Community Development Banking News
CDFI Banking: Industry, Policy, and Beyond.
CDBA is following up on the energetic discussion we had in last week's webinar on the FHA Small Building Risk Sharing (SBRS) program with a second webinar (October 20, 2015) that will delve into the fine detail of the application process. The SBRS program promotes multifamily housing project financing by providing lenders a 50% risk sharing arrangement with HUD. The presentation will be led by SBRS Initiative expert Diana Talios of the FHA. The webinar is free to employees of CDBA member banks and $75.00 for registrants from non-member banks. Please note that registration for this webinar is separate from the previous webinar, so please register now even if you attended the previous webinar.
Financial education website NerdWallet is now featuring CDFI banks and credit unions as a socially responsible alternative to big banks. NerdWallet is a resource that enables users to search a database of hundreds of financial products to find the best products. To have your institution's products listed on NerdWallet -- a great way to make them visible to a young, tech-savvy audience -- sign up for free here. In its writeup of CDFI depository institutions, NerdWallet highlighted New York based Spring Bank. Before Spring Bank opened, many low-income residents relied on check cashers and other high-cost alternative lenders. Someone lacking a strong conventional credit history might successfully apply for a loan at an 18 percent interest rate at Spring Bank, while a similar loan from a payday lender might charge up to 400 percent.
Virginia Community Capital has opened a new office in downtown Norfolk, Va. to enhance its lending capability throughout Virginia. The first loan made through the office will be to Conte Acquisitions, LLC, which will receive the innovative capital they need for a multi-tenant retail building. Thresa Joyce, senior vice president and senior loan officer, will lead the opening of the office. Ms. Joyce has over 20 years of experience in the financial and commercial real estate industries. Jane Henderson, VCC’s President and CEO stated, “VCC is very pleased to announce the opening of our new office in Hampton Roads. We are looking forward to expanding our presence in this region, helping more people and more communities.”
Community bankers provide relationships to small business clients that the big banks can't match, writes Mission Valley Bank President and CEO Tamara Gurney. "Any street corner bank – big or small – can handle the transactional side of banking, but it takes a team of trusted advisors who understand a client’s business to develop programs to meet their exact needs," Gurney writes. "It is that aspect that gives community banks a distinct advantage over the larger institutional banks that often gain new customers with teaser rates and short-lived promotions but don’t deliver long term results... Even with the changing physical landscape and technological advances within the banking industry, it still comes down to having a banker who is willing to partner to help a business achieve success."
Merchant cash advance wholesaler Pearl has been sold to private equity firm Capital Z Partners after a courting period by buyers including blue chip firms such as Goldman Sachs. Merchant cash advance is a legal, unregulated way to lend money to small businesses at interest rates as high as 250 percent. To get around state interest limits, the companies argue they aren’t charging interest—they’re buying the money businesses will make in the future at a discount. Pearl’s innovation is to preempt clients’ existing debt by offering a second advance to borrowers who had already received an advance from another broker. Pearl's advance, due in two or three months, must be paid off before their original debt. Pearl reached loan volume of $100 million in 2013. Last year, merchant cash advance surpassed the SBA as a source of loans for less than $150,000.
A new CFPB plan unveiled last week would eliminate arbitration clauses in financial product agreements that prevent consumers from filing class action lawsuits. The proposal would require arbitration clauses to explicitly say that they do not apply in class action cases. Meanwhile, firms still using such clauses for individuals would have to provide the CFPB with information about those claims and the amount of resulting awards given to consumers. CFPB Director Richard Cordray said the arbitration clauses — which, consumers are rarely aware of beforehand — amount to a "free pass" to avoid class actions. The new restrictions would apply to a host of consumer financial products including credit cards, automobile leases and debt collection.
Grant Bancshares Inc., the bank holding company for Louisiana-based Bank of Montgomery, will acquire the $64 million Bank of Ringgold. Bank of Montgomery, which currently operates from six locations, will expand its footprint to include the Bank of Ringgold's three locations. Following the merger, Bank of Montgomery will have approximately $280 million in total assets and $250 million in deposits. “We have a strong commitment to our local communities, and we take pride in knowing all of our customers by name. That will never change,” says Bank of Montgomery President and CEO Ken Hale. “We welcome the Bank of Ringgold’s customers to our community banking platform with exceptional products and services.”
The CFPB has named Sunrise Banks CEO David Reiling vice chair of its Community Bank Advisory Council (CBAC). CBAC was created to ensure the perspectives of community depository institutions with less than $10 billion in assets are shared with the CFBP. Reiling hopes to further the council's mission of representing the needs of community bankers. “The experience of this past year on the Community Bank Advisory Council has been more than rewarding,” said Reiling. “I am honored to be asked to serve as the CBAC Vice Chair and look forward to engaging with the Bureau to communicate the impact of regulations on community banks as well as the customers and communities they serve.”
Allies arrayed against the Minnesota payday lending industry are gaining traction thanks to a $2.2 million Next Opportunity Award for Sunrise Banks of St. Paul. The bank's small-dollar loan program, TrueConnect, already covers 10,000 employees through participating employers. Sunrise CEO Dave Reiling said the fresh capital will allow the bank's TrueConnect program “to scale nationally and offer a safe-loan alternative for 26 million Americans who do not have a credit score.” Through TrueConnect, offered as an employee benefit, a worker can get a loan of up to $3,000. The loan is retired through payroll deductions for up to 12 months. Sunrise, which makes 60 percent of its credit available in low-income communities, has signed up over 20 employers and is expanding TrueConnect to California, Ohio and other states.
BankPlus Hernando branch president Dink Upchurch is banking on a sound economic recovery and the Greenwood native said all indications are that the nation is healing from the Great Recession. His branch, located on the historic DeSoto County Courthouse square, gives him an up-close view of how that recovery is hitting main street. "The thing about being on the square is that everybody knows everybody,” Upchurch said. “I’ve been in some areas that I will call places, but this is a community… The economy seems to be coming back… We made $17 million in loans this past year at this branch and the bank as a whole in DeSoto County, including its seven branches, made $91 million in loans, according to the latest figures."