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The size of your bank reveals a lot more than you might think (part II)
 

In a previous post, we wrote how the size of your bank reveals a lot more than you might think. (TLDR: Want to work with a bank that focuses on communities? The data is in: consider the smaller ones.)

In this follow-up blog post, we take a closer look at the range of ways in which banks make community investments.

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Before we get started, let’s remember what banks are designed to do

By design, banks are tools for community investment: they pool community cash in order to fund community projects.

People put money into bank accounts. This cash then supports people to take out loans — to buy a building for their small business, or to buy machinery to improve their farm operations, or to update their home, for example. People with a loan pay interest back to the bank, in addition to the amount they borrowed. A bit of this interest goes to the people depositing money into bank accounts, and the rest of the interest goes to the bank.

(Imagine if someone asked you to hold onto their money for a while…and then imagine if hundreds or thousands more people asked you to do this. You’d have a decent chunk of cash under your control… what a business model! This is banking. So how are you picking who is holding onto your money… and what the heck are they doing with it?)

This sort of community financing — loans from a bank — is a relatively inexpensive source of funding when compared to other sources of funding, like private equity (in which other people take an ownership stake in the business or farm or house) or credit card financing or payday loans, for which interest rates are often much higher than what a bank can offer. Banks can offer relatively inexpensive loans because the cost of their main source of funding — the money people store away in bank accounts — is nominal if not nearly free versus other forms of capital (the cost of deposits for a bank is whatever banks pay you in interest, plus the cost to manage your account, like giving you monthly statements and making sure someone is available to take your call or answer your questions, if you have them, and the cost of bringing you to the bank in the first place, via marketing or sales).

Because loans from a bank are a relatively inexpensive form of capital versus other financing options, the availability of bank financing for communities is really important. Without it, communities need to pay more for cash… or go without cash… both of which means less maintenance and growth for communities.

Let’s take a look at the varying degrees to which different banks make different community investments

Community investments are loans to businesses (small and large), loans to farms (small and large), loans for housing and construction, financing for public works (like roads and bridges and parks), and loans for households (like loans to buy a car or pay for college).

Banks put anywhere from 0% to 97% of the money in the bank into community investments. It’s a large range. The other 3%-100% of money in the bank not put into community financing is put into financial markets, toward transactions abroad, and into bank operations.

Community investments are generally diversified, so you won’t find a bank putting 97% of the money in the bank into any one community activity, like small business loans. Rather, you’ll see banks putting a fraction of money into small business loans, and some into housing loans, and some into public works financing, and so forth.

Below is a chart of how the thousands of banks within the US banking industry invest in different community activities, from those that do the least (those in the bottom 1 percentile) to those that do the most (those in the 99th percentile.) To summarize: 99% of banks in the US put anywhere between 0% and 75% of the money in the bank into housing loans; anywhere from 0% to 68% of money into business loans; anywhere from 0% to 60% of money into farm loans; anywhere from 0% to 38% of money into public works financing; and anywhere from 0% to 17% of money into construction loans.

The share of money in the bank that banks invest in communities, from the bottom 1% of banks to those in the 99th percentile

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

These ranges exist for a few reasons: (1) banks are structured to finance different things, (2) that may be influenced by local market demands (banks in rural areas are more likely to do farm lending than those in urban areas, for example), and (3) lending activities reflect the priorities of the bank’s leadership.

The size of the bank can be your starting point to understand what the bank is structured to do.

Note: not all banks are focused on making community investments as the main part of their business

Several dozen banks in the US — about 1% of banks — have more than $50 billion in the bank. The other 99% of banks — several thousand — have less than $50 billion in the bank.

As you can see in the graph below, more than 50% of the money in banks with more than $50 billion is invested in something other than communities (as stated above, these other activities include financial markets, investments outside the US, and bank operations).

Banks with less than $50 billion in the bank put the majority of their dollars into communities, on average.

The average share of money in the bank that banks of different sizes invest into something other than communities

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

So with this context — banks with under $50 billion in the bank on average put the majority of dollars in the bank into communities, while banks with more than $50 billion, on average, do not — let’s take a deeper look at the particular areas of community financing done by different banks.

The range of small business lending by banks within the US

A small business loan is defined as a loan to a business for $1 million or less. Across the bank industry, banks put anywhere between 0% to 38% of the money in the bank into small business loans.

The smaller the bank, the more likely it is, on average, to be specialized in financing small business.  

The average share of money in the bank that banks of different sizes put into small business loans

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

The smallest banks -- those with less than $250 million in the bank -- put on average 14% of the money in the bank into small business loans.

The largest banks -- those with more than $1 trillion in the bank -- put on average 1% of the money in the bank into small business loans.

What does this mean for you and your bank account?

This means that if you put your money in a bank account with a smaller bank rather than a larger bank, you on average may create 14 times more community funding for small businesses with your money.

How?

A good way to think about this is how a bank uses $10,000, for example.

According to the chart above, a bank with less than $250 million in the bank is, on average, going to invest 14% of that $10,000 into small business loans. A larger bank — one with more than $1 trillion in the bank — will only invest 1% into making small business loans.

So if you put $10,000 in a bank account with a smaller bank, the bank may put 14% of it into small businesses, while the largest banks may only put 1% of it into small business loans.

This may sound surprising at first -- large banks have so much money, you’ll say… even 1% of a large bank’s money is a lot of money, you’ll rationalize… and you’d be right. 1% of a trillion dollars is more than 14% of $250 million. But that doesn’t change the fact that there are bank accounts available to you where your money would be creating 14 times more financing for small business, in result of your banking decision.

The range of large business lending by banks within the US

A large business loan is defined as a loan to a business for more than $1 million. Across the bank industry, banks put anywhere between 0% to 51% of total dollars in the bank into large business loans.

While the smallest banks lead the bank industry in their focus to finance small business, mid-sized banks with with $1 billion to $50 billion in the bank lead the industry, on average, in their focus to finance large business loans.

The average share of money in the bank that banks of different sizes put into large business loans

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

If you put $10,000 in a bank account with a mid-sized bank, the bank may on average put 24% of it into large business loans, while the smallest banks may on average put 6% of it or less into loans for large business.

If you’re looking for a large business loan, or are interested in supporting banks making large business loans, you might want to check out mid-sized banks.

Banks financing small farms

Loans to small farms are defined as farm loans under $500,000. 98% of banks put anywhere between 0% to 41% of the money in the bank into making loans for small farms. 

Just like they lead the bank industry for their focus in making small business loans, small banks also lead the industry, on average, for their focus in small farm lending.  


The average share of money in the bank that banks of different sizes invest into small farm lending

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

The smallest banks in the US allocate, on average, 9% of the money in the bank for small farm lending. The largest banks in the US on average allocate less than 1% of the money in the bank for small farm lending.

