Independent Banker - May 2017 - 52

$390 million-asset Industrial Bank in Washington, D.C.
" When you have 1,500 people in the room and three
blacks, you know you're one of only three. "
" I'm used to it, " adds Suchitra Padmanabhan, president
of the $31 million-asset CBW Bank in Weir, Kan.-the
number-two community bank in its asset class (see page
Minority banks hold almost 7 percent of community
banks' assets. Like other community banks, they struggle
with regulatory burdens, low interest rates, rising technology
costs, and keeping a high quality of commercial loans
as well as a profit in deposit accounts.
What sets them apart is a clientele that checks the
boxes of one or more minority categories: racial or ethnic
minority, immigrant, poor English skills, a substantial
unbanked or underbanked population, less income and
less education than average.
Here's the result: smaller loans and deposit balances.
In areas that are more diverse
now, you've got to decide
if you're willing to hire
someone of another
color even if they
might not be your
first choice.
-B. DOYLE MITCHELL JR.,
INDUSTRIAL BANK
Undiversified loans and deposit portfolios. Difficulty raising
capital. Given all that, greater regulatory scrutiny. A
limited universe of clients. A tougher time attracting and
keeping qualified staff.
" Since African-Americans don't have the wealth or
the income that our counterparts have, we have a higher
past-due ratio, and our asset quality might not be as good, "
Mitchell explains. " Some businesses may not have the
capital or the resources that other business owners have. "
He's confident in his bank's stability, though. " [Regulators]
tell us all the time that our problem-asset level tends
to be higher, " he says. " We've shown that we can manage
at that level. "
" A lot of regulation now is about concentration of com39).
As an Indian-American woman, she is a minority in
the banking world twice over. " I see a really long line to
the men's room and none at the women's, " she says. " Think
of the positive things. "
Every challenge has its upside. But as the country grows
ethnically more diverse-even in some rural areas-banking
will need to grow more diverse too. And the bankers
we talked to have some ideas about how to do it.
The facts and figures
The FDIC defines a minority bank as any depository
institution where one or more African-American, AsianAmerican,
Hispanic or Native American people own at
least 51 percent of the voting stock. An institution is also
considered minority if most of the board is minority and
the communities served are predominately minority.
Minority banks are as diverse in size as the rest of the
community banking world. Those 157 minority-owned
banks range in asset size from $24 million to $33 billion.
They have names as all-encompassing as American Plus
Bank and as specific as Cathay Bank, State Bank of India
and Native American Bank. A few have just one location;
International Bank of Commerce, in Texas and Oklahoma,
has more than 200.
52 ICBA IndependentBanker May 2017
mercial credit, " notes Jill Sung, president and CEO of New
York's $250 million-asset Abacus Federal Savings Bank. " If
we're serving certain populations that have specific needs
for that kind of credit, the regulators
shouldn't be worried about
'Oh, you shouldn't have more than
10 percent of that type of loan.' "
Should community banks
7%
Minority banks' share
of US community
banks' assets
reflect their local demographics?
Minority bankers agree that
they should. " If you go into Small
Town USA and the population is
8,000 and 97 percent white, it's
more than appropriate for the
leadership to be white, " says Mitchell, speaking for most.
But America isn't as monolithic as it looks on a map.
Consider the minority labor on Iowa farms, says William
Farrow, president and CEO of Chicago's Urban Partnership
Bank, with $492 million in assets. " This country has a much
higher dispersion of minorities " than the stereotype, he
notes. " Not everyone is concentrated in urban areas. "
The financial sector's slowness to change will affect the
bottom line if it hasn't already, bankers and others say.
Study after study has shown that diversity boosts the bottom
line. " It's Psychology 101, " says Mitchell. " Similarity
breeds familiarity; familiarity breeds comfort. If you don't
Independent Banker - May 2017

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