A report on the federal bank deposit insurer’s efforts to promote minority depository institutions (MDIs) throughout 2019 shows there were 144 federally insured MDIs – down by a net four institutions from the previous year but including two newly chartered institutions – with combined total assets of nearly $249 billion as of Dec. 31.
The Federal Deposit Insurance Corp. (FDIC), the report notes, defines an MDI as any federally insured depository institution for which 51% or more of the voting stock is owned by minority individuals, or a majority of the institution’s board of directors is minority and the community that the institution serves is predominantly minority. Those 144 MDIs in existence as of Dec. 31 employed 36,676 people, the three-page report shows. Of the 144, 96 of the institutions have the FDIC as their primary federal regulator; the Federal Reserve supervises 15, and the Office of the Comptroller of the Currency (OCC) supervises 33, the report shows.
The agency notes that the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) established a number of goals regarding MDIs: to preserve their number; to preserve their minority character in cases involving merger or acquisition; to provide technical assistance to help prevent their insolvency; to promote and encourage creation of new such institutions; and to provide for training, technical assistance, and educational programs for MDIs.
The FDIC reports that the decline in the number of MDIs last year was the result of the combination of one bank failure and various mergers and acquisitions. Of the total assets of the institutions involved in those transactions, 57% ($3.7 billion of $6.5 billion in MDI assets) remained in MDI institutions after the transactions, the report says.
Meanwhile, it notes that the number of profitable firms declined over the year to about 85% of all MDIs compared to 91% as of Dec. 31, 2018. The percentage of unprofitable MDIs exceeds 14% “and remains significantly higher than the percentage of both community banks and all banks that are unprofitable,” at 3.81% and 3.59%, respectively.
The FDIC said the unprofitable institutions generally are smaller institutions, many located either in urban areas that experienced significant economic distress during the financial crisis or smaller rural markets with economic challenges.
Steps taken by the agency to help grow MDIs and improve their operations last year were noted as follows:
- Published Minority Depository Institutions: Structure, Performance, and Social Impact, a research study that looked at the demographics, structural change, geography, financial performance, and social impact of MDIs over a 17-year period ending Dec. 31, 2018.
- Hosted three roundtable discussions among MDI and large bank executives to facilitate greater lending and community development activities in low-income neighborhoods and how such collaborations could receive favorable consideration under the Community Reinvestment Act (CRA). During the roundtables, executives from 29 large banks and 24 MDIs discussed potential partnerships including financial support, lending collaboration, and service activities including technical assistance.
- Established a new MDI Subcommittee of the Advisory Committee on Community Banking (CBAC). There are nine executives serving as members of the MDI Subcommittee representing African American, Native American, Hispanic American, and Asian American MDIs across the country.