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Fewer Black-Owned Banks Survive to Fill Vital Financial Needs Advertiser disclosure: You’re our top priority. Each day. We believe everyone should be able make financial decisions with confidence. Although our site does not include every company or financial product on the market, we’re proud that the guidance we offer as well as the advice we provide and the tools we develop are objective, independent simple, and free. How do we earn money? Our partners compensate us. This could influence the types of products we write about (and the places they are featured on our site), but it doesn’t affect our suggestions or recommendations that are based on many hours of research. Our partners cannot be paid to ensure positive ratings of their goods or services. . Fewer black-owned banks are able to Fill Vital Financial Needs by Alice Holbrook Assigning Editor | Banking, savings, and homebuying items Alice Holbrook edits homebuying content at NerdWallet. She has been covering personal finance issues for more than a decade and previously was a member of NerdWallet’s banking and insurance teams as well as a stint on their copy desk. The location of her work is Ann Arbor, Michigan. February 6 2018, 2018 Edited by Tony Armstrong Lead Assigning Editor | Banking Tony Armstrong began his NerdWallet career as a writer and moved up to assistant assigning editor and then to director of assigning editors on the team for banking. Its work was highlighted on the Los Angeles Times, Mashable, Money, Nasdaq.com, USA Today and VentureBeat. He has been as a guest on Minnesota Public Radio. Tony received a bachelor’s degree in English literature and creative writing in Macalester College. Email:

. The majority of products featured here are from our partners who compensate us. This influences which products we feature and where and how the product is featured on a page. However, this does not influence our evaluations. Our opinions are our own. Here’s a list of and . drove a deluge of interest in black-owned banks when it was first made public in mid-2016 — but two and one-half years later, the majority of those banks have balance sheets that are moving towards the opposite direction. The hashtag was sparked by a calling on individuals to open accounts at black-owned banks. The rapper’s bank of choice – Atlanta-based Citizens Trust Bank — is among the ones that have increased in size since the #BankBlack campaign began. But for the majority of banks owned by blacks, the outlook is not as rosy, with decreased assets and even closings. “The operating costs [and] the regulatory costs make it difficult to operate a efficient community banking institution,” states Kim Saunders who is president of the National Bankers Association. The problem isn’t unique to black-owned banks, she adds — it’s something that all smaller banks face. “Scale matters.” But, on Twitter users are continuing to hashtag their support for and plans to transfer their funds. The following are the reasons why advocates believe that black-owned banks can be a good investment. >> MORE These banks are a great source of access to African-Americans as a population are underserved by financial institutions. Almost half are either unbanked or underbanked, meaning they augment their bank accounts with often-costly alternatives such as payday lenders and check cashers. This is nearly twice the proportion of the population as a whole, according to a 2018 Federal Deposit Insurance Corp. report. Banks owned by blacks have a significant contribution to those statistics. For example 67 percent of their mortgage loans go to African-Americans, according to 2013 remarks made by Martin Gruenberg, former chair of the FDIC. For banks that aren’t black-owned, fewer than 1percent of mortgages are granted to African-Americans. And residents of neighborhoods the banks serve are likely to have low or moderate incomes. Saunders calls the approach “compassionate credit.” “We’re will be there for our customers] through the good and bad ones,” she says. OneUnited is the largest black-owned bank by assets, offers second-chance checking for those who have been denied accounts in the past as well as secured credit cards for people seeking to repair damaged credit, and training for those who are first-time home buyers. “The cities we service are primarily brown and black,” said Teri Williams, OneUnited’s president and chief operating officer in a 2017 interview “and when it comes to incomes, many are people struggling. There are people who are in their 50s and 60s who claim to have never set foot in an institution. They weren’t comfortable. They didn’t believe banking was for them.” After being victimized by fraud involving check cashing, Travion Jackson couldn’t open an account at his family’s bank. He finally tried OneUnited hoping to open another account. “But they said that I was fine. I opened a new regular account,” Jackson said in 2018. “That has made it more efficient.” Jacqueline Boles, director of retail banking at Industrial Bank, says expanded access, particularly to small-scale business loans, will lead to more solid communities. “Small companies in our communities will employ people who look similar to them. Now, these individuals have an opportunity to make an adequate living,” she says. You can find them across the U.S. Banks owned by blacks are a powerful political influence for Jackson’s adoptive mother, Amy McCabe Heibel, and her partner shifted to OneUnited following the increase in media and social media coverage of black-owned banks. “For us as a family of biracial origin it was essential to place our money where our values are,” she said in the year of 2018. This means “having money invested in a company which invests in black communities,” but those aren’t the only benefits, McCabe Heibel said. “The pictures are of people that look like the people we know,” she added, and “communication is clear. It’s not full of the doublespeak of the financial industry.” McCabe Heibel isn’t the only person who has opted for a black-owned bank for ethical reasons. “A vast array of people are choosing our bank,” Williams said. “They appreciate the fact that their money is supporting the development of communities.” Many banks owned by blacks like Industrial and Industrial, are classified as Community Development Financial Institutions. This means they put 60 percent of their assets into low- and moderate-income neighborhoods, as per Boles. Customers who switch to OneUnited will receive services similar to those offered with other institutions. In OneUnited’s case, that includes mobile and online banking as well as bill pay and remote deposit of checks. Saunders encourages all to think about an institution that is black owned. “Not just are we trying to succeed when it’s possible, but we’re seeking to be good and I think that should resonate with everybody,” she says. >> Want to do more? Learn more about the places where black-owned banks stand . Black-owned banks were founded through segregation. During this time, the majority of African Americans didn’t have access to capital, as per Saunders. The number of banks that had majority African-American ownership in 2007, prior to the recession. However, when the communities that these banks served experienced higher-than-average job loss and foreclosure rates on homes and banks also suffered as well. Most recent FDIC data shows 23 black-owned and managed institutions in comparison to 24 at the close of 2016, shortly following the virality of #BankBlack. Of the banks that remain in the black community, around half have reported less assets than they did at the end of 2015, before went viral. Banks that have more than $100 million of funds were much more likely report gains over smaller ones, however bigger banks were not immune to financial troubles. New York’s Carver Federal Savings Bank falls just behind OneUnited in terms of assets, however it posted more than $135 million less assets in September than it did in the month of December. For certain banks, #BankBlack might have actually been a money-losing strategy, according to Industrial Banks’ Boles. “We profit from our comprehensive relationships with customers,” the bank’s CEO says. including loans or credit cards. Checking and savings accounts, particularly ones that aren’t used are financial liabilities because they require the banks to cover online banking and other services without a return — meaning supporters should move their financial assets, as well. Other banks — including OneUnited and Industrial have seen growth after #BankBlack. OneUnited currently has assets of $649 million according to the latest FDIC figures. Industrial, too, has experienced an increase in its assets. In a typical week, Boles stated that they had around 150 new online account applications in the process. After #BankBlack, she states, “We had up to 2,000 [applications] on the waiting list.” The bank was forced to call in extra assistance to deal with the surge, and it still sees increases in interest every often. “The community is beginning to recognize the power of its dollars” Williams said, “and the necessity to be more deliberate in how it uses the money.” If you’d like to check out these alternatives Jeanne Lee contributed to this report. The author’s bio: Alice Holbrook joined NerdWallet in 2013 and is now an editor for the team that deals with home and mortgages. Her work has been covered in USA Today, MarketWatch, Newsweek and The Washington Post. 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