Gail MarksJarvis: Bank Black movement faces challenges

McClathcy-Tribune Information Services

September 26, 2016

Lori Roper is planning her wedding and preparing to put all the arrangements into place: choosing the venue, ordering the cake, picking a dress, selecting music and opening a checking account at an African-American owned bank.

"This needed to be done," she said as she recently opened the account at Seaway Bank and Trust Co. with her fiance, Troy Mackey. They will pay all the wedding bills out of the new account, and Roper thinks selecting a black-owned bank is crucial for starting the marriage right.

"We are committing to the community, and we are committing to each other," she said as she and Mackey signed the papers at the 51-year-old bank in Chicago’s Chatham neighborhood.

Roper, an attorney supervisor for the Cook County public defender’s office, was inspired by a campaign at Seaway that’s a local version of a national effort known as Bank Black. The slogan is supposed to induce people to save money at banks owned by African-Americans so the institutions have the money on hand to improve surrounding black communities with loans crucial to individuals and small-business owners.

Whether opening new accounts at black banks will ultimately turn around neighborhoods ravaged by a lack of investment and jobs, however, is being questioned by experts who have watched banking for decades. This is not the first time a movement has emphasized supporting black banks, and a previous one during the civil rights era fell flat, said William Bradford, a University of Washington finance professor.

If the current effort motivates a lot of affluent people to open accounts in black banks, this round of black empowerment might work better than the last to help black banks thrive, he said. "But typically there is failure."

When the country was more segregated, black-owned banks were key to lending and banking services in predominantly black areas, but since then there has been increased competition from larger banks. With deeper pockets and advanced technology such as ATMs and 24-hour call centers, the giants have absorbed banking customers while black banks have struggled to handle extra costs and stay profitable, Bradford said.

The latest campaign to move money into black banks took hold nationally in July when rapper Killer Mike, in an Atlanta radio interview, responded to a question about what to do about the shootings of two black individuals by police in St. Paul, Minn., and Baton Rouge, La. Killer Mike’s answer: Fight back economically. Put money into black-owned banks so the banks will employ people from nearby and give loans to the individuals and businesses that will allow them to prosper.

Running under hashtags #bankblack and #moveyourmoney on Twitter, other celebrities joined in, including singer Solange Knowles, sister of pop star Beyonce. On Knowles’ Instagram account, she announced it was "time to literally put my money where my mouth is."

In August, Seaway, one of three Illinois black banks, which are all headquartered in Chicago, announced its own Bank Black campaign as it used social media and emails to community leaders and customers to join the movement. Seaway asked each person to bring 20 people to the bank to open new accounts. The participants were welcomed to a street fair-type setting with picnic tables and food, a live band, and bank tellers ready to process paperwork in the parking lot next to the bank.

Although bringing 20 new customers turned out to be a tall order for most participants, people such as Roper made the trip to Chatham. Meanwhile, community leaders such as Leon Finney, president of Woodlawn Community Development Corp., urged parents and grandparents to bring children to open their first accounts and provided children $10 through a church donation to get started.

"I’m starting with $10, but hope to get a summer job and save $1,000 by 2017," said 15-year-old Kyla Reynolds, who opened accounts with about 20 other children ushered to the bank by Aleta Clark, a community activist from the Englewood neighborhood.

"We have to teach our kids to save," Finney said. The nation’s 43 million African-Americans are expected to spend $1.3 trillion in 2017, but they aren’t harnessing their money adequately to build their personal wealth or the black community’s wealth, he said.

"It’s high time for black dollars to stay in the community," Killer Mike said in an interview, noting that most of the money black people spend goes toward white-owned stores and other businesses.

"At a certain point you have to do what successful other people do: Take control of your community; fight economically. And black banks have been the backbone of black commerce. If a black business doesn’t get a loan it can’t be successful, it can’t hire other black people, and those people can’t buy houses and land and send their children to better schools."


Since Bank Black started gaining attention in July, Seaway has opened 1,306 new accounts and has received about $8 million in new deposits, said Daryl Newell, Seaway’s chief retail banking officer. Typically, the bank brings in about 10 to 20 new accounts daily, he said.