When you bank your money with a small bank versus a large bank, up to 9x more of your money, on average, can support small farms. 

Banks financing large farms

Loans to large farms are defined as farm loans for more than $500,000. 98% of banks put anywhere between 0% to 34% of money in the bank into loans for large farms. 

Surprisingly, it is the smallest banks, on average, which lead the bank industry in small farm lending, that also lead the bank industry in making large farm loans.

The average share of money in the bank that banks of different sizes put into large farm loans

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

One reason smallest banks lead larger banks in their large farm lending focus may be that smaller banks are more likely to be headquartered in rural areas versus larger banks and, as outlined above, the local market in which the bank is headquartered contributes to the focus of the bank.

Banks financing housing

Housing loans are defined as loans for residential properties. 98% of banks put anywhere between 0% to 75% of the money in the bank into home lending. 

Smaller banks are more focused on financing home ownership than the largest banks in the country.

The average share of money in the bank that banks of different sizes put into lending for housing

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

When thinking about supporting banks that focus on financing home ownership, another relevant data point worth considering is if the bank keeps the home loans on its books, or sells the loan. Banks that make home loans and hold them, versus banks that make home loans and sell them, can be thought of as having a longer-term relationship with its borrowers, and hence a longer-term stake in the value of the communities in which their borrowers live.

Banks financing public works

Public works financing is loans and securities for local government to fund schools, water & sewer systems, roads, airports, rapid transit, athletic stadiums, and general cash flow needs. 98% of banks put anywhere between 0% to 38% of the money in the bank into financing for public works. 

The smaller the bank, the more likely it is, on average, to finance public works.

The average share of money in the bank that banks of different sizes put into public works financing

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

On the whole, the overall trend of bank financing for public works parallels that of small business and farm lending: the share of dollars in the bank dedicated to public works steadily increases as bank size decreases.

The smallest banks, an average, put 8% of the money in the bank into public works, while banks with more than $50 billion put on average 1% to 2% toward public works.

Banks financing construction

Construction loans are defined as loans for land development, and other land loans. 98% of banks put anywhere between 0% to 17% of money in the bank into making loans for construction. 

Banks in the $500 million - $1 billion range lead the industry in focus for financing construction loans, and the smallest banks are on average 4x more likely to finance construction lending than the largest banks.

The average share of money in the bank that banks of different sizes put into construction loans

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

Finally, let’s look at household lending.

Banks financing households

Household loans are defined as automobile loans and other consumer loans, including student loans and loans for personal expenditures like medical expenses and appliances. 98% of banks put anywhere between 0% to 23% of the money in the bank into lending to households. 

The larger banks — though not the biggest of banks — tend to lead the market in financing loans for household use at 3x the rate of the smallest banks.  

The average share of money in the bank that banks of different sizes put into lending for households

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

In summary

Most banks do a bit of everything. 

Over 90% of banks put the majority of dollars in the bank into financing communities. The largest banks tend not to.

The smallest banks in the US, on average, lead the banking industry in their focus for financing small business, small and large farms, and public works (schools, bridges, roads, and other cash needs for local governments).

Mid-sized banks in the US, on average, are the most likely to fund large business loans, housing, and construction.

The largest banks in the US, on average, do not lead the bank industry on any community investment category when looked at as a percent of total dollars in the bank: apples-to-apples and dollar-to-dollar versus other banks.

….

Do you know what your money’s up to? See what your money is doing and learn more about banks you may like.

 
BlogTeam Mighty
The power of different banks in different cities
 
 

There are several ways to assess power, and most of them boil down to who’s got the most money, and/or who’s got the most people supporting them (who collectively have money).

Banks have power to the degree people put their money in them.

Banks have power to the degree people put their money in them.

Banks publicly report how much money people deposit in their bank (in the form of checking, savings, CDs, and money market accounts), and how many accounts they have.

So let’s take a look at the banks in each of four metropolitan areas -- the Chicago metro, the New York City metro, the San Francisco metro, and the Washington DC metro -- and the sum of money people choose to deposit with them.

There’s a lot of money in deposit accounts in New York City bank branches.

Bank branches in the New York City metropolitan area have more money in deposit accounts than in all of the bank branches in the Chicago, San Francisco, and the Washington DC metro areas combined.

The New York City metro area has 201 banks -- about 10 banks for every 100,000 residents -- with $1.8 trillion put in deposit accounts within NYC area branches. This is $89,000 in bank deposits, per capita.

Number of banks in each metro, and the amount of money ($ billions) in bank deposits in all the branches within the metro. Banks in metro area defined as banks with an office or branch in area. Source: FDIC Deposit Market Share Report, June 2018. Deposit dollars data source: FDIC Summary of Deposits Survey, June 2018.

The next closest city with the most banks and money in them is Chicago. There are 189 different banks in the Chicago metro area. This is 20 banks or so for every 100,000 residents, more banks per capita than the other cities on our list. People collectively hold $398 billion in checking, savings, CD and money market accounts within Chicago area bank branches. This is about $42,000 for every Chicago resident.

Chicago has more banks per capita.

Number of banks in each metro area for every 100,000 residents, and money on deposit in all banks in the area, per capita. Bank location source: FDIC Deposit Market Share Report, June 2018. Deposit dollars data source: FDIC Summary of Deposits Survey, 2018.

San Francisco bank branches have more money in their deposit accounts per capita than those in Chicago or DC. People living in the San Francisco metro area have about 15 banks per 100,000 people, or 69 total banks. There is about $79,000 in checking, savings, CD, and money market accounts in bank branches in the San Francisco area, per capita.

In the Washington DC metro area, 77 banks -- about 13 for every 100,000 residents -- held $256 billion on deposit in bank branches: about $41,000 per capita.

Money in deposit accounts can come from people and organizations near and far.

The money in any given city’s network of banks can come from people and businesses located across the country, and not just from those residing in the city.   

For example, let’s say you live in Seattle. If you bank with a bank solely located in Chicago, your money is in Chicago. If you bank with a national bank, your money may be wherever in the country the bank has an office and chooses to put your money, whether that be Seattle or New York City or Sioux Falls, South Dakota. If you bank with an online bank, chances are the online part of the business is a digital storefront to a brick-and-mortar bank that manages the deposit part of the business, and your money’s at work in the place(s) where that bank works.

The geographic location of a bank’s deposits is important, because banks generally finance communities proportionate to where they have branches and the amount of deposits in them. (There’s a law called the Community Reinvestment Act that encourages banks to do just this.)

So take a look at where a bank concentrates its deposits to have some context about where and how a bank is focusing its financing.

(Pro tip: If you want your money to support a particular community, browse banks that have their deposits concentrated there.)

For example: Southern Bancorp accepts deposits from across the country. Because banks generally finance communities proportionate to where they have branches and the amount of deposits in them, Southern focuses the majority of its community financing in the Mississippi Delta.

