Banking with Impact: Survey of “Mission-Oriented” Banks Shows Major Benefits for Nation’s Most Disadvantaged Communities

A “Very Different Profile” From Typical U.S. Banks: Findings Explain Why More Impact Investors Should Look at Banks Focusing on Minorities, Women, and Other Underserved.

Distressed communities across the U.S. with above-average poverty and unemployment levels are seeing more loans, job creation, and access to banking services as a result of the work of the “mission-oriented banks” according to a new report from the National Community Investment Fund (NCIF), a nonprofit investment fund that helps steer capital to such institutions.

NCIF analyzed a collection of public and self-reported data for 2013 from 24 pioneering banks, 21 of which are certified Community Development Financial Institution (CDFI) Banks and 16 of which are Minority Depository Institution (MDI) Banks.  The two dozen institutions reported nearly $1.5 billion in loans, including lending to commercial developments, small businesses, agriculture and consumers.   

Available online the Telling the Story report shows the 24 mission-oriented banks have a strikingly different profile from the broader universe of more than 6,500 U.S. banks:

  • 69 percent of all Home Mortgage Disclosure Act (HMDA)-reported mortgage lending was in low-and moderate-income (LMI) areas, compared to 26 percent for all U.S. banks. Mission-oriented banks have a special understanding of the needs of the distressed communities and work to target products and services that reflect clients’ economic realities. The tighter focus on the needs of such individuals provides impact investors with a clearer way to direct their dollars where they can do the most good.
  • 86 percent of the median reporting bank’s branches are in LMI areas, compared to 40 percent for all U.S. banks.
  • The median poverty rate for the surveyed banks’ branch locations is 1.8 times higher than U.S. banks overall, and the unemployment rate is 1.6 times higher.  Branches are located in areas with poverty rates as high as 71 percent and unemployment rates as high as 23 percent.

NCIF president & CEO Saurabh Narain said:  “Individuals and institutions engaged in impact investing need look no further than their closest mission-oriented bank to find a place where they can make a real and needed difference. These institutions are local, anchor institutions operating oftentimes in underserved communities and the work they do creates long-term change for individuals and businesses. Mission-oriented banks are an important vehicle for community and economic development in their ability to leverage investments through lending activity as well as their depository and non-financial services.”

Kat Taylor, co-founder and co-CEO, Beneficial State Bank, said: “We hold a commitment to strong third-party, auditable metrics like NCIF’s to ensure our banking practice is driving toward a new economy that is fully inclusive, racially just, and environmentally sound; we can always improve — but only if we keep and challenge our benchmarks.”

Wayne-Kent Bradshaw, president and CEO of Broadway Federal Bank, said FSB participates in the data collection process “to highlight the bank’s commitment to our community. Our bank’s Mission Intensity of 90 percent shows that a majority of our loans support low- and moderate-income communities and our mission directly.”

Huey Townsend, chairman, president and CEO of Guaranty Bank and Trust Co. explained that his bank contributes to NCIF analysis “to showcase our institution’s impact in serving the credit and depository needs of the communities we serve – especially in rural Mississippi.”

Other key findings from the 24 banks surveyed in the NCIF report include:

  • More than 44 percent of deposit accounts held less than $1,000, likely reflecting a preponderance of low-income clients.
  • 81 percent clients are minorities and 43 percent are women.
  • 86 percent of bank employees are minorities and 68 percent are women.
  • 64 percent of bank board members are minorities and 20 percent are women.
  • 81 percent of the median reporting bank’s lending activities are aligned with their mission.  NCIF’s Mission Intensity metric tracks such things as loans to nonprofits, loans to low-income borrowers, and loans to minority-owned and women-owned businesses.
  • 70,000 jobs have been created by reporting banks since 1998. Based on 2013 data, approximately 45 percent of jobs created went to women and 65 percent to minorities.
  • $38 million in green or environmentally-friendly lending was reported in 2013.
  • Banks include environmentally-friendly practices in their operations – 22 percent have implemented policies and procedures to enhance green operations and 17 percent seek locally sourced or environmentally-friendly purchasing. 

The NCIF report includes self-reported data from the following 24 banks:

Albina Community Bank, Portland, OR
Beneficial State Bank, Oakland, CA  
Broadway Federal Bank, FSB, Los Angeles, CA
Carver FSB, New York, NY
Citizens Savings Bank & Trust Co., Nashville, TN
Citizens Trust Bank, Atlanta, GA
City First Bank of D.C., N.A., Washington D.C.
City National Bank of New Jersey, Newark, NJ
Community Bank of the Bay, Oakland, CA
Continental National Bank, Miami, FL
Finance and Thrift Company, Porterville, CA
First American International Bank, Brooklyn, NY
First Eagle Bank, Chicago, IL
Guaranty Bank & Trust Co., Belzoni, MS
Illinois-Service Federal Savings & Loan Assoc., Chicago, IL
Industrial Bank, Washington, D.C.
Liberty Bank & Trust Co., New Orleans, LA
Mechanics and Farmers Bank, Durham, NC
Mission National Bank, San Francisco, CA
Native American Bank, N.A., Denver, CO
Security Federal Bank, Aiken, SC
Spring Bank, Bronx, NY
The Harbor Bank of Maryland, Baltimore, MD
Urban Partnership Bank, Chicago, IL

NCIF has collected and analyzed data on mission-oriented banks since 1998 as part of its BankImpact suite of products. BankImpact includes several products including an online database of social performance data, custom analysis for investors, and third-party analysis for banks.

The annual NCIF Telling the Story report uses information self-reported by banks during calendar year 2013. Reported data includes the following: all loan originations, products and services offered, accounts, jobs created, board and staff diversity, environmental outcomes and other mission-related outputs.

Self-reported data is supplemented by publicly-available data sources: 1) Home Mortgage Disclosure Act (HMDA)-reported lending data as of 12/31/2013, accessed through the Federal Financial Institutions Examination Council (FFIEC); 2) Investment Area and Highly Distressed census tract data accessed through the Community Development Financial Institution Fund; 3) Summary of Deposits data as of June 30, 2013, accessed through the Federal Deposit Insurance Corporation (FDIC); and 4) Statistics on Depository Institutions data as of December 31, 2013, accessed through the FDIC.

National Community Investment Fund is a 501(c)(4) nonprofit investment fund that invests in mission-oriented banks and other financial institutions in order to increase access to services and encourage economic development in LMI and underserved communities. NCIF is the largest investor in the mission-oriented banking industry, with investments in 15 percent of all certified CDFI Banks. NCIF has $228 million of assets under management, including $206 million in New Markets Tax Credit allocations. Additionally, NCIF creates innovative business opportunities and facilitates the flow of funds from mainstream, philanthropic, and socially responsible investors as well as public sources. As an impact investor, NCIF pursues a triple bottom line strategy that maximizes social, environmental, and financial returns.

For more information: (312) 881-5841