Is time running out to save black-owned banks?

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A recent bank failure and a new legislative effort are drawing attention to the struggles of black-owned banks.

City National Bank of New Jersey was shuttered by regulators earlier this month, reducing the number of black-owned banks to 21.

The failure came on the heels of a new effort by Rep. Gregory Meeks, D-N.Y., to help minority-owned banks. Meeks is working on a draft of the proposed Ensuring Diversity in Community Banking Act, which would boost federal government deposits in minority banks and provide incentives for investing in those lenders.

“Addressing the rapid disappearance of minority banks, and related issues including banking deserts and lending discrimination are priorities,” said Andrei Vasilescu, a Meeks spokesman. Meeks expects to formally introduce the bill “in the coming weeks and looks forward to bipartisan support."

Meeks, as chairman of the House Financial Services Committee’s Subcommittee on Consumer Protection and Financial Institutions, held a hearing last month on the challenges minority banks face. He’s set to hold a session on Wednesday to question regulators about efforts to promote minority institutions.

Black-owned banks have suffered greatly since the financial crisis, with their ranks declining by more than half since the end of 2007.

Eight of the 22 black-owned banks in business on June 30 lost money over the prior 18 months, including City National, which lost $5.1 million during that span, according to data compiled by the FDIC. Six others earned less than $1 million over that period.

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Meeks' proposal is the latest initiative to boost interest in black-owned banks.

In October, the $667 million-asset OneUnited Bank in Boston, the largest black-owned bank, unveiled BlackBank X, a campaign built around a debit card with up-to-date features including tap-to-pay and early access to paychecks for direct depositors.

Other efforts have floundered.

The Black Money Matters movement, led by rapper Michael Render in 2016, led to a initial uptick in deposits. The lift was short-lived; deposits at the black-owned banks that remain open have fallen by 3% since the end of 2017, to $3.9 billion on June 30, according to data compiled by the Federal Deposit Insurance Corp.

Total assets held by black-owned banks have fallen by nearly 25% since peaking at $6.8 billion in 2008.

De novo efforts with a minority focus have also failed to gain traction since the crisis.

An initiative to open Marathon International Bank, a proposed de novo that would have catered to the Ethiopian-American community in Washington, fizzled out. Moxy Bank, a proposed black-owned bank in Washington, has yet to open nearly a year after securing conditional approval from the FDIC.

A call to Moxy wasn't returned.

Meeks’ proposal is “a good first step,” said Amy Forester Roberti, vice president of congressional relations at the Independent Community Bankers of America, adding that the ICBA has been providing input during the drafting process.

Along with its deposit and investment provisions, Meeks’ bill would create a streamlined application process for minority banks and credit unions to be certified as community development financial institutions. As CDFIs, they would be eligible to issue government-guaranteed bonds whose proceeds could serve as capital for community investments.

“Minority depository institutions just naturally fit” in the CDFI sector, Roberti said. “This is the first time in our memory a member of Congress has shined the light on minority institutions."

Black-owned banks have been helping with drafting Meeks' bill through the National Bankers Association, which represents minority- and women-owned banks, said Teri Williams, president and chief operating officer of OneUnited Bank.

"I do think it will be beneficial," Williams said. "Clearly, something needs to change in order to preserve and promote black banks."

The FDIC arranged the sale of City National's deposits, and most of its assets, to the $436 million-asset Industrial Bank, a black-owned bank and CDFI in Washington. Industrial agreed to operate three of City National's branches, including one in New York's Harlem neighborhood. It would be Industrial's first expansion beyond the nation's capital.

"This acquisition will allow us to expand our footprint into the northeast region and deepen our commitment to impacting economic development in various communities," Industrial CEO B. Doyle Mitchell Jr. said in a press release announcing the deal.

While she was glad to see another black-owned bank take on City National's assets and deposits, Williams said she was disheartened by the failure.

"All of the black banks, all 21 of us, are very close," Williams said. "We all know each other. ... When we lose one, when a bank closes, it's very sad for us because there’s a lot of history all of us share."

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CDFIs Failures ICBA Washington DC Community banking
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