CDFI Fund, I am committed to doing everything I can to help the CDFI industry progress through the next stage of its evolution."
Two years after the demise of a proposal to speed up U.S. electronic payments, a revised measure now appears likely to be approved by the banking industry. The new proposal was designed to resolve an issue that derailed the 2012 proposal: the fact that banks on the receiving end of transactions will be required to invest in the upgraded ACH network, but won't receive many direct benefits. The revised proposal would require any bank that initiates a same-day payment to pay 8.2 cents per transaction to the bank on the other end, covering the technological investments that banks on the receiving end of the transactions would need to make. Nacha is accepting comments on the proposal, with a deadline Feb. 6.
A working paper by the San Francisco Fed offers best practices for crafting Community Reinvestment Act (CRA) performance context—knowledge about the bank’s local markets, the needs of its community and the opportunities that exist within the local network of resources and organizations. The performance context is as much a self‐assessment as it is a regional assessment, not only identifying the needs in a bank’s assessment areas, but also determining which needs are within a bank’s capacity to address. The paper encourages banks to identify credit needs and opportunities for community involvement using a combination of quantitative measures from sources like the American Community Survey and qualitative accounts from community members and leaders.
In a joint interview, longtime Carver Bancorp CEO Deborah Wright and new president and CEO Michael Pugh discussed the evolution of the bank's role in its communities. "[Michael] is a tremendous talent," Wright said. "We've worked together for a couple of years and, over that time, I became comfortable that he could take the organization to the next level." Pugh intends to expand the bank's customer base with new products. "[T]here is continued opportunity to have feet on the street and grow primary banking relationships," said Pugh. "The next step is a credit solution for middle-income customers who would be interested in banking with Carver if we could offer the same products as the big players."