The State of Black-Owned Banks after the Financial Crisis

The banking industry received significant attention during and after the 2008 financial crisis.  The condition of black-owned banks (BOB) in the wake of the crisis is described in a Summer 2014 Community and Banking article. (The journal is published by the Federal Reserve Bank of Boston.)

According to the article, BOBs are predominately located in communities that other banks might view as unprofitable.  These communities are areas where more than half the residents live below the poverty line and where poverty rates are almost twice the national average, suggesting that BOBs primarily serve the capital needs of low-income customers, while creating jobs and providing job training opportunities in these areas.  

Citing national statistics from the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), the article indicates that from 2000 to 2011 there was a sharp decline in the total number of BOBs with only a slight decrease in the total number of branches.  During this same period, the geographic area served by BOBs expanded (measured by the number of unique ZIP codes of account holders) and the average deposits per branch and per bank increased significantly.  Specifically, the statistics show that from 2000 to 2011 the:

• number of BOBs declined from 51 to 33 (35.3%),
• number of branches decreased from 163 to 159 (2.5%),
• number of ZIP codes served expanded from 142 to 150 (5.6%), and
• average deposits grew to over $10 million per branch office (40.9%) and slightly less than $180 million per bank (159.8%)

These trends suggest that there may have been some consolidation, with a smaller number of BOBs serving a larger number of customers. The consolidation may also have been fueled by the cost advantages of operating on a larger scale and tighter federal bank regulations.