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Fewer Black-Owned Banks Survive to meet the financial needs of vital people
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Fewer black-owned banks are able to Fill Vital Financial Needs
By Alice Holbrook Assigning Editor | Homebuying, savings and banking services Alice Holbrook edits homebuying content at NerdWallet. She has covered personal finance topics for over a decade . She has also worked on NerdWallet's banking and insurance teams, as well as doing an internship at the copy desk. She is located in Ann Arbor, Michigan.
Updated Feb 6, 2018
Editor: Tony Armstrong Lead Assigning Editor | Banking Tony Armstrong leads the banking team at NerdWallet. He has been writing about personal finance for nearly 10 years. Tony started his career at NerdWallet as a writer and worked his way up to the position of assistant assigning editor, and eventually to lead editor. Writing by him has also been featured in the Los Angeles Times, MarketWatch, Mashable, Nasdaq.com, USA Today and VentureBeat. Tony is a resident of Minneapolis, Minnesota.
The majority or all of the products we feature are provided by our partners who compensate us. This impacts the types of products we write about and where and how the product is displayed on a page. But, it doesn't influence our opinions. Our opinions are our own. Here is a list of and .
generated a tsunami of attention to black-owned banks when it became a viral topic in the middle of 2016 However, two and a half years later, many of those institutions have balance sheets that are moving to the right direction.
The hashtag was inspired by a calling for people to open accounts with black-owned banks. The rapper's preferred preference for his bank -the Georgia-based Citizens Trust Bank -- is one of those that has expanded since #BankBlack was launched. But for many black-owned banks there isn't a picture as rosy, with decreased assets and even closings.
"The operating costs [and] regulatory costs make it extremely difficult to run a efficient community bank" claims Kim Saunders, president of the National Bankers Association. The issue isn't exclusive to black-owned banks, says Saunders -- it's a problem that every smaller bank faces. "Scale matters."
Nevertheless, on Twitter people continue to hashtag their love and intentions to transfer their funds. Here's why advocates say black-owned banks are worth investing in.
>> MORE:
Black-owned banks are a great source of access
African-Americans as a group are underserved by financial institutions. Nearly half of them are unbanked or underbanked, which means they supplement your bank account with often-costly alternatives like check cashers or payday lenders. That's nearly double the percentage of the population as a whole, according to a 2018 Federal Deposit Insurance Corp. report.
Black-owned banks play a significant part to play in improving those figures.
For example 67% of mortgage loans are given to African-Americans as per 2013 remarks by Martin Gruenberg, former chair of the FDIC. For banks that aren't owned by blacks and owned by blacks, less than 1percent of mortgages are granted to African-Americans. The residents of the neighborhoods that banks serve have low or moderate incomes.
Saunders describes the strategy as "compassionate lending." "We're will be with [our clients] during both the good and difficult times" Saunders says.
OneUnited is the nation's largest black-owned bank in terms of assets, offers second-chance checks for those who have been denied an account in the past secured credit cards to people who are rebuilding credit after damage and also education for first-time home buyers.
"The cities we work with are primarily brown and black," said Teri Williams OneUnited's president and chief operating officers in a 2018 interview "and on the income side, there are many those who are struggling. We have people aged 50 and 60 who tell us they've never been to an institution. They didn't feel welcomed. They didn't feel banking was for them."
After becoming the victim of check-cashing fraud, Travion Jackson couldn't open an account at the bank of his family. He eventually tried OneUnited hoping to open an account with a second chance. "But they assured me that I was fine. I've just opened a regular bank account." Jackson said in the year of 2018. "That helped me get it done."
Jacqueline Boles, director of retail banking at Industrial Bank, says expanded access, especially to small business lending, means more solid communities. "Small enterprises in our communities will employ people that look like them. Now, these individuals are able to earn an adequate living," she says.
Explore across the U.S.
Black-owned banks are a powerful political force
Jackson's adoptive mom, Amy McCabe Heibel, and her partner shifted to OneUnited after they saw an increase in media and social media coverage of black-owned banks. "For us as a biracial family it was crucial for us to put our money where our priorities are," she said in the year 2018.
That includes "having money in a company which invests in communities of color," but those aren't the only advantages, McCabe Heibel said. "The pictures are of people that look like the those we've known," she added, and "communication is clear. It's not full of financial industry doublespeak."
McCabe Heibel isn't alone in person who has opted for a black-owned bank to protect their ethical values. "A very diverse group of customers are coming to the bank to help us grow," Williams said. "They appreciate the fact that their funds are helping the development of communities."
A number of black-owned banks, such as Industrial and Industrial Community Development Financial Institutions. They invest 60% of their assets back into low- and moderate-income areas, according to Boles.
If they do make the switch, they can expect services similar to those they get in other banking institutions. In OneUnited's case, that includes online and mobile banking as well as bill pay and remote deposit for check.
Saunders encourages all to think about a black-owned bank. "Not only do we want to do well when possible however, we're also trying to be good and I think that ought to be the case for all," she says.
>> Want to do more? Find out more about
Where Black-owned banks stand
Black-owned banks were created during segregation. During this time, many African Americans didn't have access to capital, as per Saunders.
The number of banks with the majority owned by African Americans in 2007, before the recession. But as the communities that these banks were serving suffered greater-than-average losses in jobs and home foreclosure rates and banks also suffered as well. The most recent FDIC statistics show 23 institutions owned by blacks and managed by blacks which is down from 24 at the end of 2016, just after #BankBlack went viral.
Of the banks that remain in the business, around half report less assets as they did at the year's end, prior to #BankBlack. Banks with more than $100 million of assets were more likely to make gains over smaller ones, but larger banks weren't immune from financial difficulties. New York's Carver Federal Savings Bank falls just behind OneUnited in terms of assets, however it reported $135 million less assets in September 2018 than in December 2015.
For some banks, #BankBlack could be a loss-making strategy, as per Industrial Banks' Boles. "We earn money through our extensive relationship with our customers," the bank's CEO says. which includes loans or credit cards. Checking and savings accounts, especially unused ones, are financial liabilities, because they require banks to pay for online banking as well as other services with little of a return -- meaning supporters should move their finances to the next level, too.
Other banks -- such as OneUnited and Industrial have seen growth after #BankBlack. OneUnited now has total assets of about $649 million according to the latest FDIC data.
Industrial has also seen an increase in activity. In a typical week, Boles said, they have approximately 150 online application for accounts in the process. Following #BankBlack, she states, "We had up to 2000 applications sitting waiting in the queue." Bank was forced to pull in extra help to manage the increase in applications and continues to see rises in interest each time again.
"The community is beginning to understand the importance of their dollars," Williams said, "and the need to be more purposeful when it comes to how it makes use of the money."
If you want to #BankBlack, take a look at these alternatives
Jeanne Lee contributed to this report.
Author bios: Alice Holbrook joined NerdWallet in 2013 and is currently an editor on the home/mortgages team. The work she has done was mentioned on USA Today, MarketWatch, Newsweek and The Washington Post.
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