Support Bolsters Minority Banks' Resilience
Minority-owned banks across the United States have proven their mettle in a year of industry upheaval, remaining robust despite initial fears of potential struggle. The resilience exhibited by these institutions, officially known as Minority Depository Institutions (MDIs), has been boosted by concerted support from both the government and larger banks.
"MDIs have emerged stronger now coming out of the pandemic and the recent crisis due to the government support and help from the big banks,"
affirmed James Sills, CEO of M&F Bank, a Black-owned lender based in Durham, North Carolina, at an MDI event hosted by JPMorgan Chase & Co. (NYSE: JPM) in New York.
Challenges and Victories of MDIs in the United States
As of March this year, there were 148 MDIs in the US, reports the Federal Deposit Insurance Corp. Over a quarter of these have vanished in just over a decade, succumbing to insolvency or consolidation. However, those that remain have managed to fortify their financial position.
Robert James, CEO of Carver State Bank in Savannah, Georgia, highlighted the positives, saying, "Coming out of the crisis, as a sector, we now have a stronger return on investment, more income avenues, and are better placed as we head into a possible recession."
The Rise of Racial Equity Pledges and Their Impact on MDIs
The aftermath of 2020's global protests, triggered by the killing of Black man George Floyd by a police officer, saw an uptick in racial-equity pledges by banking giants. The largest US lender, JPMorgan, committed to investing $30 billion over five years to bridge racial inequality. Over $100 million of this pledge has already been invested in MDIs.
These partnerships with banking behemoths like JPMorgan have provided MDIs access to increased capital, technology upgrades, and the ability to hire more staff.
"Partnering has helped minority-owned banks expand their revenue sources, cushioning their balance sheets," confirmed Samuel Cox, CFO of Citizens Trust Bank, a Black-owned lender based in Atlanta.
Rising Interest Rates and External Support Bolster MDIs
Despite the allure of higher yields pulling depositors towards rising interest rates, MDIs have strengthened their balance sheets. Moreover, they've been unfazed by the turmoil caused by the collapse of three large regional lenders, which has seen customers seeking refuge with bigger institutions.
Lenders such as Bank of America Corp (NYSE: BAC) have shown their support by pledging to deposit $200 million into minority-focused lenders. Additionally, it has made equity investments of $42.5 million in 22 MDIs and Community Development Financial Institutions.