Map shows where deposits with Southern Bancorp are at work, by county. Data source: FDIC Summary of Deposits Survey, 2018.

A few banks dominate in major metropolitan markets.

Of all of the money that lands in deposit accounts in Chicago, 22% is deposited with JP Morgan Chase. That’s a sizeable amount of money from people and businesses in a city controlled by a single bank.  

But not as much as New York City, where Chase also controls more money than any other bank in the metro, with 32% of deposits, locally.

In San Francisco, it’s a similar story to New York, but this time, headlined by a different bank: Bank of America controls 32% of money on deposit in San Francisco bank branches.

In the Washington DC metro, E*TRADE Bank controls 17% of deposits.

Among 200 or so banks in each the Chicago and New York City metropolitan areas, JP Morgan Chase has in its Chicago and New York City area branches nearly a fourth and a third, respectively, of all the money in deposit accounts in all of the bank branches in those cities. Bank of America has in its San Francisco area branches a third of all the money in deposit accounts in San Francisco area branches. E-Trade Bank has 17% of all of the money in deposit accounts in the Washington DC area.

The share of total deposits in a metro area held by the bank with the most deposits in its branches. Source: FDIC Deposit Market Share Report, June 2018

Millions of accounts are kept with local banks, the most populous type of bank.

Despite the dominance of the expected market players -- national banks -- in major cities, local banks are meaningful contenders for deposit dollars. (For the purpose of this blog, we’ll define local banks as those that are 100% located within the metro area.)

About 1.9 million accounts are with local banks in the Chicago area. In the New York City area, about 2.6 million accounts are with local banks. There are more than half a million accounts with local banks in the San Francisco area, and over 800,000 with local banks in the DC area.

Number of deposit accounts in local banks (millions). Source: FDIC Deposit Market Share Report, June 2018

Local banks have a larger market share in Chicago and DC areas than they do in NYC and San Francisco areas. Still, they collectively control billions of dollars in each market.

Local banks in the Chicago area control 18% of the money in checking, savings, CD and money market accounts in all bank branches across the Chicago metro area.  

In the New York City area, local banks control 9% of total deposits in the area.

In the San Francisco area, local banks control 4% of total area deposits.

And in DC, local banks are entrusted with a larger share of deposit dollars than local banks in other cities on our list, with 24% of all deposit dollars .

If these numbers seem modest, remember the amount of dollars on the table: 9% of the $1.8 trillion in deposit accounts in the New York City area is $162 billion; 4% of the $371 billion in deposit accounts in the San Francisco area is is nearly $15 billion.

The percentage of total deposits ($) within a city placed in local banks. Data source: FDIC Sumaary of Deposits Survey, 2018.


A bank no longer needs to have a lot of branches to have a lot of deposits.

Taking a look at the ten banks with the most deposits in each metro area, you’ll see that a bank need not have many branches to have a leading share of local deposits.

Bank branches, no doubt, may have mattered in helping a bank become popular in the past. Back in the day, when you had to walk into a branch to do your banking, a bank with a lot of branches was able to attract a large customer base. Today, having a lot of branches in key locations across a city is great advertising, above all else. (Bank branches are an expensive sort of billboard for banks. We say billboard, because many people don’t really walk into bank branches anymore. Rather than cash machines, bank branches are more like the Apple Store, or the Nike store, or any other store that still has a storefront. The storefront helps you remember it’s there. With lots of local locations, a bank might lead you to think it’s locally focused. Though as outlined above, a better indicator of local focus is not the number of branches a bank has, but where the bank concentrates its deposits.)

When finding a bank these days, what's relevant to look at is not necessarily how many branches it has, but whether the bank offers a value proposition that matters to you (like financing Native American equity, or small business in Chicago, or small farms in the Mississippi Delta, or sustainability) and the technology to make banking from anywhere possible (like online account opening and mobile deposits).  

In Chicago and New York, about 50% of the bank branches you bump into are likely to be owned by one of the ten most popular banks. In San Francisco and Washington DC, there’s closer to a 70% chance that any given bank branch you see belongs to one of the ten most popular banks in those cities. This is great advertising. No wonder these banks are top of mind.

Looking for banks online versus on any given street would likely result in a different set of banks making up the most popular banks in a city for people’s deposits.

Where do you bank, and why?

What banks do you support, and why? What’s your money up to?


Mighty helps you find the best banks for your money and values. Browse banks now.

*Deposit data from June 30th, 2018

 
 
BlogTeam MightyBlog
The size of your bank reveals a lot more than you might think (part I)
 

Banks get a lot of press for being big. Some is seemingly a positive. Some, not so much. And the good of being small? Is there any value to a bank that is small? Read on.

 
It’s not always clear, the importance of size.

It’s not always clear, the importance of size.

Banks get a lot of press for being big.

Some is seemingly a positive: big network of ATMs; big network of bank branches.

Some, not so much: big scandal; big fine; too-big-to-fail.

Whatever the big attribute, if the popular adages ring true (all press is good press and bigger is better), big banks are winning in being top of mind when most people think about banks.

But here’s what doesn’t get as much press: you have a big selection of banks to choose from, many more than you may have ever considered, and there’s a big correlation between the size of a bank and how it uses your money.

The biggest banks in the US (those with more than $1 trillion in assets) put an average of $31 of every $100 in the bank into communities as community investments*, mostly in the form of loans for business, housing, construction, farms, and public works.

And when it comes to smaller banks?

The banks with less than $50 billion in the bank -- 99% of banks in the country --  put an average of $71 of every $100 in the bank into communities as community investments. That’s double the average of the biggest banks.

This means that if Small Bank A and Big Bank B are both working with $10 million in the bank, Small Bank A invests $4 million more into communities than Big Bank B. That’s 40 small business loans of $100,000 each.

Imagine you’re walking down a street where 40 storefronts each received $100K in working capital as a loan, versus another street in which those loans weren’t made.

Which street would you rather stroll on a Saturday? Close to which street would you prefer to own a home? If you like to see storefronts occupied and your property value increasing, we assume you’d vote for the street where the small business loans were made.

Here’s a view of the community investing focus of the bank industry, divided out by bank size.

Average number of dollars that banks of different sizes invest in communities, for every $100 in the bank

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

Dollar for dollar, banks with less than $50 billion in total assets — again, 99% of all banks — put more financing into communities than the 45 or so banks with more than $50 billion in total assets.

Even the smallest banks in the country -- those with less than $250 million in total assets — put more money, dollar for dollar, into communities than banks more than 200 times their size.

Another way to look at this is to consider the 100 individual banks in the US that put more of their total money into community financing than all the rest.  

These banks invest $92 or more of every $100 in their banks into communities. We’ve  charted these banks by bank size, below.

The 100 banks that put the most of their money into community financing, grouped by bank size. Chart shows the percentage of banks in each asset class.

