Community Banks Outperform In Services To Underserved

Several studies by the Woodstock Institute underscore an important role community development banks play in the financial institutions industry: serving the "underserved."

One of those studies looked at how banks in the Chicago area served minorities and lower-income consumers. What it found was that in 2001, a higher percentage of loans from community banks went to minorities and lower income people than what "all other lenders" were providing. For example, over 52 percent of community development banks' loans for home purchases went to lower income/minorities as opposed to about 35 percent of other lenders' loan portfolios. Almost 85 percent of home purchase loans in community banks went to minorities compared to about 42 percent of other lenders' loans.

A second Woodstock Institute study, which looked at the programs of specific banks across the nation, found that providing financial services for lower-income consumers is financially sustainable. The study says factors that contributed to that profitability included electronic technology, cross selling capabilities, and staff training. Among the banks that were featured in the study were Union Bank of California, Banco Popular de Puerto Rico, First Bank of the Americas in Chicago, First Interstate Bank in Montana and Wyoming, and Wells Fargo Bank in Wisconsin.

Woodstock also released the followed related statistics:
Nationwide, the number of community development banks has increased from 27 in 1992 to 39 in 2001. In the same period, deposits at those banks grew from $1.72 billion to $4.22 billion. Lending increased from $802 million to $2.91 billion.

Copyright © 2003 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 12, 3/03