Community Development Banking News
CDFI Banking: Industry, Policy, and Beyond.
The NCUA has proposed changes that would make it easier for credit unions to lend to businesses, making them more formidable competitors with banks and other lenders for commercial trade. The revisions would eliminate requirements that credit union borrowers personally guarantee loans as well as a provision that imposes 80% loan-to-value cap on collateral offered as security. The NCUA also expects to increase the amount of loans a credit union can make to a single borrower while lifting a cap on an institution's aggregate construction and development lending. Credit unions would still have to adhere to the current statutory cap limiting business lending to roughly 12.25% of total assets.
Chicago, Illinois-based First Eagle Bank was one of three banks awarded the Illinois Bankers Association Community Service Award. The Illinois Bank Community Service awards honor financial institutions in the state that demonstrate a strong commitment to community service. First Eagle Bank has maintained an “Outstanding” CRA rating since 2009 and has undertaken a number of community development initiatives, including providing an $850,000 subsidy to Mercy Housing Lakefront through the Federal Home Loan Bank of Chicago Affordable Housing Program. First Eagle has also partnered with the Chicago Housing Authority on its Student Internship Program, designed to provide job readiness training and placement opportunities for CHA residents.
The latest issue of the Southern Bancorp Mission News is out with details on a range of Southern's recent initiatives. Southern Bancorp's policy team is encouraging savings among low-income individuals by working with lawmakers on implementation of the American Savings Promotion Act. The federal legislation allows banks and credit unions to encourage savings with Prize Linked Savings programs -- cash-prizes awarded through savings raffles. Prize Linked Savings programs are fun, no-risk methods of encouraging customers to open savings accounts and make regular deposits. Southern Bancorp worked with Arkansas state legislators to craft regulation of the program in the state.
Two new reports from Clarity Services and Charles River Associates found that the CFPB’s proposed payday lending rules could cause a majority of lenders to close down. The rules would require non-bank payday lenders to refuse credit to those below a certain payment-to-income ratio. The Clarity Services report examined payday lending transactions and concluded that payday storefront businesses would lose more than 70 percent in volume. The Charles River Associates report found that the rule would reduce loan revenues of payday lenders by an average of 82 percent.
City First Bank of DC and Southern Bancorp have become the newest members of the Global Alliance for Banking on Values (GABV). The GABV is a network of banks that share the mission of using finance to deliver sustainable economic, social and environmental development. This marks an increase in membership for the GABV to 28 banks and banking cooperatives around the world -- among them Sunrise Banks and Beneficial State Bank. "I welcome these banking trailblazers to the Alliance,” said Dr. Marcos Eguiguren, Executive Director of the GABV. “Each member brings a unique perspective and expertise on how to use finance to create positive impact for the individuals, organizations and communities we serve.”
Small banks could pay less in assessment fee premiums under a new FDIC proposal. The proposal would change the calculus used in determining assessment fees, incorporating metrics based on banks’ loan portfolios. The proposal would result in 60% of small banks paying lower premiums. The plan is intended to be revenue-neutral, reallocating a greater percentage of assessment fees to riskier institutions. It would also add a "loan mix" category in its risk assessment that takes into account the types of loans a bank holds. It would apply only to banks with less than $10 billion of assets that have been insured for at least 5 years. The proposal would go into effect one quarter after the Deposit Insurance Fund reaches 1.15%; it currently stands at 1.03%.
A new study from the Center for Responsible Lending on the cumulative costs of predatory practices finds substantial costs to borrowers, communities and the economy on the order of hundreds of billions of dollars. The study found that dealer-brokered auto loans, which often contain abusive provisions, are twice as likely to result in repossession as bank or credit union financed auto loans. Borrowers of color are up to three times more likely to receive an abusive loan compared with a white counterpart and families with annual incomes below $25,000–$35,000 are much more likely to receive an abusive loan product. Blemished credit can have a far reaching effect; one in seven job-seekers with blemished credit has been passed over for employment after a credit check.
The CDFI Fund of the U.S. Treasury has announced more than $3.5 billion in New Markets Tax Credit awards aimed at encouraging investment and economic growth in low-income urban and rural communities. A total of 76 organizations, including City First Bank of DC and Central Bank of Kansas City will receive tax credit allocation authority. The New Markets Tax Credit Program allows individual and corporate taxpayers to receive a non-refundable tax credit against federal income taxes for making equity investments in Community Development Entities. The program is estimated to have created almost 600,000 new jobs and supported the construction of more than 160 million square feet of retail, manufacturing and office space since its inception.
Appalachian Community Capital (ACC), a new central bank for Appalachian CDFIs, has announced a successful first-round investment closing. Appalachian Regional Commission is leading formation of the new CDFI which will now begin lending with support from Christiansburg-based Virginia Community Capital (VCC). ACC will allow its member CDFIs to pool their capital needs and attract bigger investors. ACC is expected to leverage $233 million—$42 million over the next 24 months alone—in private bank capital. VCC will service ACC’s loans and provide back office support through their Christiansburg office. "The entire Appalachian region will benefit from the capital ACC is providing in tandem with other CDFIs,” said Jane Henderson, VCC President and CEO.
CDBA has wrapped up the 2015 CDBA Peer Forum, a two day event featuring conversations between community development bank executives and leading community development finance experts. The 2015 Peer Forum was the largest yet, attended by nearly 70 bankers from 44 community development banks across the United States. Guest speakers included Administrator of the Small Business Administration Maria Contreras-Sweet, CDFI Fund Director Annie Donovan and Assistant Secretary for Financial Stability Tim Bowler. An election was also held at the Peer Forum in which Brian Argrett of City First Bank of D.C. was elected Chair and Robert Jones, III of Atmore, Alabama’s United Bank was elected Vice-Chair.