Data Source: Federal Financial Institutions Examination Council, Call Report and Uniform Bank Performance Report. Q1 2019.

None of the top performing community-investing banks have more than $50B in assets.  

How about banks that focus on financing important modern issues, like racial equity?

Banks certified for financing racial equity in the US, grouped by bank size. Chart shows the percentage of banks in each asset class.

Data Source: Federal Deposit Insurance Corporation (FDIC) list of Minority Depository Institutions. Q1 2019.

The US government certifies banks that contribute to the advancement of racial equity both through their ownership and governance structure (banks majority owned and/or governed by people of color) and through their part in serving communities of color.

None of these banks are larger than $50 billion in total assets, and the majority have less than $500M.

For banks focused on financing poverty alleviation, women’s equity, and sustainability, the pattern holds.

Banks focused on financing areas of impact, grouped by bank size. Chart shows the percentage of banks in each asset class.

 

Data source: The Office of the Comptroller of the Currency (OCC) list of women-owned banks; the Global Alliance for Banking on Values list of member banks; the certified B-Corporation directory; the US Department of Treasury list of Community Development Financial Institutions (CDFI). Q1 2019.

Banks certified for their sustainability financing focus are likely to have somewhere between $1 and $10 billion in assets.

All banks in the US certified for their roles in funding poverty alleviation (certified Community Development banks) have less than $10 billion in assets.

Most banks owned by women have less than $250 million in total assets.

To sum it up: Banks that are smaller in size seem to have lending and governance structures that enable them to focus on funding important communities and causes that may otherwise be overlooked by the largest banks as a priority line of business.

If you want your money to finance communities and issues like sustainability and poverty alleviation, the smaller banks are more likely to direct more of your money toward these efforts.

See how your dollars in different banks stack up

*For this analysis, Mighty defined dollars invested into communities as dollars in: small and large business loans, small and large farm loans, household loans (including automobile loans, student loans, and other consumer loans), construction loans, housing loans, and public works loans and securities.


 
 
Stories of people banking for impact
 

Everyone used to bank with the local bank, but the building down the block is no longer necessarily locally-controlled. The modern indicators of a local bank have changed. Accordingly, so must the way in which people search for banks. Read below how people are navigating the current banking marketplace in their interest to bank for impact.

 
A bit of change can make a big impact.

A bit of change can make a big impact.

Who is banking for impact? Do-good millennials? The uber wealthy? The guy down the block? The three-generation family that’s synonymous with their town? People who like information transparency? People who like their money to serve their interests?

All of the above.

The World Economic Forum wrote that depository institutions, or banks, were the original impact investment organizations, specifically those focused on poverty alleviation (Community Development Financial Institutions).

Today, more than 90% of adults in the US having a bank account. Meanwhile, less than half hold investments in financial markets.

The bank account is arguably the oldest — and today’s most accessible — impact instrument.

We’ve collected stories — from the web and from our own Mighty users — about how people are choosing the best banks for their money and values, starting with their checking account, savings account, CD or business banking.

People

  • Chicago native, tech entrepreneur and former banker Daniel Ramirez-Raftree lives in New York but keeps an online savings account with a local Chicago bank that's focused on funding poverty alleviation and racial equity in Chicago. "If you’re a civic-minded person concerned about social impact,” Ramirez-Rafttree said while speaking as part of Chicago Ideas Week, “you’re much more likely to agree with what community-investing banks are doing with your money than what other banks would be doing with it.”

  • Comedian, writer, and commentator Baratunde Thurston wrote about his personal decision to reevaluate his bank, as he wrote on social media: “It makes me feel dirty knowing they're cycling my money through private prisons and other such activities I deem unethical to oppressive. I think it's important that as many of my actions as possible line up with my values, and where I store my money (and who I let USE that money to finance the activities of others) is a big part of that.”

  • After moving her money to a black-owned bank, Solange Knowles reflected “While I realize this is a very personal decision and thing to share, I’m proud to say I made that step today. Time to literally put my money where my mouth is.”

  • Comedian Sarah Silverman moved all of her money away from a big bank in protest of the Dakota Access Pipeline, saying “We can vote, we can protest, but another active thing we can do is watch where we spend our money...we have a ton of power in places we never realized, and one of those places is where we do our banking.” Watch Silverman speak about this on video.

  • Rapper Killer Mike urged members of the black community to put their money in black-owned banks. In the first five days, more than 8,000 people opened up accounts. See press coverage via HuffPost, NY Post and Pitchfork.com.

  • Actor and clean energy advocate Adrian Grenier spoke publicly about his decision to move his bank deposits to a sustainable bank: “After researching the impact banks can have on the environment, I decided that divesting my investments wasn’t enough, where my deposits are held is extremely important as well.”

Small businesses

  • For Jeff Beckham, Founder of Black Box Creative in Chicago, banking is another way of strengthening his connection to the community. He uses different banks for different reasons: one strictly for transactional purposes, and another for the values-aligned, neighborhood-oriented relationships it offers his business and his local community network.

  • “We were pretty unhappy with the relationship we had with our previous bank at the time (a large national institution), and were looking for something new," Rasheed Hammouda, Cofounder of Chicago-based financial technology firm BridgeFT said regarding his decision to use a local Chicago bank for his business. "It’s good for us to work with a bank that shares our mission to build the local startup community.”

  • The team at Gotham Greens chose to use a community-focused bank when building its facilities in Chicago, describing themselves as "farmers that live in apartments" and the company as "fueling blooming communities where others fear urban decay" in order to "grow extraordinarily fresh food in extraordinarily fresh places.”

  • Artist Amanda Williams, owner of AW Studio, investigates color, race, and space with her work, and uses a community-focused bank because it’s “a neighborhood place. People there know your name when you walk in...I enjoy seeing the team there and maintaining a connection. This feeling should happen a bit more in life in relationship to business vendors.”

  • Billy Belchev, President of Chicago-based web development shop Webitects, says the the firm banked locally since day one as it fits the firm's culture. “We happily work with many mission-driven organizations in Chicago and across the country,” Belchev said, "and love that our bank supports local businesses.”

  • Family-owned Wabash Seafood in Chicago works with a community-focused bank because, according to the owners, "the bank understands small business ethos, the importance of small business relationships, and the importance of setting standards of excellence when making your name in small business."

  • Bottom Line Yoga owner Lauren Goggins works with a local bank to achieve her mission of supporting wellness in Chicago. According to Goggins, “We're a purpose-driven Chicago company and value working with purpose-driven partners and clients."

Nonprofits

  • Green America advocates for the importance of banking with your values and putting your checking or savings to work building the local green economy.

  • The Polk Bros. Foundation opened a money market account at a local poverty alleviating bank because, according to foundation staff, "it’s an easy way to help the community while at the same time advancing the foundation’s mission by further investing in several of the foundation's focus areas, including workforce development, housing and economic development, and safe communities.”

