Liquidity is the lifeblood for all banks. With it, they’re able to extend personal and small business loans and underwrite mortgages, among other things. But for African American lending institutions, liquidity remains a challenge.
To contend with that fact, the Congressional Black Caucus Foundation, Inc. announced that it will deposit a total of $5 million in African American banking institutions in order to provide greater liquidity for these banks.
A total of five banks — located in the North, South, East and Midwest — will receive $1 million each. All are ranked among the BE 100s:
- Chicago-based Seaway Bank and Trust Co. (No. 3 on the BE Banks list with $546.59 million in assets)
- New Orleans-based Liberty Bank and Trust Co. (No. 4 on the BE Banks list with $536.29 million in assets)
- Washington, DC-based Industrial Bank (No. 7 on the BE Banks list with $364.04 million in assets)
- Newark, NJ-based City National Bank (No. 8 on the BE Banks list with $331.13 million in assets)
- Durham, NC-based M&F Bancorp (No. 10 on the BE Banks list with $293.71 million in assets)
The last few years have been unforgiving for many community banks. While most didn’t get caught up in the trading of mortgage-backed derivatives that devastated a slew of commercial banking giants, many were heavily exposed to the real estate downturn by way of loans to churches and local commercial properties. And while mainstream America was fretting over the stock market, inner cities saw foreclosures and business bankruptcies skyrocket. And during the throes of the Great Recession, capital dried up as unemployment rose.
B. Doyle Mitchell Jr., president and CEO of Industrial Bank, calls the transaction a “terrific start and a great show of support.” According to Mitchell, Industrial Bank provides residential and commercial real estate loans, a significant amount of which are with churches. “It provides liquidity for us to lend in our communities.”
Black buying power is projected to reach $1.1 trillion by the year 2015, according to a report by information and analytics company Nielsen and the National Newspaper Publishers Association. However, much of that spending happens outside of the African American community.
“African American banks put almost all of our assets right back into our community,” says Mitchell. “And the more liquidity we have the more we can lend in our community.”
Ron Busby, Sr., CEO, U.S. Black Chambers, Inc., says it’s about keeping the dollars circulating in the black community.
“As small black businesses invest in our local black and minority banks in our communities, they get stronger,” says Busby. “The majority of small business loans made by minority banks go to small, minority owned businesses and churches.”