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  • Community development banks in the news--opportunities for mission investors

    January 13, 2009

    Lisa Hagerman, Tuesday, January 13th, 2009

    Community Development Finance Institutions (CDFIs) have been getting some positive press lately.  Greg Fairchild Associate Professor at the University of Virginia’s Darden School of Business comments that the CDFI model can help us out of the mortgage mess.  CDFIs have built a business model on providing mortgages, building savings accounts and providing equity to small businesses in underserved markets often perceived as too risky, and have done so with charge offs less than or comparable to the overall banking industry.  See the full article in the American Banker (Viewpoint:  CDFI Model Can Show the Way Back to Reality, January 2, 2008).  Cliff Rosenthal, CEO of the National Federation of Community Development Credit Unions comments that CDFIs have strong balance sheets and are relatively unencumbered by the types of losses that have affected mainstream banking and investment institutions ( See Outlook for Community Investing in 2009). 

    Recent press on community banks (See Crain’s New York Business Article November 24, 2008) talks about how as major banks scale back their small business lending, it has created more opportunities for the smaller community banks—that often keep their loans rather than reselling them and follow a due diligence process that emphasizes a company’s finances and credit history.  Carver Federal Savings Bank projects a 15% increase in small business loans this year, with most deals in the $100,000 to $2.5 million range.  Carver Federal Savings Bank is a member of the Certificate of Deposit Account Registry Service (CDARS), a deposit-placement service that allows deposits with member institutions to be eligible for full FDIC insurance of up to as much as $50 million.    

    More for Mission Leadership Committee member, W.K. Kellogg Foundation, has deposited $22.4 million in community banks and credit unions—part of their “mission-driven” commitment (See W.K. Kellogg press release).  Carver Federal Savings Bank and ShoreBank, the largest CDFI, are among the seven selected banks.  

     

    posted 3:45PM 01/13/2009 by Lisa Hagerman

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