Minority-owned banks' performance has significantly improved: FDIC

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WASHINGTON — Minority depository institutions’ financial performance has “significantly improved” over the past five years, though the number of charters has continued to decline, according to a study released Tuesday by the Federal Deposit Insurance Corp.

The study found that loan performance was a key factor in the overall improved financial performance of such institutions. While they tend to outperform non-minority-owned community banks in generating revenue, they have much higher expenses, the report said.

"The health of minority depository institutions is essential to the health of our nation's financial system,” FDIC Chairman Jelena McWilliams said in a press release. “FDIC is dedicated to preserving and promoting the financial strength of MDIs. The vitality of these banks is critical given their role in supporting the economic well-being of minority and traditionally underserved communities."

The study was announced at an interagency MDI and Community Development Financial Institutions conference between the FDIC, Federal Reserve and Office of the Comptroller of the Currency.

The decline in the number of minority charters is a reflection of trends in the overall banking industry. From 2008 to 2018, the number of minority depository institutions declined 31%, which was more gradual than the 33% decline in community banks, the study found. At the end of 2018, “the MDI segment had no institutions that opened since 2013,” the study said.

McWilliams also announced several key initiatives focused on such banks, including a new subcommittee to the FDIC’s Advisory Committee on Community Banking. There will also be a series of roundtables between minority depository institutions and FDIC-supervised institutions to promote collaboration, such as direct investment and deposits in MDIs.

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