For most of us, choosing a bank usually comes down to two things: who has the most ATMs and how close is the nearest branch. We might consider where our spouses or families bank, but we rarely consider much more than that. But where we keep our money may be as important as where we purchase our food. Think the local movement only applies to food? Think again.
Community banks, like farmers markets, are smaller, localized versions of their too-big-to-fail counterparts. They’re equal parts neighborhood community center and full service lending institutions. “We’re really focused on making the communities we serve strong,” says Kibi Anderson of Broadway Federal Bank. “It’s not in either of our interests to put someone in a house they can’t afford. A strong community means they’ll come back and take another loan.”
This community-focused approach to wealth creation isn’t new. Broadway Federal Bank, the oldest and largest minority-owned community bank on the West Coast, started because of rampant red lining, which allowed banks to discriminate against African Americans. As blacks entered the middle class and began buying homes, many were thwarted by white-owned banks that would not lend to them. Broadway Federal Bank was a response to these unfair practices, founded on the premise that people of color deserve the same opportunities for wealth creation as their white neighbors.
Initially a savings and loan institution, the bank has since grown its services and now offers small business loans and commercial real estate loans along with checking and savings among other educational and community programming. “There’s really a lot more hand holding and education than you would get at other institutions,” says Anderson. “We don’t really have a large pool so we need to make the people we work with wealthy.”
That kind of personal investment is, in large part, why community banks’ lending practices are more rigorous and conservative than larger lending institutions. It may also be what helped many of them weather the financial storms of the last few years better than their massive counterparts. But if their lending practices are more rigorous, they are also more nuanced. While they take the three Cs of responsible banking seriously (credit, capital, and character), it’s this last element that community banks consider more closely than others.
“We are more willing to listen to stories—if you’ve had a divorce or an illness in the family we’ll consider that,” says Anderson. “More people are going to community banks because they want to feel like they have more control over their money—a lot of people felt disillusioned (during the economic collapse) because they couldn’t talk to anyone. They didn’t know who was managing their money. Here you can walk in and get a meeting with our president and CEO. You can have a conversation about what your needs are.”
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