True bank failures in New Jersey in the decade after the recession have been virtually nonexistent.
But, as unprecedented as it is, to talk about the fact that Newark-based City National Bank became one of the first to break that streak when it was forced to close in November might be burying the lede.
Because what the story of the bank’s closure highlighted was that there was only one African American-owned bank across the entire Garden State. And, now, there are none.
City National Bank was among New Jersey’s only three FDIC-qualified minority depository institutions, meaning more than half of the voting stock is owned by minorities or a majority of the board of directors is minority and the bank’s reach is in minority communities.
The banking industry’s nearly absent diversity in ownership roles has been an elephant in the room. But John McWeeney, CEO and president of the New Jersey Bankers Association, isn’t pretending he doesn’t see it.
“We do need to do a better job as an industry of having more diversity in the C-suite and the CEO role in particular,” he said. “We’ve made great strides in middle management and senior management positions — that’s where you see a very diverse group of new hires. But we’re not there yet at the CEO rank.”
New Jersey also isn’t alone in this. Pennsylvania only has three minority depository institutions, while New York has around 10. But each of those neighboring states has only one black-owned bank each, according to FDIC data from this year.
And those numbers have been consistently shrinking nationally, just as the closure of City National Bank has further diminished New Jersey’s numbers. The list of these black-owned institutions across the country included 48 banks in 2001; in 2018, the number was 23.
City National Bank was shuttered by the Office of the Comptroller of the Currency because “the bank had experienced substantial dissipation of assets and earnings due to unsafe or unsound practices,” the regulatory agency reported. The bank’s assets were acquired by an institution in Washington, D.C.
“That was unfortunate; they had an important mission to try and serve minority communities in New Jersey as well as New York City,” McWeeney said. “It’s important to have that in the state, but it is a challenging business model.”
We do need to do a better job as an industry of having more diversity in the C-suite and the CEO role in particular. We’ve made great strides in middle management and senior management positions — that’s where you see a very diverse group of new hires. But we’re not there yet at the CEO rank.”
John McWeeney, CEO and president of the New Jersey Bankers Association
McWeeney explained that community banks are already challenged with making money in a low-interest-rate environment, especially given the cost of compliance and technology that’s required today for a bank to operate on the back end.
“But for those targeting low- to moderate-income communities and providing credit to those markets, they’re also taking on more risk to accommodate borrowers in communities that might not qualify for conventional bank lending,” he said. “Naturally, you’re going to have a higher failure rate with that type of lending, so you need a lot of capital to do that — and that’s tough to come by.”
Outside of banks serving particular markets, McWeeney said community banks of all sorts are at least in the midst of hiring a more diverse workforce.
“And that’s naturally going to evolve toward us being where we want to be,” he said. “So, to some degree, this is already happening. But, to the extent we can accelerate it, that’s a good thing.”
New Jersey banking leaders are starting with being proactive about taking any opportunity to espouse the benefits of more diversity in the industry.
“As I say all the time, it’s not about checking off a box,” McWeeney said. “It’s about good business in a market for banking that is very diverse.”
Youth must be served
There’s another largely missing component among the leadership of New Jersey’s sometimes century-old community banks: People born within the past half-century.
“We do have a lot of smaller community bank members that still need to attract, retain and develop that next generation of leaders,” said John McWeeney of the New Jersey Bankers Association. “That’s why we’re introducing programs that will help them along those lines.”
Three years ago, the banking trade organization introduced a program that was meant to help small banks identify and train young leaders. Since then, about 45 individuals have graduated the yearlong training program.
McWeeney also was excited to point to his organization’s recent partnership with Rider University. The college is now offering a 20% tuition reduction to NJBankers employees and employees of the organization’s many member banks.
“We’ve had some dialogue with other universities, because hope to expand that program,” he said. “We expect it to be a big deal for helping develop that next generation of leaders.”
Reach the New Jersey Bankers Association at: firstname.lastname@example.org or 908-272-8500.