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Fewer Black-Owned Banks Survive to Fill Vital Financial Needs
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Fewer Black-Owned Banks Survive to Fill Vital Financial Needs
The article was written by Alice Holbrook Assigning Editor | Savings, homebuying and banking products Alice Holbrook edits homebuying content at NerdWallet. She has covered personal finance issues for more than a decade . She has also worked for NerdWallet's banking as well as insurance teams and was also a part of a stint on their copy desk. The location of her work is Ann Arbor, Michigan.
Updated on February 6, 2018.
Written by 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 then moved up to the position of assistant assigning editor, and eventually to the position of lead assigning editor. The writing of Tony has been highlighted 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 pay us. This affects the products we feature as well as the place and way the product is displayed on the page. But, it doesn't affect our assessments. Our opinions are our own. Here's a list of and .
The hashtag #BankBlack sparked a flood of attention to black-owned banks when it became a viral topic in the middle of 2016 But two and a half years later, the majority of those institutions have balance sheets that are moving towards the opposite direction.
The hashtag was inspired by a calling on individuals to open accounts with black-owned banks. The rapper's preference for his bank -- Georgia-based Citizens Trust Bank -- is among those that have grown since #BankBlack began. But for many black-owned banks, the picture is less than rosy, with lower assets and even closures.
"The operating costs [and] the costs of regulating make it very difficult to operate a profitable community bank," says Kim Saunders who is president of the National Bankers Association. The problem isn't unique to black-owned banks, says Saunders -- it's something all smaller banks face. "Scale matters."
However, on Twitter, people are still tagging their enthusiasm and plans to move their money. Here's why black-owned banks are worthy of saving.
>> MORE:
Black-owned banks offer needed access
African-Americans as a group are not well-served by banks. Almost half are either unbanked or underbanked, which means they can supplement their bank account with often-costly alternatives such as check cashers and payday lenders. This is more than double the amount of the population as a whole, according to a 2018 Federal Deposit Insurance Corp. report.
Black-owned banks play a significant role to play in improving those statistics.
As an example 67% of mortgage loans are given to African-Americans as per 2013 remarks made by Martin Gruenberg, former chair of the FDIC. Among banks that aren't black-owned and owned by blacks, less than one percent of mortgages are given to African-Americans. The residents of the neighborhoods that banks serve tend to have low to moderate incomes.
Saunders calls the approach "compassionate loaning." "We're going to be with our customers] in the good and difficult times" she assures us.
OneUnited is the largest black-owned lender by assets, offers second-chance checks for customers who've been denied accounts in the past secured credit cards for those who need to rebuild damaged credit as well as instruction for homebuyers who are new to the market.
"The cities we support are primarily brown and black," said Teri Williams the president of OneUnited and chief operating officer, in a 2018 interview "and on the income side, many are those who are struggling. There are people aged 50 and 60 who tell us they've never set foot in an institution. They didn't feel welcomed. They didn't feel that banking was for them."
After being victimized by fraud involving check cashing, Travion Jackson couldn't open an account with his family's bank. He finally tried OneUnited in hopes of opening another account. "But they told me they were fine with me. I opened a new bank account." Jackson said in the year 2018. "That improved it."
Jacqueline Boles, director of retail banking at Industrial Bank, says expanded access, particularly to small-sized business lending, leads to more stable communities. "Small enterprises in our communities will hire people who look like them. Now, these individuals are able to earn an adequate living," she says.
>> Find across the U.S.
Black-owned banks can be a political force
Jackson's adoptive mother, Amy McCabe Heibel, and her husband switched to OneUnited after they saw an increase in media and social media coverage of banks owned by blacks. "For us as a family of biracial origin, it was important for us to put the money where our values have been," she said in the year 2018.
That includes "having funds in a location that invests in the black community," but those aren't the only advantages, McCabe Heibel said. "The images are of people who look like people we've met," she added, and "communication is transparent. It's not full of financial industry doublespeak."
McCabe Heibel isn't alone in one who chooses a bank owned by blacks because of ethical concerns. "A quite diverse set of people are choosing our bank," Williams said. "They like the fact that their funds are helping the development of communities."
Many black-owned banks, including Industrial and Industrial Community Development Financial Institutions. This means that they invest 60% of their assets back into low- to moderate-income communities, as per Boles.
If they do make the switch, they can expect services similar to the ones offered in other banking institutions. In the case of OneUnited, that includes mobile and online banking including bill pay, as well as remote deposit for check.
Saunders suggests everyone consider a black-owned bank. "Not only are we seeking to do well when possible however, we're also trying to be good and I believe that this should be a common theme for everyone," she says.
>> Want to do more? Discover more about
The Black-owned banks' position
The first black-owned bank was established in the era of segregation, when a lot of African Americans didn't have access to capital, as per Saunders.
In 2007, there were 44 institutions with majority African-American ownership in 2007 prior to the recession. However, when the communities these banks served suffered higher-than-average job losses and home foreclosure rates The banks were also affected, too. Recent FDIC statistics show 23 institutions owned by blacks and managed by blacks, down from 24 at the close of 2016, just after #BankBlack went viral.
Of the banks that are with us, about half have reported less assets as they did at the close of 2015, prior to #BankBlack. Banks with greater than $100 million in assets were more likely to gain over smaller ones, but bigger banks were not immune to problems with finances. New York's Carver Federal Savings Bank falls just behind OneUnited in terms of assets. However, it reported $135 million in assets less in September 2018 than in December 2015.
For certain banks, #BankBlack could have actually been a money-losing proposition, according to Industrial Banks' Boles. "We make money from comprehensive relationship with our customers," Boles says. which includes loans as well as credit card. Savings and checking accounts, particularly those that are not used, are financial liabilities, as they require banks purchase online banking as well as other services without much of a return -- meaning those who support #BankBlack need to move their money around, as well.
Other banks, including OneUnited and Industrial -- have risen following the #BankBlack scandal. OneUnited currently has assets of around $649 million, as per the most recent FDIC information.
Industrial too has seen an increase in activity. On a typical week Boles stated that they had about 150 new online application for accounts pending. Following #BankBlack, she said, "We had up to 2000 applications sitting in the queue." The bank needed to call in additional assistance to deal with the surge and continues to see increases in interest every now and again.
"The community is starting to realize the power of its dollars," Williams said, "and the necessity of being more deliberate when it comes to how it makes use of the money."
If you're interested in #BankBlack, look into these options
Jeanne Lee contributed to this report.
The author's bio: Alice Holbrook joined NerdWallet in 2013 and is now an editor on the home/mortgages team. She has had her work highlighted in USA Today, MarketWatch, Newsweek and The Washington Post.
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