The number of Black-owned banks has dwindled over the years from 48 in 2011 to just 21. Suffering from too few customers and undercapitalized to lend money and help build wealth, the remaining banks have struggled to survive.
The existing 21 Black-owned banks had assets totaling just $4.85 billion, according to the Federal Deposit Insurance Corp. By comparison, the top four banks in the U.S. each have more than $1.6 trillion in assets, according to Bank Rate.
Two Black-led banks have merged to help ensure their survival.
Under the merger, Los Angeles’ Broadway Federal Bank and Washington, D.C.’s City First Bank will form the largest Black-led bank in the U.S., The Los Angeles Times reported.
The deal joins Broadway Federal’s parent — the publicly traded Broadway Financial Corp. — with City First’s parent, CFBanc Corp., to create a combined entity with more than $1 billion in assets. The deal is expected to be finalized in the first quarter of 2021. The new firm will be publicly traded.
In wake of the continuing protests across the U.S. over racial injustice, companies are taking a closer look at Black banks. Streaming giant Netflix, for example, pledged in June to invest up to $100 million in financial institutions that support Black communities.
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The #BankBlack movement was launched in 2016 after fatal police shootings of Black men.
The Broadway-City First Bank merger will bring more capital and capability, allowing it to “direct more capital through loans and into the underlying communities that we both serve,” said City First President and CEO Brian E. Argrett, who will be CEO of the new, as-yet-unnamed entity.
“Being a Black-owned bank or credit union is a federal designation. The Federal Deposit Insurance Corp, or FDIC, classifies these institutions as Minority Depository Institutions, or MDIs,” Bank Rate reported. According to the feds, MDIs are any depository institution in which minority ownership is 51 percent or greater, or in which the majority of board members is composed of minority members and the community the bank serves is predominantly minority.
The union of these two banks will not only help the institutions but the communities they serve.
Listen to GHOGH with Jamarlin Martin | Episode 73: Jamarlin Martin Jamarlin makes the case for why this is a multi-factor rebellion vs. just protests about George Floyd. He discusses the Democratic Party’s sneaky relationship with the police in cities and states under Dem control, and why Joe Biden is a cop and the Steve Jobs of mass incarceration.
Black-owned and Black-led banks need to increase the number of checking and savings accounts, business lines of credit, mortgages, and other loans to “significantly move the needle,” said William Michael Cunningham, economist and CEO of consulting firm Creative Investment Research, in an LA Times interview.
“The lack of Black wealth means that you don’t have a community asset base you can utilize to create larger Black financial institutions,” he said. “The money just isn’t there.
“The asset base is too small for them to have a measurable economic impact on the Black community,” Cunningham added. “That’s just the bottom line.”