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John Turner and Sidney King
Category: Insights

A New Way for Banks to Think About Supporting CDFIs

Regions Bank and Commonwealth National Bank create a new model to spur investment in underserved communities.

By John Turner and Sidney King | May 24, 2021

NOTE: John Turner and Sidney King, President and CEO of Commonwealth Bank, recently reflected on a creative partnership between the two banks in a thought leadership column. The following column originally appeared on the American Banker website on May 18, 2021. 

As bank CEOs serving side by side in local markets, we strive to create wealth, share risk, and meet the financial needs of the entire community. We understand that our organizations exist to serve customers and we grow when access to the financial pie expands to include everyone. When groups and neighborhoods do not have access to the financial system it affects all of us.

Last fall, our teams began a dialogue through a series of conference calls. The goal: to spur economic activity in communities where access to the financial system has historically been limited. Both of our banks — Regions Bank in Birmingham, Alabama, and Commonwealth National Bank in Mobile, Alabama — have resources that, leveraged appropriately, could create better outcomes. The ultimate result of those conversations is a greater understanding of how our institutions operate, the shared challenges we face, and a partnership intended to strengthen our communities and our own institutions in the process.

Banks like Regions and community development financial institutions like Commonwealth have worked together for many years, typically with larger banks infusing cash into CDFIs to support loans to small businesses that may find it difficult to access capital.

We collectively agreed that a new approach was in order — one fundamentally rooted in sustainable and profitable growth, benefiting all stakeholders.

Historically low rates have taken a toll on Commonwealth’s net interest margin and the need to hold expenses in check meant that Commonwealth has not had the capacity to hire a commercial banker to support growth, particularly since the position wouldn’t be accretive to earnings for 18 to 24 months.

With some innovative thinking on everyone’s part, Regions is providing funding to support an experienced commercial banker for two years to boost lending efforts at Commonwealth over a timeframe that should be accretive to earnings. To ensure Commonwealth will have an appropriate level of reserves and liquidity to cover its projected growth, Regions also funded a loan loss reserve. Further, the Regions Community Development Corporation also made an investment in Commonwealth to bolster liquidity.

Providing funding for a commercial banker provides Commonwealth a “hand up” for long-term stability. Adding the loan-loss reserve component supports loans that will strengthen small community businesses. This approach makes the most of our individual banks’ strengths.

Last year was an incredibly difficult one on a variety of fronts. The COVID-19 pandemic, economic challenges and civic unrest spurred by racism all drove home the uncomfortable truth that equal opportunity and access are not yet a reality. Last year was also challenging for banks navigating economic volatility and a low rate environment — and this difficulty was especially pronounced for minority depository institutions and CDFIs whose customers generally have less wealth and a smaller financial buffer to weather economic slowdowns.

Today there are fewer than 20 Black-owned banks in the United States, and Commonwealth is one of only two based in Alabama. As both an MDI and a CDFI, Commonwealth plays a unique role in promoting the economic viability of underserved communities by providing access to financial products and services for local residents and businesses. In many cases, these community members are not eligible for traditional bank products and services and are at risk of remaining out of the financial mainstream. Like Commonwealth, Regions has a long history of serving Alabama and continues to focus on creative solutions to meet the needs of those in our home state, and beyond.

Traditional banks, CDFIs and MDIs can play a powerful role in creating more inclusive prosperity, one loan, one account and one banker at a time. Working together we can accomplish far more than we can individually, and we look forward to seeing the long-term results of our investments in the communities that we both serve.

 

About Sidney King:
Sidney King is President and Chief Executive Officer of Commonwealth National Bank in Mobile, Alabama. Before returning to Commonwealth in 2020, King served for 12 years as Kansas City Regional President for Liberty Bank and Trust, nine years as President and CEO at Commonwealth and five years as President and CEO at First American Bank in Jackson, Mississippi. His banking career started in 1982 at Harris Trust and Savings Bank in Chicago. King then served 10 years in various increasingly responsible lending positions at the Independence Bank of Chicago and its sister institution Drexel National Bank. Prior to his banking career, King was employed for five years with a medium-sized Chicago-based public accounting firm and earned accreditation as a certified public accountant. He is a graduate of DePaul University in Chicago where he received a degree in accounting.

About Commonwealth National Bank

 Commonwealth National Bank is a full service nationally chartered commercial bank headquartered in Mobile, Ala. with approximately $54 million in assets and two branches. Established in 1976, Commonwealth is designated as a Minority Depository Institution (“MDI”) and is also classified as a Community Development Financial Institution (“CDFI”).

 About John Turner:
John Turner is President and Chief Executive Officer of Regions Bank and Regions Financial Corporation, headquartered in Birmingham, Ala. Before joining Regions, Turner was named president of Whitney National Bank and Whitney Holding Corporation in 2008. Turner joined Whitney in 1994 as its Alabama regional president after nine years at AmSouth Bank, where he held senior consumer, commercial and business positions. Turner holds a bachelor’s degree in economics from the University of Georgia.

About Regions Financial Corporation
Regions Financial Corporation (NYSE:RF), with $153 billion in assets, is a member of the S&P 500 Index and is one of the nation’s largest full-service providers of consumer and commercial banking, wealth management, and mortgage products and services.  Regions serves customers across the South, Midwest and Texas, and through its subsidiary, Regions Bank, operates more than 1,300 banking offices and approximately 2,000 ATMs. Regions Bank is an Equal Housing Lender and Member FDIC. Additional information about Regions and its full line of products and services can be found at www.regions.com.

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