The American banking industry has not had the best of times recently - what with the economic malaise that began in December of 2007, the ensuing government bailouts, executive pay scandal, and most recently rogue bets at J.P. Morgan that lost billions.   

However, two bright spots in the industry are helping to restore faith in the otherwise embattled banking realm.    

The first is the rising role of community banks in helping to kick-start developments in distressed communities.  As the recession amplified from 2008 to 2010 many larger banks tightened their credit requirements, barring many private parties from taking out loans that may have been used to start new businesses, expand operations, or invest in improvements. This is what Fed Chairman Ben Bernanke said earlier this year about the benefits of community banking:

"... their primary activities revolve around the traditional banking model--specifically, taking short-term deposits to fund longer-term investments, such as small business, agricultural, or commercial real estate loans. Accordingly, risks at community banks tend to arise from their lending, in the form of credit risk, interest rate risk, or concentration risk, rather than from the trading, market-making, and investment banking activities associated with the largest banks. By taking on and managing the risks of local lending, which larger banks may be unwilling or unable to do, community banks help keep their local economies vibrant and growing. Importantly, community banks are well positioned to go beyond the standardized credit models used by larger banks and consider a range of factors when making credit decisions. In particular, they often respond with greater agility to lending requests than their national competitors because of their detailed knowledge of the needs of their customers and their close ties to the communities they serve."

Indeed, in an effort to spur new growth, Federal and local initiatives were enacted and many community banks benefited from new approaches that focused on encouraging the positive feedback loop of investing locally. City First Bank, a Clean Currents wind powered customer, was one such community bank to benefit from these initiatives.

The Department of the Treasury awarded tax credits to DC based City First Bank in order to finance development in low-income communities in the region. “The New Market Tax Credit has been a powerful tool to create jobs and stimulate economic development in low-wealth communities,” said Brian Argrett, City First CEO.  City First has so far used the tax credits to help finance the refurbishment of the Tivoli Theater in Columbia Heights and Mary’s Center Health Clinics in Petworth, among other projects in the DC area.

Another bright spot is the increasing importance of sustainability initiatives in banks’ operating charters with regard to both internal initiatives as well as a dedication to external lending for green purposes.  Congressional Bank, another Clean Currents wind powered customer, is one such bank that has made the real commitment to operating in a more sustainable and greener manner.  Congressional Bank was the first area bank to earn the Montgomery County Green Business Certification label and was a recipient of Bethesda Magazine’s Green Award last year for its commitment to sustainable practices.  The bank’s commitment extends to a focus on lending to companies that generate eco-friendly solutions to their customers, in turn creating green jobs and leveraging green practices throughout the greater community.

Of course community banks are not the only banks that are delving into green financing or community development.  Click HERE to read more about the growing role of larger banks in advancing green energy goals and in financing green construction in our area.

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