  • The University of Chicago deposited $1 million across four community-investing banks as a “practical and responsible solution in furthering the University’s commitment” to the surrounding neighborhood.

  • Genesys Works provides pathways to career success for high school students in underserved communities and works with community-investing banks to help students open savings accounts as well as explore careers in banking with a first job in a community bank.

  • "As churches, our goal with our money is to serve our mission, vision and purpose not just when we are spending it but also when we are saving and investing it. Our choice of bank should be based on directing our money to the places where it will do the most good while it is being held on our behalf." -Dr. Scott Bader-Saye for The Christian Century

Local governments

  • The City of Chicago placed $20 million in a Chicago black-owned bank. According to City Treasurer Kurt Summers, “My office works to invest in the City’s neighborhoods and communities. Community banks are a great opportunity for that because they are designed for the sole purpose of re-investing in their local area.”

  • The State of Rhode Island moved state cash to local banks and credit unions in an effort to “support local financial institutions lending to small businesses in the Ocean State."
 
 
 
BlogTeam Mighty
Is your bank a good representation of you?
 

For the majority of the people in the US, when it comes to bank leadership, odds are: probably not.

You stand for many things. Does your money back what you stand for?

You stand for many things. Does your money back what you stand for?

What does banking have in common with Hollywood, the US Congress, and large business?

Disproportionate representation.

The Money Managers. The Dealers of Entertainment. The Architects of National Policy. The Job Creators.

These industry and culture shaping positions demand diversified, representative control.

Except there isn’t.

 

The Underrepresentation of Women

One of every two people in the US is a woman. So equal representation would mean that men and women hold an equal number of seats at the leadership table.

Yet only one woman owns a small business for every three men who do. One woman speaks in top Hollywood films for every four men who do. One woman holds a seat in Congress for every five males who do. One woman is CEO of a Fortune 500 company for every 17 men who are. And one woman owns a bank for every 372 males who do.

The odds that you’re supporting a small business owned by a woman are 93 times better than the odds that you’re putting your life savings under the governance control of women bank owners.

Women’s equity stakes are lacking across industries. In banking, it’s abysmal.

 The Underrepresentation of People of Color

Two of every five people in the US are people of color. And when it comes to top leadership positions? Two people of color own a business for every six white people who do. Two people of color speak in top Hollywood films for every six white people who do. Two people of color hold seats in Congress for every ten white people who do. And two people of color own or govern a bank for every 67 white people who do.

For people of color, equity stakes are lacking across industries. Especially in banking.

For people of color, equity stakes are lacking across industries. Especially in banking.

 Use your power, or lose it

So what’s one to do? And what’s this got to do with you?

Well, if you’ve got some cash, and have got some ideas, you’ve got some power.

You can choose to undo historical and systemic patterns of inequities that are neither arbitrary nor benign by thinking before banking, and putting your money behind organizations focused on financing underrepresented groups.

The significance of supporting small business banks

The majority of businesses in the US are small businesses. By supporting small business, you’re more likely to be supporting more equitable representation of female and minority ownership than were you to only support large businesses.

By supporting organizations that are focused on supporting small businesses, you’re more likely to make a direct impact on growing women’s and minorities’ equity stakes within the economy.

Closing the gap

Backing organizations to help advance equitable representation isn’t about deciding how to better slice a pie.

Rather, it’s about eliminating blind spots in influential sectors that shape our economy.

 

Mind the gap.

From supporting small business to banking with banks that do, you can use your power to advance better representation across important economic and cultural institutions in the US.

Or you can do nothing. While others harness their power to advance their interests, which may or may not be a good representation of you.


 
 
How many banks are in the US? The average person doesn't have a clue.
 

9 out of every 10 people made the same error.

How many banking options do you have? Most people’s assumptions are off the mark.

How many banking options do you have? Most people’s assumptions are off the mark.

How many banks are there in the US?

We invited random people on the street to write down guesses on a piece of paper.  The answers we got were predictably varied, with guesses ranging from 10 to 50,079,000,600. Spoiler: the answer is somewhere in between.

In summary, the average person who thinks they’d have a realistic idea has no idea how many banks there are. And why should they, you might think?

Well we happened to conduct this exercise on the streets of the University of Chicago campus, where the probability that a passerby is coming from or heading into a conversation about some combination of economics, banks, capitalization ratios and market competition is high. So the average passerby would be likely to at least think she has a clue, and she’d enjoy the opportunity to make an educated guess.

To put it another way, our question is like asking a New Yorker how many food carts there are in Manhattan. It’s a question for which many would assume they could at least make a decent guess somewhere in the ballpark, and more likely than not enjoy doing so.  

Because you’re reading our blog -- a banking blog -- we assume you’re in the category of someone who thinks they have a clue.

So let’s see if you’re more informed than the average person.

Up for playing along? Stop scrolling now and guess the number of banks.




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Really, take a guess.

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Somewhere between 10 and 50,079,000,600.

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Got your number?

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Someone playing along, making an educated guess.

Someone playing along, making an educated guess.


There are currently 5,477 banks in the US.* If you’re like most people we talked to, your guess was far too low.

Regardless of whether our participants wrote down their gut reaction or treated this like a market-sizing consulting interview question (yes, that happened), the vast majority of people underestimated the number of banks in the US.

On this poster alone, 30 of the 35 guesses were too low. That means nearly 9 out of every 10 people we talked to thought there were fewer banks than there actually are.

But here’s what really caught us off guard: 74% of people we talked with guessed a number that was less than half the true count.

This means that 3 in every 4 people we talked with were surprised to learn there are more than double the number of banks than they thought there were.

Perhaps this can be explained by a trend that’s fairly well-known: the consolidation of the banking industry. In a globalizing world, big business (or in this case, big banks) buy smaller businesses (or banks).

But despite this consolidation, the number of banks available for the average person is on the rise. How so?

Well, banks today can better compete, irrespective of size, thanks to technology. A majority of banks offer online banking, a growing number offer mobile banking, and more and more are incorporating other technologies for their customers’ convenience, like letting new customers transfer their direct deposits and bill pay from their old bank to their new bank with one click. This means that more people can use more banks than ever before, no matter where they’re located, with little need (if ever) to visit the bank in person.

So yeah. If you use a bank, know there are more than 5,000 others, among which there might be a few that you’d really dig. Banks located in more locations than you may have considered were even open to you.

Just like the lunch you just ate today was perhaps made with ingredients produced near and far, you can consider banks today both near and far, too.

Are you banking with the best bank for your money and values?

Search banks now 


*Data from FDIC, Q3 2018. Non-depository, non-insured financial institutions excluded from this number.


