Keynote Address of Director Donna Gambrell at National Bankers Association 81st Annual Conference
August 7, 2008
Introduction
Thank you for your kind introduction. It is a pleasure to be here today at the National Bankers Association’s 81st Annual Convention. As you are aware, we are in the midst of numerous and momentous historical challenges in our financial markets. The U.S. government has taken a number of bold steps to stabilize the markets, and last week Congress passed the Emergency Economic Stabilization Act. The legislation contains a broad set of new tools that the Treasury Department is moving quickly to implement. Perhaps most central to the collective interests of all assembled here today, the Federal government is now authorized to purchase troubled assets from banks and other financial institutions, which will free them to resume lending to businesses and consumers across the nation.
There has been much discussion about the impact of the economic crisis on Main Streets across the country. When I think of what Main Street symbolizes, it brings to mind many of the great traditional American values - hardworking citizens inspired by the entrepreneurial spirit, small business owners and families striving for homeownership and saving to ensure their own financial stability in the future.
I am very proud to be the Director of the CDFI Fund and support CDFIs across the country that have a long history of serving Main Streets and communities in need. CDFIs have a proven track record of offering alternatives to the risky, and often predatory, lending practices of those who originated many of the mortgages now in foreclosure.
Awards made by the CDFI Fund are made to high caliber community-based financial institutions that demonstrate the ability to deliver viable business plans that offer credit, capital and financial services in low-income communities and to underserved persons. In order to be successful, these CDFIs have developed underwriting standards which are effective in offering financial services and products to persons who have traditionally lacked access to capital – on terms and conditions that are successful for both the borrower and the lender.
CDFIs, as a class of financial institutions, have years of experience lending to borrowers with poor credit histories and have developed products and credit counseling services that permit borrowers to enter into and participate successfully in the financial mainstream. A number of CDFIs concentrate their efforts in the home mortgage arena and, for many years, these CDFIs have successfully offered home mortgage loan products in their communities. In this economic crisis, it is important that we not forget that Americans living in distressed communities need our continued efforts to bring them financial services more than ever.
Dedication to Serving Distressed Communities
The National Bankers Association (NBA) serves as a vital trade organization for minority and woman-owned financial institutions across the country. Members of the Minority Depository Institution (MDI) community share the same goal as the CDFI Fund by serving low- and moderate-income communities. In fact, of the 50 NBA members, 25 are now certified as CDFIs.
The Fund has a long history supporting NBA members achieve our shared mission. Over the last 10 years, NBA members have received $39 million through the Bank Enterprise Award (BEA) Program, almost $10 million in financial assistance and technical assistance awards through the CDFI Program, and $439 million in tax credit allocations through the New Markets Tax Credit (NMTC) Program.
My goal today is to outline the benefits of the CDFI Fund's certification and funding programs so that they can be better utilized by NBA members. In these economic times, serving the underserved is more important then ever. By utilizing the Fund’s programs you can significantly enhance your ability to serve the individuals and communities most in need.
Certification as a CDFI
In order to better understand the obstacles and challenges for MDIs when applying for certification and awards, I recently hosted a teleconference with Floyd Weeks of Citizens Bank and Bob Cooper of OneUnited Bank. I also participated with staff from the Fund in the FDIC Interagency MDI Conference in Chicago where I heard first-hand the challenges you are facing. I offered ideas for how the Fund can be of greater assistance and we are working diligently to implement them. Earlier this year, the CDFI Fund partnered with the Office of Thrift Supervision for a joint webcast targeted at minority thrifts. In addition to these outreach activities, Fund staff also recently participated in CRA week with the Federal Reserve Board in educational workshops for MDIs in Puerto Rico.
At each of these outreach events, the Fund explained how the U.S. Department of Treasury's "CDFI" designation represents a commitment to serving community and economic development goals in low-income communities. CDFI certification is often used as tool to garner deposits from large banks, socially responsible corporations, and other large financial institutions. It is often a magnet for large banks in determining where to make investment for CRA credit.
