Here’s How Black Banks Are Tapping Into Banking Giant To Make A Difference

For many decades, Black Americans have not obtained much help in gaining access to financial services. But some minority depository institutions, or MDIs, are stepping up to help change that crisis with an investment and financial backing of the nation’s largest bank.

Take Citizens Trust Bank, which deployed over $93 million last year, of which 72% supported low-to-moderate income (LMI) communities it serves. The extra funding allowed the bank to broaden its reach, amplify the type of products and services it offered, and expand into other markets serving minority areas.

Another MDI, Carver State Bank, reports 91% of its loans in 2022 were dispersed into minority communities, including 71% in LMI communities. The bank says 27% of its lending went to affordable housing projects in communities that need them, while 21% went to local minority-owned small firms. Citizens Trust and Carver State are based in Atlanta and Savannah in Georgia, respectively.

They are among more than 15 MDIs. JPMorgan Chase states the bank has invested more than $100 million over the last two years, more than doubling its original pledge. All told, those MDIs serve about 90 communities in 19 states and the District of Columbia.

While MDIs play a critical role in providing underserved areas financial services, a reported 25% have vanished over a decade. Forces like mergers and acquisitions, access to capital needed to scale, high expenses, and consolidation or insolvency have contributed to the decline.

Chase recently held a roundtable discussion attended by all the MDIs at its New York City headquarters to focus on the problem. MDIs’ role in the financial ecosystem, the support they need to grow, and the impact the work has created to help MDIs better serve customers and communities were discussed.

Gatherings like the roundtable are vital in helping show how MDIs are providing resources to underserved communities and strategizing ways to beef up such actions.

Teaming with MDIs is a key part of JPMorgan Chase’s $30 billion pledge to drive inclusive growth and help erase the racial wealth gap. Chase reports its relationship with MDIs has allowed them to expand, compete, and increase its community impact. Some of the firm’s efforts included providing equity investments, onboarding MDIs as clients, and creating a money market fund to allow MDIs to generate new fee income.

Economist William Michael Cunningham, founder of MinorityBank.com, says JPMorgan Chase’s commitment shows increased attention to MDIs as part of a renewed focus on needs in the Black community. However, he says, the real test comes when the bank approaches the complex issues in the Black community like Black maternal mortality. “We see an opportunity for JPMorgan Chase to make loans to companies and nonprofits that are working on that issue.”

Tied to the discussion, Chase provided dialog from some bankers in attendance.

Matt Sable, head of the Financial Institutions Group at J.P. Morgan Commercial Banking, stated, “We’re really focused on the outcomes. It’s not perfect in terms of measurement, but we’re looking at returns, employee growth, and helping to upscale MDIs to further their work in our communities.”

Robert James, the National Bankers Association chairman and president & CEO of Carver Financial Corp., reflected, “JPMorgan is interested in creating holistic relationships that help our institutions. They are dedicating resources to us, helping us solve problems and they’re helping us to tweak our own individual business models.”

James Sills, CEO of M&F Bank, added, “JPMorgan Chase has allowed us to scale up and generate more loans to deepen our impact. Because we have additional fee income from our partnership with JPMorgan Chase, it allows us to be able to do things we never would have been able to do.”

And Citizens Trust Bank CFO Samuel Cox commented, “JPMorgan has helped us with the expansion—we’re taking products to additional underserved communities and our relationship is helping us do that.”

Check out the initial announcements here and here, providing more details about JPMorgan’s investments in financial institutions.