 
 
The important thing you might have overlooked doing since the last election
 

Guest post by Bridget Newsham

Bridget Newsham is an editor and writer based out of Chicago, Illinois. She writes primarily about local politics, housing, and urban development but is always excited to take on new and interesting subjects. Her work has been featured in Chicago Magazine, VICE, South Side Weekly, among others.

Your money in your bank is used to finance what you believe in, or undermine your interests. Choose a bank that shares your values.

Image credit: mighty Mighty intern Lauren Han

Image credit: mighty Mighty intern Lauren Han

Regardless of what side of the political aisle you are on these days, I think we can all agree things feel a little out of our control. Times are tough out there. We know you’ve been busy protesting, having tough political conversations with your uncle at the holiday dinner table, and taking other important steps to impact change in our world—that’s awesome! But I am here today to make sure you take one quick final step (it’ll take less than 10 minutes, muuuuch quicker than that 2-hour protest you went to last week) to ensure you make the biggest impact with the least amount of effort: changing your bank account.

My bank account you say? Yep, you read that right. Although the other civic actions you’ve been taking are critical to making change, let’s be honest here: money makes the world go round, and banks are funding a whole array of causes that you might not agree with. We wouldn’t want the other hard work you’re doing to be wasted because your money is being used to undermine the very issues you’re fighting for.

This idea isn’t new. And it’s actually become trendy. Calling out banks for where and what they invest in has hit the celebrity circuit. Sarah Silverman called out her bank for supporting the Dakota Access Pipeline and then plucked her money right out of that bank and put it into a community-focused credit union that aligned with her values. In response to the police killings of young black men in 2016, Killer Mike of Run the Jewels urged people to put their money in black-owned banks, and 8,000 people did.

The cool thing about all of this is that if you’ve got a few dollars in a bank, you can vote with that money, and bank without sacrificing anything. As a matter of fact, there are community-investing banks across the country, and with these banks, there’s a good chance you’ll get a better rate and lower fees.

Chicago native, tech entrepreneur and former banker Daniel Ramirez-Raftree recently moved to New York but decided to keep a portion of his money in a local Chicago bank because he knew his money would be used for good. “If you’re a civic-minded person concerned about social impact,” Ramirez-Rafttree said, “I can tell you you’re much more likely to agree with what community banks are doing with your money than what almost any other bank is doing with it.”

Eliot Abrams is a University of Chicago alumni who worked with fellow classmates to transfer one-million dollars of the University’s money to four community-focused banks. “Through some research, we realized the university had a ton of cash on hand at all times,” said Abrams. “So we thought there was no reason not to keep this money in a community-focused bank.” And the university agreed. The only restriction was that the money needed to be insured by the FDIC, but good news! The majority of banks in the country are FDIC-insured. Your deposits in all FDIC-insured banks are equally safe up to at least $250,000. And many banks offer multimillion-dollar deposit insurance.

The beauty of choosing among community-focused banks is that each is a little bit different. Some invest in Black-owned businesses, some invest in rural communities, others have a strong interest in the environment. Some do all of the above. Many have an explicit purpose beyond growing richer.

Embedded in communities, community-focused banks create flexible loan options, provide higher interest rates, and many being small businesses themselves, are well-suited to work with other small businesses. Though they may not have thousands of branches nationwide, most have online banking or mobile apps, and local market expertise. Abrams summarizes: “community-focused banks tend to have more flexibility in terms of what they can offer.”

By now you must be asking yourself, huh—maybe it’s time to consider voting with my bank dollars in addition to my ballot and my megaphone?

 
BlogBridget NewshamBlog
Four myths about opening a bank account
 

You may be holding onto some old ideas about what banking is and isn’t.

 
Fear is a bad advisor.

Fear is a bad advisor.

 
 

We know it’s been a while since some of you have opened up a bank account. Maybe you’ve only done it once or twice in your lifetime.

Just like anything you do infrequently, the thought of opening up a new bank account might make you feel a bit anxious.

We’ve written down four myths you may have and then unpack them.

Myth #1: I have to visit a bank in person to open a checking, savings or CD account.

Truth: You can open up an account from your living room couch.

If visiting a bank branch sounds like the last thing you’d ever want to do, good news: hundreds of banks offer online account opening. So you can open your account in between ordering take-out and shopping for shoes.

For banks that don’t yet offer online account opening, many let you open up an account over the phone.

Myth #2: It takes eons to open up a bank account.

Truth: It can take as little as 15 minutes.

You can open a bank account online in about 15 minutes. Some banks advertise times as low as 5 minutes.

Considering the amount of time the average person spends on the internet browsing different ways to cook noodles, that’s a tiny chunk of your day.

Opening an account in person can take longer, more like 20 minutes, which is a lot shorter than eons.

Myth #3: I need to ready a ton of paperwork prior to opening a bank account.

Truth: In most cases, it’s like getting your driver’s license. You’ll need a government-issued ID, a social security number, and your current/previous address(es).

You do not need every single document that proves your existence.

Banks do have to abide by regulations to make sure you are exactly who you say you are. (This is good for everyone.) This can usually be accomplished with a government ID and a social security number, and knowledge about your previous addresses.

Online, you’ll usually have to answer a few more questions to prove you are who you say you are.

If you plan to walk into a bank, call the bank in advance to confirm what’s needed.

Myth #4: I have to transfer everything over from my old bank to open an account with a new bank.

Truth: You can have multiple bank accounts.

You don’t need to close your old bank accounts to open up a new account with a new bank. Many people use 2 or 3 or more banks for different purposes: one for checking, one for savings, one for a CD. One for a loan. One for its special interest rate offer. Mighty helps you do all of this while asking yourself: is some of my money supporting places and causes I believe in? Other people are asking this of themselves, and if you want to, too, start browsing banks.

If you have more questions, considering giving a bank a call and talking to someone. When you call a community-focused bank, you’ll find that the experience of

 
BlogTeam MightyBlog
We helped Chicagoans place $3.5 million in virtual bank deposits as part of Chicago Ideas Week. Here’s the recap.
 

Chicago has 193 different banks—are you banking with one that uses your money in alignment with your values?

Last month, a group of students, small business owners, community organization leaders, and finance professionals gathered to explore this very question as part of our interactive Chicago Ideas Week lab at the University of Chicago Polsky Center for Entrepreneurship and Innovation.

Lab panelists, pictured from left to right: Daniel Ramirez-Raftree, Consultant at Acceleration Group; Jefferey Beckham, Founder at Black Box Creative; Megan Hryndza, Founder & CEO at Mighty and panel moderator; Eliot Abrams, PhD Candidate in Economics at the University of Chicago Booth School of Business; Jabari Porter, Chief Investment Officer at the City of Chicago Treasurer Office; Sophia Wagner, Lead Product Analyst at Mighty & panel coordinator.

