September 18, 2013
Member News
City First Foundation Presents Finance Summit
City First Foundation
(11-7-13)
The City First Family of Companies will be holding its inaugural finance summit, “The Resurgence of Neighborhoods: Fueling D.C.’s Economic Growth” on November 7, 2013 at the Omni Shoreham Hotel in Washington. The summit will focus on how small businesses, new housing options, increased transportation options and innovative financing are changing neighborhood dynamics, contributing to Washington's population growth and building the city's economic vitality. Speakers will discuss the success of Washington's highly desirable neighborhoods can be replicated in underserved neighborhoods while avoiding gentrification that jeopardizes equity and cultural diversification. Attendees are encouraged to register here.
Congressional Black Caucus Foundation Invests $5 Million in Black-Owned Banks
Washington Post
(9-17-13)
The Congressional Black Caucus Foundation, hosting its annual conference in Washington this week, announced a $5 million investment in five African American-owned banks to spur lending in communities of color. The donations are part of a broader effort to support small businesses and encourage private investment in minority banks. “Minority banks are an important source of accessible financial services and are key to reaching financially under-served communities,” said the foundation's Chief Executive Shaunise Washington. The Congressional Black Caucus Foundation selected five black-owned, fiscally sound banks scattered across the country: Industrial Bank in the District, Liberty Bank & Trust Co. in New Orleans, Mechanics & Farmers Bank in Durham, N.C., Seaway Bank & Trust Co. in Chicago and City National Bank of New Jersey in Newark. Each institution will receive $1 million through certificates of deposits guaranteed by the Federal Deposit Insurance Corp.
Greater Washington's 10 most and least profitable banks in Q2
Washington Business Journal
(9-17-13)
The Washington Business Journal ranked the D.C. area's top 10 most profitable local banks of Q2 2013. CDBA member City First Bank of D.C. ranked second, up 7 slots from last quarter. City First reported a net income of $1.2 million, up 175% from the first quarter. Their return on assets was 2.25%. City First Bank of DC provides financial and other services in low-to-moderate income communities in Washington. Washington area banks posted a median net income of $862,000 in the quarter, up 19 percent from a year earlier and up 8 percent from the first quarter.
New Regional Bank Aims to Grow Appalachian Economy
AP
(6-14-13)
The Appalachian Regional Commission has announced the formation Appalachian Community Capital, a loan fund intended to attract capital to underdeveloped regions of Appalachia. Jane Henderson, Chairperson of CDBA as well as CEO and President of Community Capital Bank of Virginia, is a member of the new loan fund's Organizing Committee. At the Clinton Global Initiative conference in Chicago, Appalachian Community Capital was held as a model for other underdeveloped regions. At the conference, The Appalachian Regional Commission said it will invest $3.4 million to get the loan fund off the ground. It's firming up commitments for another $39 million from philanthropic foundations, public investors and large commercial banks. Over the next 24 months, the Appalachian Regional Commission plans to leverage $233 million in private capital to create a projected 2,200 jobs in the 13 states the commission serves.
Of Interest
When Fed Trims Bond Purchases, How Remains Undecided
Wall Street Journal
(9-17-13)
Federal Reserve officials face a tough call on whether to pull back on an $85 billion bond-buying program. Though the jobless rate has fallen since the Fed launched the program last year, inflation is below its objectives and economic growth is weak. If they do decide to start winding down the program, they face a second tough call on whether to reduce their purchases of Treasurys, mortgage-backed securities or both. The Fed is currently buying $45 billion per month of Treasurys and $40 billion per month of mortgage bonds. One line of thinking is that the Fed should pull back on Treasury purchases first, because mortgage bond purchases do more to boost the economy and thus should be left in place longer. The second line of thinking is that the Fed should keep its exit from its bond buying programs simple, reducing its purchases of Treasurys and mortgage-backed securities proportionately in order to avoid market confusion. A third line of argument at the Fed argues that none of these programs work very well and the Fed should end them all as soon as possible.
Credit Union Times
(9-17-13)
The CDFI Fund has recognized 13 Missouri credit unions as CDFIs. The unusual mass recognition came of the Community Development Across Missouri initiative, led by the consultancy CU Strategic Planning and supported by the Missouri Credit Union League. “Our company’s analysis of credit unions in Missouri revealed that 100 of the state’s 134 credit unions meet the Treasury’s eligibility requirements. There are two more CDFI certifications pending in Missouri this year, and another 10 that will be submitted for approval in 2014," said Jamie Chase, CU Strategic Planning founder.
More mortgage originators could change hands in coming months as pressure mounts on small banks and servicers to deploy excess capital and pad revenue. More than a dozen mortgage lenders have sold this year. Charles Welch, a managing director at Deloitte Corporate Finance, said this type of M&A activity is expected to increase in 2014. "It is better today to sell as a mortgage company than it was a year ago, and it should be even better next year," Welch said. A number of small banks have capital in hand and credit under control but are struggling to book loans. Bankers continue to lament the midsummer increase in long-term interest rates, which simultaneously curbed refinancing and demand for new mortgages. That shift could motivate banks to buy an originator, particularly those with an established track record courting new home buyers, said Welch.
A report by the Center for Responsible Lending describes the situation faced by payday loan borrowers. According to the report, 37% of payday borrowers experience default in the first year of borrowing and 44% experience default within the first two years. Despite the high risk of default, borrowers often re-borrow shortly after repaying their previous loan, the size and frequency of the loans increasing over time. Half of repeat payday loans were opened at the borrower’s first opportunity, 87% within two weeks and 94% within one month of the previous loan. Overall, the report states, borrowers were indebted an average of 212 days of the first year in which they had taken out a payday loan and continued to be indebted for over half of the second year. The report notes that "best practice" legislation often fails to prevent the industry's problems; in states with such legislation, about half of repeat loans were opened at the borrower’s first opportunity and nearly 90% were made in the same pay period the previous loan was paid off. The authors recommend stronger federal regulation of the industry, including a 36% APR limit and imposing more stringent ability to repay requirements on lenders.
The Federal Reserve Bank of Boston
(8-15-13)
A study by Dmytro Holod of the College of Business at SUNY -- Stony Brook and Joe Peek of the Federal Reserve Bank of Boston quantifies the value of small business lending. The study compares the book and market values of banks' small business loan portfolios to identify how maintaining relationships with borrowers affects the market value of banking organizations. The study finds that for commercial and industrial loans, relationship-based lending to small businesses does add value to banking organizations both overall and relative to large commercial and industrial loans. This effect was strongest among small and mid-sized banking organizations. The study also finds that the loan amount matters. The smallest category of loans, with original amounts of $100,000 or less, saw the greatest change in value. The study finds, however, that small loans which are not relationship-focused, such as many commercial real estate loans, did not benefit from the same added-value as commercial and industrial loans.
Jobs
FDIC Seeks Community Affairs Specialist (Lexington, Ky.; Livonia, Mich.)
The Community Affairs Specialist communicates with community-based organizations, academic researchers, government officials, lenders and regulatory agencies to report on credit issues and the effectiveness of reinvestment policies. This specialist will assist in coordinating meetings to address specific community reinvestment issues, prepare community profiles and represent the FDIC as a speaker or participant at events. The Community Affairs Specialist will also assist in designing and conducting Community Reinvestment Act and community development training and develop educational materials related to community reinvestment issues. This position will provide written and verbal commentary to the Community Affairs Officer and senior management.