The ability to take advantage of the Fund's programs also helps to capitalize MDIs so as to put more money back into the communities they serve. Awards from the Fund can help with Safety and Soundness requirements by reassuring regulators that there is additional capital available to offset riskier loans and investments.
The Fund is currently conducting a series of “certification” conference calls. Potential certification applicants can ask questions of Fund staff about becoming a certified CDFI. The schedule and instructions for accessing the conference calls are on the Fund’s website at www.cdfifund.gov. The next two conference calls are scheduled to occur on October 16th and November 13th and I encourage you to participate.
CDFI Fund Award Programs
Of any of the CDFI Fund's programs, the NMTC Program provides the largest amount of lending and investment capital in a single award. The program is intended to spur the investment of new private sector capital into low-income communities by permitting taxpayers to receive a credit against Federal income taxes for making Qualified Equity Investments.
Through calendar year 2008, the Fund was given the authority to issue $19.5 billion in NMTCs. To date, five award rounds have been completed and the Fund has made 294 awards totaling $16 billion in allocation authority – this includes $1 billion in allocations for the Gulf Opportunity Zone.
We are now in the sixth round of the NMTC Program. $3.5 billion will be allocated and the award announcements will be made in the next few weeks. As part of the Emergency Economic Stabilization Act passed last week, the NMTC Program was extended through 2009 and an additional $3.5 billion of tax credit allocations will be available. The Fund will be opening the next award round in January 2009.
We hope you will look at the NMTC Program as a way to direct future private sector capital into minority low-income communities that you serve. The Fund is in the process of planning FY 2009 outreach for the NMTC Program and is interested in learning about any challenges facing MDIs so that we may be of greater assistance.
I would also like to briefly discuss the Bank Enterprise Award (BEA) Program. Many of you are already using this program, but I would like to encourage more of you to apply. The BEA Program recognizes the key role played by financial institutions in community development lending and investing. The program provides incentives for regulated banks and thrifts to invest in CDFIs and increase their lending and financial services in economically distressed communities. Any depository institution insured by the FDIC is eligible to apply for a BEA Program award.
The BEA Program has two main priorities. The first priority is to increase a bank’s financial support of CDFIs to build self-sufficiency and capacity. The second priority is to expand the community development lending and investments of banks within severely underserved areas.
Last month at the Federal Reserve Bank of Chicago, the Fund announced 52 awards for over $20 million through the BEA Program. Of the awardees, 19 are MDIs and 11 are NBA members. Prior to the award ceremony, I convened a round-table conversation with award recipients. Of the 14 present from the Chicago Fed’s (7th) district, 11 were MDIs. We had an insightful and productive conversation. I hope that you will see whether the BEA Program is something you are interested in accessing. Our next application round will open in December of this year. Jodie Harris, the Fund’s Depository Institutions Advisor, is here with me today and can provide you more information on the BEA Program.
Last, but not least, I want to encourage you to apply for awards through the CDFI Program, which can be used to capitalize your institution. The Fund provides Financial Assistance awards in the form of equity investments, loans, deposits, or grants, and awards must be matched dollar-for-dollar by the applicant with funds of the same type from non-federal sources. Banks can use retained earnings as a source of matching funds, which may be a benefit to many of you in this room.
These awards enable CDFIs to leverage private capital to respond to demand for affordable financial products and services in economically distressed markets and by low-income families. In August, the Fund announced the FY 2008 awards totaling more than $54 million to 89 organizations serving economically distressed communities across the nation. The FY 2009 round is currently open until October 29th and I encourage all of you to apply.
The Fund now offers application tutorials in the form of on-demand webcasts for all the programs I’ve mentioned. This service is offered as an alternative for those individuals and organizations who are not able to attend an in-person application workshop due to scheduling conflicts or other obstacles.
I would like to highlight a few NBA members that have successfully utilized the CDFI Fund’s programs.
Legacy Bank - Milwaukee, WI
Legacy Bank is an African-American owned, state-chartered bank founded in 1999 and is the nation’s only bank holding company organized by African-American women.