Lab panelists, pictured from left to right: Daniel Ramirez-Raftree, Consultant at Acceleration Group; Jefferey Beckham, Founder at Black Box Creative; Megan Hryndza, Founder & CEO at Mighty and panel moderator; Eliot Abrams, PhD Candidate in Economics at the University of Chicago Booth School of Business; Jabari Porter, Chief Investment Officer at the City of Chicago Treasurer Office; Sophia Wagner, Lead Product Analyst at Mighty & panel coordinator.

As covered by Next City, the purpose of the event was for Mighty to share its new beta platform — described by Mighty as being like “Trip Advisor for community-investing banks” — with an audience of lab participants who signed up to make $100,000 of virtual deposits each into banks across the Chicago metro area using the Mighty platform, and to discuss why they made their decisions.

“I put my money in GN Bank, Urban Partnership Bank, and Liberty Bank and Trust because they are each banks with a history of financing black American communities in Chicago,” a lab participant said. Meanwhile, a live poll continuously refreshed at the front of the room, visualizing where lab participants were choosing to make their deposits.

“I put some of my money in a particular bank because I saw that people in the room were putting their money there, and I could on Mighty that the bank is Chicago-focused and puts more of its money in the bank toward community financing than the average bank in Chicago,” a second lab participant said.

“I liked learning about banks that are 100% focused on Chicago,” another lab participant said. “And learning how different people have put together a banking portfolio influenced my thinking, too.”

The lab began with a panel featuring four Chicagoans and the portfolio of banks they used at their organization, or personally. Projected on a large screen behind the panelists were the names of the banks each banked with.

Pictured from left to right: Megan Hryndza, panel moderator; Jefferey Beckham, speaking about his banking portfolio as a small business owner; Eliot Abrams, speaking about his experience with the University of Chicago building its banking portfolio with consideration for a bank’s community impact; Daniel Ramirez-Raftree, speaking as a millennial interested in community development and his banking decisions; and Jabari Porter, speaking about the City of Chicago’s bank portfolio.

Pictured from left to right: Megan Hryndza, panel moderator; Jefferey Beckham, speaking about his banking portfolio as a small business owner; Eliot Abrams, speaking about his experience with the University of Chicago building its banking portfolio with consideration for a bank’s community impact; Daniel Ramirez-Raftree, speaking as a millennial interested in community development and his banking decisions; and Jabari Porter, speaking about the City of Chicago’s bank portfolio.

Jeffrey Beckham, Founder of Black Box Creative, spoke from the point of view of a small business owner. Beckham said he used different banks for different reasons: one strictly for transactional purposes, and another for the values-aligned, neighborhood-oriented relationships it offers his business and the other small businesses he works with.

Eliot Abrams, a PhD candidate in economics at the University of Chicago Booth School of Business, spoke about his role while an undergraduate student at the University of Chicago to work with his classmates to prompt the University to place $1 million of university deposits into banks focused on making community investments. (A case study of the student-led campaign was written up by Democracy Collaborative, here (see page 33)). Abrams said that getting the university to agree to making the deposits required just a few short meetings.

Abrams explained that as part of his senior class’ community outreach initiative, he and his fellow students asked the university to move some of its money on deposit in FDIC-insured banks to others that were equally insured but more focused on financing small businesses and housing in neighborhoods around the university. According to Abrams, both students and university officials agreed that making a deposit in a community-investing bank was an easy and low-risk way for the university to make an impact.

Daniel Ramirez-Raftree, a NY-based consultant with Acceleration Group, spoke about his decision to use both a global bank and a Chicago-focused bank.

Ramirez shared that he moved to New York City to advance his career after two years of working with Urban Partnership Bank in Chicago, which he learned about while a student at the University of Chicago. Ramirez-Raftree said that he maintains an online savings account with the Chicago bank to keep a connection to Chicago community.

“While it’s true that I could perhaps make a higher interest rate if I put my money in an online-only bank, I did the math and decided that the small bump in interest isn’t worth my sacrificing my aligning my money with my values,” Ramirez-Raftree said, adding that his interest rate from Urban Partnership Bank is better than that offered by some global banks. “I know community-investing banks make many small loans and this is more costly than only making large loans, so I understand why a community-centric bank may not always offer market leading rates.”

Jabari Porter, Chief Investment Officer with the City of Chicago’s Treasurer’s Office, highlighted the City’s placement of $20 million of deposits with GN Bank as part of the City’s initiative to build a bank portfolio that balances the City’s financial management needs with its commitment to support community investments in neighborhoods across the city. Porter encouraged the audience to engage their local representatives if municipal deposits were something a community was interested in attracting to its locally-focused neighborhood bank(s).

Lab participants began placing their virtual deposits using the Mighty platform at the conclusion of the panel having listened to the experiences of the panelists, and by exploring bank impact data on Mighty and conferring with the ideas of fellow lab attendees.

Lab participants at Mighty’s Chicago Ideas Week lab: How to Pick a Community-Focused Bank.

Lab participants at Mighty’s Chicago Ideas Week lab: How to Pick a Community-Focused Bank.

Sophia Wagner, Lead Product Analyst at Mighty, left, speaks with panelist Eliot Abrams, PhD student at the University of Chicago Booth School of Business, right, at Mighty’s Chicago Ideas Week lab: How to Pick a Community-Focused Bank.

Sophia Wagner, Lead Product Analyst at Mighty, left, speaks with panelist Eliot Abrams, PhD student at the University of Chicago Booth School of Business, right, at Mighty’s Chicago Ideas Week lab: How to Pick a Community-Focused Bank.

Here’s a summary of the three ways in which the lab participants chose to place their virtual deposits.  

 
 

1 - Chicago Lab participants chose to make their deposits with banks that put the majority of their deposits to work in Chicago.

At the start of the event, lab participants learned that among the 193 different banks with a branch or HQ office in the Chicago metro area, just 7% of these banks’ total deposits are at work in Chicago.*

After engaging with the Mighty platform, lab participants made clear that the banks in Chicago that put the majority of their deposits to work in Chicago are of special interest.  

In the course of the simulation, lab participants overwhelmingly chose to deposit their virtual cash with Chicago-focused banks putting the majority (if not all) of their deposits to work in Chicago. Specifically, 18 of them.

This resulted in the lab participants’ virtual deposits supporting banks that put 96% of their deposits to work in Chicago, versus the 7% of deposits at work in Chicago according to the status quo Chicago bank industry average.

 
 

STATUS QUO

Where deposits are at work* among all Chicago banks**

LAB SIMULATION

Where deposits are at work* among all Chicago banks chosen by lab participants***

*Deposits at work is the share of bank deposits held in branches in the Chicago metro area as a percentage of Chicago banks' total domestic deposits. **All Chicago banks includes banks in the US with a branch or HQ office in the Chicago metro area. Data source: FDIC Summary of Deposits Survey, Q3 2017. ***All Chicago banks chosen by lab participants includes banks in the US with a branch or HQ office in the Chicago metro area with which lab participants chose to place virtual deposits as part of Mighty’s Chicago Ideas Week lab.
 


