Community development banking: more impact, similar returns

The National Community Investment Fund analyzed a group of 483 community development banking institutions with $217 billion in assets and $143 billion in loans.

Findings of the study indicate the fallacy of the securitization strategy which imposed higher risk premiums on lending in low- and moderate-income neighborhoods, giving rise to the sub-prime mortgage glut, a leading factor in the economic downturn.

Institutions in the survey are also five times more likely to have branches in low and moderate-income neighborhoods, another factor which would presumably increase their risk. Included in the study are 195 Minority Deposit Institutions, including African-American owned banks.

Compared to non-CDBI banks with less than $2 billion in assets, the institutions in the study had a 4.98 percent return on equity at the end of 2010, compared to a 5.56 percent return for the peer group.