Since inception, Legacy and its affiliates have received multiple awards from the CDFI Fund to support its growth and development. Legacy Bank received a 1998 Financial Assistance (FA) award for $21,500 and a 1999 FA award for $1.5 million, which was used to capitalize the bank. Legacy Bank also received a 2005 FA award for $1.4 million, a portion of which was used to support its community partner, Legacy Redevelopment Corporation, to build its own capacity through the creation of portfolio and financial policies and procedures, standard loan documents and technology upgrades. Legacy Redevelopment Corporation received a 2007 TA award of $317,533 to expand the volume of its model home and predevelopment loan products.
Legacy Bank has received four BEA Program awards: a 2001 award for $528,000; a 2003 award for $1 million; a 2007 award for $491,521; and a 2008 award for $675,000. Legacy’s BEA Program awards were in recognition of its support of affordable home mortgage loans, small business loans, and commercial real estate loans to underserved areas of Wisconsin.
Through its subsidiary, Wisconsin Community Development Legacy Fund (WCDLF), Legacy received two NMTC allocations: $100 million in 2003 and $120 million in 2007. WCDLF used its 2003 NMTC allocation to offer a variety of products including commercial real estate loans, business loans, equity investments in Community Development Entities (CDEs). Its 2007 allocation of NMTCs will be used to bring equity-equivalent financial capital and low cost senior debt to low-income communities in Wisconsin.
Native American Bank - Denver, Colorado
Native American Bank (NAB) was founded in 2001 by twenty Tribal nations across the country after the consolidation of Blackfeet National Bank and Native American Interim Bank, N.A. (Browning, MT). In addition to financial services and deposit accounts, NAB provides commercial loans for the purpose of working capital, new capital investments, and real estate development. It also offers a full range of federally supported loan programs via the Bureau of Indian Affairs and U.S. Department of Agriculture, as well as home mortgage lending in collaboration with Tribal housing authorities. NAB is a certified CDFI and national bank with more than $100 million in assets and branch locations in Colorado, Alaska, Montana, and Idaho with service available to Native peoples nationally.
NAB and its affiliates have received several awards since its inception. In 2000, 2001 and 2004, NAB received BEA Program awards for $99,212, $132,000 and $703,415 respectively, for its financing activities in distressed communities. In 2002, NAB received a $70,000 TA award to conduct a market analysis and develop a marketing campaign to better serve the needs of local markets. NAB was awarded a second TA award in 2005 to install a full service ATM on the Rocky Boy Reservation in Montana, to conduct board training and strategic planning, and to obtain consulting services to implement a comprehensive system to collect and report information on community development activities and impact.
International Bank of Chicago - Chicago, Illinois
International Bank of Chicago (IBC) was established in 1992 in response to a growing concern over predatory lending practices prevalent in metropolitan Chicago’s low-income and ethnically mixed communities. Since 1999, IBC has received six BEA Program awards for almost $5 million. IBC has also received two CDFI Program awards for $1 million to expand their ACCESS loan program. This program will consists of personal loans to qualified individuals in need of money due to an unexpected emergency, for example, health care payments, prevention of foreclosures, or payment of delinquent taxes.
International Bank of Commerce - Brownsville, TX
International Bank of Commerce (IBC) was founded in 1966 to meet the needs of the small businesses of Texas. Since its opening, IBC has grown from less than $1 million in assets to over $11 billion making it Texas’ largest holding company. IBC now serves more than 100 communities throughout Texas and Oklahoma with more than 260 branches and more than 405 ATM’S. IBC has received two BEA Program awards from the CDFI Fund.
Closing
I would like to reiterate the CDFI Fund’s strong commitment to MDIs and our desire to see your greater participation in all CDFI Fund programs. We will continue our efforts to coordinate outreach to MDIs, and enhance our communication with the NBA. I have provided a few MDIs as models for receiving awards from the CDFI Fund and I believe all of you can be just as successful.
Thank you
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