2 - Chicago Lab participants deposited their money with 18 different banks, most all of which are focused on financing the real economy, and many which are focused on financing populations where equity historically lacks.

“An immediate benefit of Mighty is seeing that there are many more bank choices in Chicago — and differentiated bank choices — than I had ever realized,” a lab participant said.

Through the course of the simulation, lab participants deposited their virtual cash into 18 different banks.

Of the $3.5 million of total virtual deposits placed:

  • 88% or $3.08 million was deposited with banks focused on financing the real economy, which Mighty also refers to as the neighborhood economy or communities, in the form of community loans and investments.**

  • 61% or $2.14 million was deposited with banks certified for their focus on financing poverty alleviation.**

  • 35% or $1.23 million was deposited with banks certified for financing Black American Equity in communities.**

  • 17% or $595,000 was deposited with banks certified for financing Asian American Equity in communities.**


LAB SIMULATION

Types of banks with which lab participants collectively placed $3.5 million of virtual bank deposits

 

**Real Economy focused banks, which Mighty also refers to as community- or neighborhood-focused banks, are banks that put more of their assets into financing business loans, housing loans, construction loans, municipal loans and securities, farm loans, and household loans than the bank industry average in the US, as reported on the Financial Institutions Examination Council (FFIEC) Call Report, Q3 2017. Examples of non real economy financing by banks includes assets in the bank, like trading assets, used to invest in financial markets, and assets used to cover bank operating expenses. **Poverty Alleviation certified banks are banks certified by the U.S. Department of the Treasury for making the majority of their loans for the economic benefit of low- and moderate-income communities. Banks receiving this certification are certified as Community Development Financial Institutions, or CDFIs, Q3 2017. **Black American and Asian American Equity certified banks are banks certified by the Federal Deposit Insurance Corporation (FDIC) for being either (1) majority owned by individuals that are of a minority group, or (2) governed by a majority of individuals (at the Board level) that are of a minority group and the bank primarily serves a population pertaining to the minority group.


3 - Chicago Lab participants created $1 million of new community investment, mostly in the form of business and housing loans.


Of all of the money in all of the banks with a presence in the Chicago metro area, 40% of the total money in these banks is used to finance the real economy across the US in the form of loans and other community financing for businesses, farms, housing, construction, public works, and consumers.

Using the Mighty platform, lab participants made deposits with a consideration for banks that put a larger share of their total bank money (60%-85%+) into community financing than the bank industry average (45%).

The 18 banks selected by lab participants collectively put 74% of their total assets into community financing.

In result of the simulation, the virtual deposits created an 85% (or $1.2 million) increase in community financing, mostly in the form of business and housing loans, versus the community financing that would result from the deposits having been made in a network of banks that behave like the Chicago bank industry average status quo.

STATUS QUO VS LAB SIMULATION

Percentage of money in Chicago metro area banks (Status Quo) that is invested into the real economy, or communities, versus the percentage of money in lab participants’ chosen banks (Simulation Cohort) that is invested into the real economy.

Money invested into the real economy, which Mighty also refers to as community- or neighborhood-focused financing, is the sum of business loans, housing loans, construction loans, municipal loans and securities, farm loans, and household loans as a percentage of total bank assets, as reported on the Financial Institutions Examination Council (FFIEC) Call Report, Q3 2017. Examples of non real economy financing by banks includes assets in the bank, like trading assets, used to invest in financial markets, and assets used to cover bank operating expenses. All Chicago metro area banks includes banks with a branch or HQ in the Chicago metro area, as reported on the Summary of Deposits Survey, Q3 2017. Averages weighted by bank size.
 
 

The event, of course, was a simulation. But if a group of 35 lab participants controlling a sum of $3.5 million could create $1.2 million of new community investments through the low-risk, relatively easy yet intentional placement of deposits with Chicago and real economy focused banks, imagine what a larger group of committed organizations and individuals could do for the city.

"The simulation was really eye-opening,” said a small business consultant in attendance at the lab. “I work with a network of small businesses and its powerful to know there is a whole network of banks specialized in financing community investments like loans for small businesses in different neighborhoods with diverse needs. I’ll use Mighty as a resource to better advise my small business clients interested in bank relationships that match their needs and ethos.”

 
 
BlogTeam MightyBlog
Impact Engine & Mighty host a panel talking money and meaning
 

On June 13th, Impact Engine hosted a panel discussion and networking event Is the Bank Account the Onramp to Bringing Impact Investing Mainstream? by partnering with Coalition Impact in Chicago and Mighty Deposits, a technology platform that connects impact-oriented customers with impact-focused banks. The focus of the discussion panel was what banking for impact looks like now and its future opportunities.

Banking for impact is the power that people have to choose socially-responsible banks, such as those that power small businesses and local farms. By investing their money, banks can leave a positive social impact. 

“There are lots of divestment conversations: fossil fuels, prisons, DAPL,” said Oscar Perry Abello, a New York City-based Fast Company + Next City journalist. "We’d like investment in bad things to stop, but we haven’t talked much about where to invest for good things. Where is our money going? Clean energy, businesses that hire re-entry workers?”

A platform like Mighty is one solution to this dilemma. A marketplace for people to shop banks at the intersection of money and meaning, Mighty helps people find banks that support the same causes they do.

"If you want your money to impact black neighborhoods, investing in black-owned banks in black neighborhoods is a big way you can impact that,” Abello suggests.

Mighty identifies these community-oriented banks and informs about their footprint. That way, people have better access to the power they’ve always had to invest in banks that share their values.

Panelists spoke of a depth to banking that hasn’t been explored much to date—the impact of individual deposits. A little known fact, banking for impact can involve just the simple act of depositing money in socially-conscious banks.

“When we’re talking about the power of banks and what they can do, deposits are the low-hanging fruit,” pointed out panelist Ronald Milsap, manager of Mission-Based Deposits at Urban Partnership Bank, one of two certified black-governed banks in the city of Chicago.  

The discussion touched upon the current state of banking across the country.  

“Bank consolidation over the past 30 years has resulted in global banks eating up local banks like it were a game of Pac Man,” CEO Megan Hryndza of Mighty pointed out. “In 1985, America had more than 14,000 banks. Today, there are just 5,800 – and of those, only 23 are black-owned and only 15 owned by women. What impact innovations can we learn from these banks, and how can we scale the best pratices?”

The panelists affirmed the potential of banks to create positive social impact in the future.

"The conversation is moving to: here are the ways banks can do good and be good businesses at the same time," Mark Newberg, Director of Impact Strategies for Wombie Carlyle, said.

 
 
Events, BlogAmy Ma
Is your bank kinda like Sandra Bullock?
BlogTeam Mighty
Heard on the street: "Hmmm..... Banks"
BlogTeam Mighty