New investments to back Black-owned banking
Wells Fargo is working with minority depository institutions to help financially empower Black communities.
Small, local banks with aspirations to drive wealth and build up neighborhoods populated by people of color started appearing across the U.S. in the 1900s. Often founded by visionary and civic-minded people focused on the best economic interests of their communities, these banks are now known as minority depository institutions, or MDIs.
Although African American MDIs have proliferated at several points in history, they have also struggled disproportionately due to recessions and other impacts, not unlike the people within the low- and moderate-income neighborhoods they serve. According to a Federal Deposit Insurance Corporation MDI Study, from 2001 to 2018, the number of African American MDIs declined by more than half. From a height of more than 100 Black-owned MDIs, only about 20 exist now.
“MDIs are a viable and very important sector of the banking industry that can directly support the financial health of communities where typically there are gaps in banking services.” — Gigi Dixon, head of External Engagement for Wells Fargo’s Diverse Segments, Representation & Inclusion group
In recent months, a growing movement to bank with Black-owned financial institutions has taken hold, with promotion of MDIs coming from places as disparate as the FDIC and the rap music industry.
From within the banking industry, Wells Fargo has been a leader in empowering MDIs. The company is taking a strategic approach by infusing Black-owned MDIs with equity investments. In addition to the capital investments, Wells Fargo banking teams will be working with MDIs to provide financial, technological, and product development expertise.
Wells Fargo invests in Black-owned banks
Wells Fargo has announced investments in the following institutions:
- Broadway Federal Bank*, in Los Angeles, California
- Carver Federal Savings Bank, in New York, New York
- Citizens Savings Bank & Trust, in Nashville, Tennessee
- Commonwealth National Bank, in Mobile, Alabama
- M&F Bank, in Durham, North Carolina
- Optus Bank, in Columbia, South Carolina
Others are expected to join the list further in 2021.
“MDIs are a viable and very important sector of the banking industry that can directly support the financial health of communities where typically there are gaps in banking services,” said Gigi Dixon, head of External Engagement for Wells Fargo’s Diverse Segments, Representation & Inclusion group. “By working together with MDIs, Wells Fargo can address some of the issues where these banks are located and help reach the unbanked. These investments will complement our community development efforts while positively impacting people in many communities we serve.”
The recent equity investments in African American MDIs are part of Wells Fargo’s pledge to invest up to $50 million in Black-owned banks.
“This is not a ‘check-the-box’ investment,” said Jonathan Jacob, senior vice president of Wells Fargo Corporate Development. “Evaluation of these investments includes collaboration with senior management to identify ways that we can deliver the capabilities of Wells Fargo to address the MDIs’ key strategic priorities. We’re very grateful that their leadership teams have dedicated a lot of time and energy with us to make sure we are finding the most appropriate and sustainable forms of investment.”
Jacob’s team has worked closely on one of the initial investments with Wayne-Kent Bradshaw, CEO of Broadway Federal, which announced plans to merge with City First Bank of Washington, D.C., in August 2020, and will form the largest Black-led bank in the U.S. post-transaction.
“We continue the same legacy the bank was founded upon, except we focus within the context of the Community Reinvestment Act to meet needs in communities where the working class live,” Bradshaw said. “The investment from Wells Fargo enhances our ability to keep our loans, so the main benefit is that we will be able to continue to do what we do, and keep more loans in our portfolio.”
Similarly, the investment will enable positive economic transformations for clients of Optus Bank in South Carolina, which focuses on small business and personal banking.
“The investment and support from Wells Fargo will allow us to substantially increase our impact on closing the racial wealth gap,” said Dominik Mjartan, president and CEO of Optus Bank. “We are grateful and committed to ensuring that this capital helps drive transformational wealth building opportunities for our communities and customers.”
“The investment and support from Wells Fargo will allow us to substantially increase our impact on closing the racial wealth gap. We are grateful and committed to ensuring that this capital helps drive transformational wealth building opportunities for our communities and customers.” — Dominik Mjartan, president and CEO of Optus Bank
The investments are also part of a broader industry effort to promote the vitality of MDIs. In December 2020, Wells Fargo was one of the first banks to sign the Office of the Comptroller of the Currency’s Project REACh MDI Pledge, which encourages all large and midsize banks to develop meaningful partnerships with MDIs. The signatories are allying to maintain MDIs as a vibrant part of the economic landscape and better promote fair, equal, and full access to financial products and services in their communities.
“We are trying to break the cycle where these institutions and their communities have faced barriers to raising significant capital,” Dixon said. “Ideally, this is going to promote the ability of MDIs to stimulate growth in low- to middle-income communities and be more profitable.”
Investing in MDIs
Broadway Federal Bank
Broadway Federal, in Los Angeles, California, traces its origin to Broadway Federal Savings and Loan Association, which was founded in 1946.
Carver Federal Savings Bank
Michael Pugh is president of Carver Bank, located in Harlem, New York.
Dominik Mjartan, president and CEO, and Paul Mitchell, chair of the board, lead Optus Bank, in Columbia, South Carolina.
James Sills is president and CEO of M&F Bank in Durham, North Carolina.
Commonwealth National Bank
Sidney King is president and CEO of Commonwealth National Bank in Mobile, Alabama.
*Broadway Federal is expected to merge with City First Bank in early 2021 and will become the largest African American MDI. Wells Fargo’s investment will close upon completion of the merger.