Throughout the country, millions of new dollars are flowing into black banks, said Michael Grant, president of National Bankers Association, a group that represents minority institutions. He has no national count but noted that in Atlanta, where Killer Mike lives and has been outspoken, Citizens Trust Bank reportedly attracted 5,000 new accounts in a single week.

To build on the momentum in Chicago, Trinity United Church of Christ is planning Move Your Money Sunday for Oct. 2, where four black institutions will be featured as outlets for new accounts: Illinois Service Federal Savings & Loan Association, South Side Community Federal Credit Union, Trinity United Church of Christ Federal Credit Union and Seaway.

"As word of mouth continues on Bank Black, people continue coming" to Seaway’s Chatham location and eight others in the Chicago area and Milwaukee, Newell said. "They say they want to support the movement."

The campaign is important to the bank, which has been under pressure from regulators since the 2008 financial crisis to raise capital. When deposits decline, the ability of banks to lend money also drops.

According to Federal Deposit Insurance Corp. records, Seaway lost $6.8 million in the first half of the year, compared with a $1.2 million loss in the same period a year ago. Nearly 17 percent of Seaway’s loans were seriously delinquent, much higher than the 1 percent at Illinois banks overall. Loans on the books declined from $231 million in June 2015 to $217 million this June, and deposits have dipped slightly to $303 million.

Seaway Chairman Veranda Dickens said the need to bring in capital is separate from the Bank Black campaign, which aims to bring in deposits and build a sense in the community that saving is essential. The bank will work with investment bankers to attract equity investments, she said.

She noted the bank was hit hard in the housing crash, when many of the homes in nearby neighborhoods plunged in value and left people struggling to pay mortgages.

The median household income in Chatham was $33,850 in 2014, and the unemployment rate was 22.6 percent, according to census data tracked by the Great Cities Institute at the University of Illinois at Chicago. More than half of the people in Chatham have stretched to pay for housing — among renters, 56.5 percent were devoting more than 30 percent of their income to rent in 2014, and among homeowners, 53.2 percent were paying more than 30 percent toward their mortgages. People spending more than 30 percent on housing struggle to make ends meet.

Seaway and the other two Illinois black banks have been under pressure from regulators.

Earlier this year, a family from Ghana invested $9 million in Illinois Service, a Bronzeville neighborhood lender that was founded in 1934 and had been close to failing before it was rescued. Troubled banks unable to turn themselves around risk seizure by the government, which typically then hands the reins to another bank.

Urban Partnership Bank, whose financial backers include a who’s who of Wall Street but which serves a largely black area, is in trouble with regulators and is trying to raise $15 million in capital.

The FDIC considers an institution a minority bank if at least 51 percent of its stock is owned by minorities, or if most of its board of directors is minority and the community it serves is mostly minority.

More than 160 minority banks were in business as of the first quarter, according to the FDIC. That includes 24 black banks. In 2008, there were 215 minority banks, including 41 black banks. The total number of insured institutions currently stands at more than 6,000.

Bradford, the University of Washington professor, said "capturing deposits and lending in the community is not going to work."

Banks, he said, must earn a profit, but the model doesn’t work well at small banks in low-income communities. Lower-income people, he notes, can’t afford to save much, and small accounts require accounting and services that are expensive for banks to operate. Meanwhile, he said, "You are going to be less able to generate good lending results" when making risky loans to small struggling businesses.

"Black banks should not be the leaders in getting wealth into black communities," he said. "It should be large banks with affluent customers in addition to less-affluent customers." That blend provides a more solid base of deposits to use in granting riskier loans. He said that’s the idea behind the Community Reinvestment Act, which Congress enacted in 1977 to reduce lending discrimination. Banks were required to show that they were meeting needs for loans in black communities.

Yet, black leaders emphasize that a greater number of blacks are affluent, and their support for black banks can help. They point to a Nielsen report from 2015 that explores the spending habits of high-income blacks.

And Lyneir Richardson, CEO of Chicago Trend, an organization aimed at uplifting neighborhoods, said with the current interest among people to make an impact with their money, channeling some into a black bank is simple. "It’s something you can do even if you don’t live in that community," he said.