A Beneficial Bank Born During a Banking Crisis
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It was July 2007. The housing bubble was about to burst. The subprime mortgage crisis that would precipitate the Great Recession was at very edge of falling into its downward spiral. Kat Taylor, her husband Tom Steyer and a team of politically frustrated, financial experts were launching a triple bottom line bank. They planned for a foundation that would hold the economic rights to the bank and by mandate, would reinvest all profits in the local community and environment.
It was a crazy time to start a bank, but perhaps just the right time to build one that prioritized community right alongside profits—rather than the model so many would come to disdain that pursues profit at all costs.
One PacificCoast Bank (then called OneCalifornia Bank) opened in Oakland, California, modeled after socially conscious financial institutions like Chicago’s ShoreBank and Muhammad Yunus’ Grameen Bank. Initially, the bank aspired to support its community by building a mortgage strategy, because as Taylor puts it, “for many, many families, homeownership is the only wealth-building tool they will ever have. . . we intended to be a mortgage lender in our own way, but we never had the chance.” Only one of the bank’s mentors, Martin Eakes, Self Help Credit Union’s CEO, read the tea leaves accurately. Taylor remembers, “He showed us the rate sheets where there’s all sorts of fraudulent stuff going on, and he said, ‘Hold onto your hats.’ And sure enough, we became a bank… and then we watched the credit market burn down around us.”
Mortgage markets tanked. Instead of helping families invest their money in new homes, the new bank spent 18 months and one million dollars trying to design a foreclosure prevention program. But that was when, as Taylor puts it, “the banks were still in denial. They had been disobeying basic underwriting for a long time and nobody was going to get them to admit that they’d had a hand in this at that time.” One PacificCoast Bank attempted to invest its money as a “silent second” investor in mortgages, as leverage to get banks to modify their terms. “We tried very hard,” as Taylor puts it, “but couldn’t get one done. You’d think if you were waving money around like that…” She sighs. Instead, One PacificCoast Bank lent in distressed neighborhoods dotted with foreclosed properties, helping for-profit and nonprofit entities renovate housing stock to stop blight—with a goal of getting foreclosed homes back on the market at affordable rental rates or with reasonable lease-to-own situations.
A certified Benefit Corporation, One PacificCoast Bank finances community-based businesses, with about 75 percent of its commerical customer loans going to organizations focused on overtly impact-related sectors. Ashara Ekundayo, co-founder and chief creative officer at co-working space Impact HUB Oakland, called One PacificCoast Bank “an amazing resource in our community. As a very diverse and very non-traditional group of social entrepreneur founders with a commitment to economic and cultural equity, at Impact HUB Oakland it was very important to us to partner with a financial institution that was also committed to not doing business as usual.” It’s not the same many of us would say about our banks.
And because its profits were designed to only be distributed through One PacificCoast Foundation, the community is the shareholder the bank serves, not the special interests of any one group. This year alone, the Foundation will give away $100,000 in sponsorships of organizations and their events, all while supporting organizations that promote financial literacy, hosting events for youth like one through Game Theory Academy, working with other credit counseling agencies, grant-making, and running impact evaluations to ensure the bank’s investments are bearing fruit in the community, sustainably.
One PacificCoast Bank has also been working to create an alternative to dodgy and exploitative payday lenders, through its pilot Pac Pal program. Through the one-year pilot, $1.1 million was loaned to 1,100 borrowers who found an easy and more manageable alternative to payday loans, pawn shops or auto title loans. The product will relaunch in 2014.
While One PacificCoast Bank grew in its ability to support its community, the financial crisis was taking down established banks all across the country. A number of Community Development Financial Institutions (CDFI), as Taylor puts it “really started tripping on the curb, because they tend to not be well-capitalized.” The CDFIs were mission-based, but had low returns because they often lend to the low-income communities that the Recession disproportionately hit.
“We recognized that we really need a strong sector of honest community banks, and we didn’t want to just stand by and watch banks go down.” One PacificCoast Bank changed its moniker from OneCalifornia Bank when it negotiated to buy (and salvage) ShoreBank Pacific before its parent company closed. In Portland, Albina Community Bank made it through the downturn, but like many other small CDFI’s was under-capitalized. One PacificCoast Bank is in an agreement to buy, when approved, 90 percent of new stock issued by the bank to recapitalize it. Albina will operate autonomously—because a community bank’s strength is its local ties.
That sort of values-first perspective is vital to many of One PacificCoast Bank’s customers. An upgrade in mobile offerings this fall is timed to reach a new Millennial customer base and affinity credit cards allow another 2,000 to 2,500 customers to support organizations like the Sierra Club and Salmon Nation. Taylor says they’ve seen considerable support from financial reformists, young people and mission-minded people who are coming to see that if financial reform doesn’t start at home, it can certainly begin just down the road, at a community-minded bank.
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