News
At a Senate Banking Committee hearing on February 12, community bankers pushed for a bill to shield them from new rules on mortgage loans, trading operations and other mandates. Democrats on the committee were divided on the issue, with moderates like Sens. Heidi Heitkamp (D-N.D.) and Jon Tester (D-Mont.) agreeing that community bankers are struggling and need eased regulations. Elizabeth Warren (D-Mass.) broke with the moderates, citing statistics that show small lenders’ profits have risen over the last year. “[T]he financial performance of the community banks shows that Congress and the regulators, I think, have done a pretty good job in tailoring the rules to community banks,” she said.
Many black-owned banks are struggling to hold on in the face of the economic devastation that has ravaged many of their customers and increased competition from mainstream banks. The FDIC counted 25 black-owned banks remaining in the country last year, down from 48 in 2001. Sixty percent of black-run banks lost money in 2013, threatening institutions that often are the only financial institutions doing business in underserved areas. "This is such an extremely important sector of the banking community," said Michael A. Grant, president of the National Bankers Association, the lobbying group for black banks. "We were hit so hard during this sub-prime crisis, and they are having a hard time working their way back from that."
Minneapolis-based Sunrise Banks has posted its 2014 Corporate Social Responsibility report via Pinterest. The bank made 184 community development loans in 2014 totaling $106.4 million. Nearly $71 million were made in Sunrise Banks' CDFI Program investment area, which includes the cities of Minneapolis and St. Paul, Minn. The bank has deployed $13 million in New Markets Tax Credit allocation in 2014. The report also highlights Sunrise Banks’ Socially Responsible Deposit Fund, which allows customers to designate any deposit account to be used for community development projects, including affordable housing, nonprofit organizations and small business lending.
City lawmakers in Santa Fe, N.M. have revived debate over public banks with a proposal to form a municipal bank that support affordable housing efforts and lending to the underbanked. And, perhaps for the first time, some bankers are interested -- if the initiative will help them make more loans. Previous public banking proposals, many modeled after the Bank of North Dakota, have rarely made it past the drawing board. But public banking advocates hope that smaller municipal banks might be easier to realize. The Santa Fe City Council last month approved a feasibility study to look into a municipal bank. The primary goal is to form partnerships with local banks to expand lending to residents who are "on the marginal side" of being creditworthy, said Santa Fe Mayor Javier Gonzales.
A new study from Harvard’s Kennedy School of Business shows that the decline in community banks has accelerated since passage of the Dodd-Frank banking reforms in 2010. The study found that the share of banking assets controlled by community banks has declined by 12 percent since 2010 -- nearly double the rate of decline in the previous four years. But industry analysts have cautioned against attributing the trends exclusively to Dodd-Frank. About half of Dodd-Frank regulations still haven’t been implemented and numerous small-bank exemptions already apply. While the Harvard study cites accelerated decline between 2010 and 2014, it was only last year that community banks began facing tougher new mortgage regulations.
A bill introduced in the House of Representatives would make the New Markets Tax Credit permanent. Introduced by Reps. Pat Tiberi (R-Ohio), Richard Neal (D-Mass.) and Tom Reed (R-N.Y.), the bill would also provide an increase in the annual NMTC allocation and provide Alternative Minimum Tax (AMT) relief for NMTC investments. As a result, NMTC investors would receive the same consideration under the AMT as is currently provided to investors in many other federal tax credits. “I’ve seen first-hand the benefits of the New Markets Tax Credit in the 12th Congressional District,” said Tiberi. "[T]his tax credit is a tool to help revitalize communities by not only putting people to work but by funding projects that are a community benefit.”
The CDFI Fund has invited comment on the CDFI Program and Native American CDFI Assistance Program (NACA Program) Applications. The fund seeks particular comment on whether the requested information is conducive to the fund’s goals, the degree of burden entailed in the collection of information, ways to enhance the quality of the information and ways to minimize the burden on respondents, including through the use of automated collection techniques or other forms of technology. The deadline for comment submission is April 12, 2015.
Urban Partnership Bank Senior Commercial Banker Jeffrey Wright spoke in an interview about his work on the Chicago’s Business Leadership Council’s emerging leaders group. The council’s mission is to create jobs, opportunities and leaders in the black community. Wright was born on Chicago’s West Side, where he was raised by a single mother on a fixed income. Now he has an undergraduate degree from Georgetown, an MBA from Northwestern’s Kellogg Business School and is a senior banker at Urban Partnership, where he is being groomed to be a future CEO. “I have direct access to really successful business leaders,” Wright said. “As I am making decisions and looking to improve my situation they are accessible and willing to help.”
Ho-Chunk Inc., the Winnebago Tribe of Nebraska's economic development corporation, has become a major shareholder in Native American Bancorporation, the Denver, Colo.-based holding company of Native American Bank. The bank is owned by 28 federally recognized tribes, Alaska Native Corporations and tribal organizations. “We have made a concerted effort to source projects that meet the bank’s mission while providing economic diversity and meaningful jobs," said Thomas Ogaard, president and CEO of Native American Bank and Native American Bancorporation. "The capital support provided by Ho-Chunk, Inc. is a valuable resource that allows us to continue these efforts, grow the bank and make a difference in the lives of the people we serve.”
Members of BancAlliance, a consortium of about 200 community banks, will start using Lending Club, a website that facilitates loans to individuals, to build new portfolios of consumer loans. The banks will each commit to buy a certain amount of loans from Lending Club, which will vet borrowers for their ability to repay. Until now, small banks generally haven’t been able to justify the cost of underwriting unsecured loans of less than $35,000 without requiring collateral because big banks can do so much more efficiently. By relying on Lending Club’s software to quickly evaluate a borrower’s ability to repay, small banks hope to extend credit to borrowers with lower credit scores than they previously served and build a pool of those loans big enough that a few bad apples won’t bring down the whole portfolio.