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David Reiling, Sunrise Banks CEO and CDBA Director, won the Good Leader Award at Minnesota Business Magazine's Community Impact Awards. The awards are intended to recognize leaders and businesses that take tangible, life-changing actions that have a real impact on the people touched by their efforts. The magazine recognized Mr. Reiling as a social entrepreneur with 25 years of innovation experience in community development finance. They praised his advocacy on behalf of underserved consumers and Sunrise Banks' work with Hmong and Somali immigrant communities. Sunrise Banks also qualified as a finalist for the Midsize Best in Class Award.
The Center for Financial Services Innovation provides a set of aspirational guidelines for small-dollar credit products. The report emphasizes responsible underwriting as a key component of a high-quality small-dollar credit product. It also focuses on the importance of proper loan structure and pricing to maintaining the borrower's ability to repay. It defines the ideal small-dollar credit product as one which is made with a high confidence in the borrower’s ability to repay, is structured to support repayment, aligns profitability for the provider with success for the borrower, gives the borrower greater financial health, has transparent marketing, is convenient and provides rights for borrowers. The report provides detailed strategies for bringing credit products in line with each of these principles.
Kansas City's KC Storefront Initiative aims to make loans to small businesses—particularly those run by women and minorities—that haven't been able to get banks to extend credit to them. Since the initiative's launch in mid-2012, more than 140 entrepreneurs have received a total of $1.2 million in financing. The loans are made by Justine Petersen, a St. Louis-based microlender that Kansas City officials recruited to run the program. But the city has played an active role in facilitating the loans. Kansas City has donated office space to Justine Petersen and contributed $110,000 to the microlender's loan-loss reserve fund. The loans range from $1,000 to $50,000—the average loan amount in 2013 was $12,000—and interest rates are roughly 8.25% to 12%. The default rate has been just 2% so far.
The Neighborhood Assistance Corporation of America, a Boston-based nonprofit lender, is making waves with its vocal advocacy in favor of reviving a more sustainable version of the subprime mortgage market. The organization's mission is to expand homeownership with mortgages to lower-income borrowers on terms that are both profitable and sustainable. It is half lender, half community organization. Applicants are subject to careful screening and, upon approval, are required to participate in the organization's advocacy efforts. The lender also replaces the typical mortgage insurance with a requirement that borrowers contribute to an emergency fund. This fund is lent out to borrowers facing medical emergencies or a job loss, preventing defaults. The organization's default rate has been low; of the 4,005 loans it made from 2004 to 2006, the peak of the housing boom, only 2.6 percent lost their homes to foreclosure--less than a third the national rate.
A new study of FDIC statistics finds that the number of small banks and their share of US banking assets declined substantially since 2000 while the five largest US banks expanded. Small banks’ share of domestic deposits fell from 40 percent to 23 percent since early 2000 while their share of US banking assets declined from 36 to 19 percent. The five largest banks now hold 44 percent of US banking assets and 40 percent of domestic deposits—up from 23 percent and 19 percent, respectively, in early 2000. Some of the decline among small banks is organic, as market forces encourage combinations in order to spread operational costs over a larger customer base. Increasing regulatory burdens, which absorb a larger percentage of small banks' budgets, also encouraged consolidation. Other banks have simply outgrown their 'small' status. But more than five percent of small banks were found to have failed in the wake of the economic crisis.
This week, February 24-March 1, is America Saves Week. Programming sponsored by the OCC, the Consumer Federation of America and the American Savings Education Council will encourage individuals and families to prepare for the future by saving. "I’m proud of the role that national banks and federal savings associations play in helping Americans build the savings they need to improve their lives" said OCC Comptroller Thomas Curry. Curry encouraged banks to continue their support for America Saves Week by partnering with local organizations to encourage savings through activities such as sponsoring financial literacy programs, implementing school-based savings programs and offering bank-sponsored savings match programs.
Minnesota legislators plan to introduce a bill that will allow companies in the state to form B-corporations, entities that pursue social missions as well as generate profits. One early advocate is David Reiling, CEO of Sunrise Banks and a CDBA director. About 20 states currently allow the charters and Reiling wants to see Minnesota join that group. "Do well and do good," Reiling said of Sunrise Bank's philosophy. "We're living proof that those concepts are not mutually exclusive." Reiling points to the bank's joint venture with Lutheran Social Services, a program that caters to low-income residents on St. Paul's east side. Under the arrangement, Sunrise Banks makes money off its prepaid debit cards, but also provides financial counseling to customers.
Newly released transcripts reveal Fed officials underestimated the severity of economic conditions during the financial crisis. Officials repeatedly fretted about overstimulating the economy, only to realize time and again that they needed to redouble efforts to contain the collapse. Ben Bernanke was clearsighted in warning of the risk of a severe recession, but struggled to persuade his colleagues. Janet Yellen, then president of the Federal Reserve Bank of San Francisco, was even more alarmed. She and Eric Rosengren, president of the Federal Reserve Bank of Boston, were the most forceful advocates for stronger action. The Fed’s understanding of the crisis was clouded by its reliance on indicators that missed sharp changes in conditions. Officials also appeared to be biased toward worrying about the risk of inflation while downplaying the risks of rising unemployment. The transcripts also show, however, that Fed officials responded decisively in the final months of the crisis, heading off an even worse recession.
Arkadelphia, Ark.-based Southern Bancorp Community Partners has announced a new product that encourages local low-income non-traditional students to invest in college education. Their College Completion Matched Savings Program matches $3 for every $1 saved by the program participant. Once they reach their savings goals and complete financial education classes, participants can use the savings to pay for tuition, books or other school fees. “If you’re willing to work hard to achieve your education goal, Southern Bancorp Community Partners is willing to help you reach it,” said Mindy Maupin of Southern Bancorp Community Partners.
The Federal Reserve Bank of San Francisco has compiled a series of articles and essays highlighting the stabilization strategies of nonprofits across the country. The essays emerged from experiences in the Neighborhood Stabilization Innovations Initiative, a project which supported emerging strategies for neighborhood stabilization after the foreclosure crisis. In this review, findings from that initiative are presented on topics including mitigating foreclosure, new models of housing counseling, public-sector entrepreneurialism and fair housing. "The 10 projects funded under the Neighborhood Stabilization Innovations Initiative point to a wide range of workable approaches, spanning many local markets and housing challenges. In each case, the success of the demonstration began with a strong, highly capable nonprofit institution," write contributing authors O'Callaghan and Weech.