New investments to back Black-owned banking

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Robert Sausedo, President and CEO, Community Build:

Community Build was formed as a direct result of the conditions prior to the 1992 civil unrest, and those conditions were lack of opportunity, lack of employment, poverty throughout the communities of Los Angeles. And the principal focus was to make a difference, give people hope.

Wayne Bradshaw, CEO, Broadway Federal Bank:

Our mission is to serve the low- to moderate-income community, we think of them as the working poor. Broadway was formed to provide financing for Blacks who are trying to live in the western part of the city.

Gigi Dixon, Wells Fargo Diverse Segments, Representation & Inclusion:

Wells Fargo made a commitment in March of last year to invest up to $50 million in minority depository institutions, better known as MDIs. These institutions are located across the United States and they serve communities that are minority primarily.

Sausedo:

Community Build was formed by seven organizations and one of those organizations was Broadway Federal. And if it weren’t for Broadway Federal from the time we started, even to today, we wouldn’t have lasted.

Bradshaw:

The Wells Fargo investment is going to have significant impact. So, for every dollar that they invest, let’s say three million, we can multiply that by 10. We have $30 million in low- to moderate-income loans. Just a few million dollars of investment by Wells Fargo into an entity like us, of an MDI, has exponential positive impact in the communities that we serve.

Dixon: One of the most exciting things about how we’re approaching this investment is we are trying to make sure that these MDIs maintain ownership of their institutions. It’s really about helping these banks do more of the great work that they’re doing in communities where we live and work.

Sausedo:

What I appreciate about Broadway Federal is they have not lost the business ethos of caring about the people. They understand the challenges that we’re faced with.

Dixon:

There’s no better time than right now to step forward and to make a sizable investment in these institutions to protect and preserve the legacy of what they mean in the Black community and other minority communities.

Sausedo:

And I applaud Wells Fargo for doing this because Wells Fargo has always attempted to find a way to have that business set of business values for the community.

Bradshaw:

One of the big positives with the Wells Fargo investment, Wells Fargo is a marquee name, so it has the impact of a good housekeeping seal of approval.

Sausedo:

But when you start making investments in organizations like Broadway Federal, it says we are making a commitment, not only to an organization like Broadway Federal, but also to communities of color.

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Based in Los Angeles, Broadway Federal Bank is one of the several minority depository institutions that Wells Fargo is investing in. (2:45)

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

A map of the United States, with cities in various states marked with a star. These include: Broadway Federal Bank, Los Angeles, California; First Independence Bank, Detroit, Michigan; Citizens Savings Bank & Trust, Nashville, Tennessee; Citizen Trust Bank, Atlanta, Georgia; Commonwealth National Bank, Mobile, Alabama; Unity National Bank, Houston, Texas; Carver Federal Savings Bank, New York, New York; M&F Bank, Durham, North Carolina; Optus Bank, Columbia, South Carolina; Carver State Bank, Savannah, Georgia; Liberty Bank and Trust, New Orleans, Louisiana.

Wells Fargo has announced investments in the following institutions:

City First Bank, in Los Angeles, California
Carver Federal Savings Bank, in New York, New York
Carver State Bank, in Savannah, Georgia
Citizens Trust Bank, in Atlanta, Georgia
Citizens Savings Bank & Trust, in Nashville, Tennessee
Commonwealth National Bank, in Mobile, Alabama
First Independence Bank, in Detroit, Michigan
The Harbor Bank of Maryland, in Baltimore, Maryland
Industrial Bank, in Washington, D.C.
Liberty Bank, in New Orleans, Louisiana
M&F Bank, in Durham, North Carolina
Optus Bank, in Columbia, South Carolina
Unity National Bank, in Houston, Texas

“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, head of Minority Deposit Institutions and Strategic Client Partnerships, Corporate and Investment Banking Diverse Segments. “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.”