News
Broadway Federal Bank avoided failure during the Great Recession and now appears on track for a full recovery. In 2008, the bank received $9 million from Treasury's Troubled Asset Relief Program to stay afloat. Treasury and the nonprofit NCIF, which had backed Broadway Federal's 2013 recapitalization, subsequently agreed to convert their preferred shares to common stock — giving up half the amount owed them. Now, in Broadway Federal's Q3 2014 financial report, the bank's net income has risen to $765,000, up from $584,000 a year earlier. "In October, we raised $9.7 million and paid off all of the senior debt," said Broadway Financial CEO Wayne-Kent Bradshaw. "The bank has a clean and pure common stock balance sheet. We spent three years fixing things and now we are ready to take off."
In a wide-ranging interview, Industrial Bank President B. Doyle Mitchell discussed the bank's history, its positive reputation among D.C.-area businesses, and the burden of regulation for community development banks. "There's way more regulation that we have to adhere to... It's more difficult to help people. And I grew up in a business where I saw how we were helping people as a financial institution, we were able to make money at the same time -- we were able to do well and do good at the same time. Now there's so many "t's" that need to be crossed, so many "i's" that need to be dotted. If you don't have all your documentation lined up, sometimes it is more difficult to help people."
President Obama has released the Administration’s FY 2016 Budget proposal. Included is total funding of $233.5 million for the CDFI Fund, a slight increase from $232 million in FY 2015. Once again, the president’s proposal eliminates funding for the Bank Enterprise Award. However, it includes increases to other CDFI Fund programs: $157.5 million for the CDFI Program, $35 million for the Healthy Food Financing Initiative and $16 million for the Native American CDFI Assistance Program. It also proposes permanently extending the New Markets Tax Credit Program at $5 billion per year, extending the CDFI Bond Guarantee Program through FY 2017 and restoring the Capital Magnet Fund. The proposal will now move on for consideration by the House and Senate appropriations committees.
The CFPB is expected to release rules early this year that will allow it—for the first time—to exercise the authority it was given under the Dodd-Frank Act to regulate payday loans. The CFPB says state laws governing the industry often fall short and that fuller disclosures of the interest and fees may be needed. Although Dodd-Frank bars the CFPB from capping interest rates, the CFPB has a number of options, including deeming industry practices unfair, deceptive or abusive to consumers. The agency is also considering tighter rules to ensure a consumer has the ability to repay. That could mean requiring credit checks, placing caps on the number of times a borrower can draw credit or encouraging states or lenders to lower rates.
A report by the Pew Charitable Trusts finds a close relationship between bank overdraft fees and customers closing checking accounts. The report compares the experiences of high frequency overdrafters, who incur more than four debit card overdrafts a year, and those of low-frequency overdrafters, who paid one to three overdraft penalties. High-frequency overdrafters paid an average of $95 in total fees for their last negative balance, nearly twice the $51 low-frequency overdrafters paid. But for both groups, overdraft charges increased the odds account holders would close their accounts and become unbanked; overdraft fees have caused one-quarter of low-frequency and one-third of high frequency overdrafters to close a checking account.
Spring Bank is supporting the growth of small businesses and startups in the Bronx through a partnership with the Business Outreach Center, a CDFI-certified small-business development organization. In the summer of 2014, Spring Bank wrote a letter of credit to help the Business Outreach Center secure the lease for the Bronx Business Incubator, a new space for entrepreneurs to conduct business, engage in workshops and network with peers. “[A] majority of small businesses get their first loans from community banks," said Demetris Giannoulias, founder and chairman of Spring Bank. "It's fun to meet people and hear them talk passionately about something that they're working on and to be able to be a part of it. That's the great thing about being a banker."
A new study by the National Federation of Community Development Credit Unions examines the financial needs of very low income consumers. Many very low income consumers interviewed for the report contrasted the simplicity of dealing in cash to the surprise fees and delayed payments they experienced at financial institutions. They expressed a fear of institutions in general and a general sense that they “didn’t belong there.” The report stresses the importance of relationships and guidance in serving very low income consumers. It also cautioned against product promotion, which is often perceived as a sales pitch and can undermine trust in a banking relationship.
OneUnited Bank and the African American Film Critics Association last week presented “Money on My Mind: Film & TV Industry,” a celebrity panel discussing behind-the-scenes career opportunities in the television and film industry for African-Americans. Panelists at the Los Angeles event also discussed the recent increase in black films that have been both green-lit and experienced box office success. OneUnited Bank hopes the event will advance its goal of building long-term wealth in the black community. “It is amazing how many unsung careers there are in the business of entertainment outside of being an actor," said President and COO of OneUnited Bank Teri Williams. “The bank is steadfast in its commitment to helping urban communities find any and all growth opportunities.”
David Reiling, chairman and CEO of St. Paul-based Sunrise Banks spoke at a roundtable on equity crowdfunding with the Minneapolis/St. Paul Business Journal. "I view [equity crowdfunding] differently than a contrary type of view where this is just a competitor... [T]he fact is that when you look at it from complementary view, these small and medium businesses do not have the same type of access to capital that large ones do. And that’s a glaring need... From a banker’s point of view, you have to take an optimistic view of this and figure out how you can be relevant in this space. We need to adopt some methodology around crowdfunding where we might see a lower return for the bank, but a higher return in terms of community building and social purpose."
A new proposal by the CFPB could allow community banks and credit unions to make "qualified mortgages" more easily. Under current rules, lenders with less than $2 billion in assets and fewer than 500 first-lien loans originations per year can attain QM status if loans are held in portfolio, even if a loan's debt-to-income ratio exceeds QM's normal limit of 43%. The proposal would expand that advantage to more banks by raising the origination limit to 2,000 loans. It would also exclude loans that a bank keeps in its portfolio from the amount that counts against the limit. In addition, any institution not in an urban area would be recognized as "rural." CDFI banks will continue to be fully exempt from the ATR-QM rule.