City First Bank Merger with Broadway Federal Bank a Sign of the Times
While protests for racial equity are taking place in towns across the U.S. sparked by police misconduct, banks have found themselves yanked into the roiling debate about race and economic opportunity.
Several prominent financial institutions have drawn community scrutiny and plenty of bad press amid claims of unfair, preferential or discriminatory lending practices.
In an effort to tackle these issues and meet the lending needs of Black customers and institutions that serve the community, two Black-led banks, City First Bank in Washington and Los Angeles-based Broadway Federal Bank, announced a merger to form a $1 billion lender in late August 2020. The new entity, branded City First, will focus on financing for multifamily affordable housing, small businesses and nonprofit development and will be the first Black-controlled bank with $1 billion in assets. In fact, according to CNBC contributor Ryan Williams “there are 4,700 banks in the U.S. that hold a combined $20.3 trillion of assets, but as of 2019, only 21 of those banks are Black-owned or led, and those have total assets of just $5 billion.”
Brian E. Argrett, who will be chief executive of City First, told The New York Times, “We need to scale up our impact. Having a larger capital base is important so we can direct more resources into underserved communities.”
This moment represents an opportunity for other, larger banks to step up and be a part of the solution. And it seems at least one is already seizing the day.
Days after the City First news, Bank of America announced that it intended to direct $300 million of a previously announced $1 billion, four-year commitment to lending and other initiatives aimed at supporting racial equity and economic uplift in underserved communities and populations. Square, Inc. also announced a $100 million investment in minority and underserved communities, which includes a $25 million investment in CDFIs and MDIs like City First.
Coincidence or a sign of the times? One thing seems clear: Lip service is not the same as lending. Banks will find themselves under increasing scrutiny to examine their lending practices and make real changes that make more impact in all the communities they serve.