Along with monetary policy, there are many other factors that determine the nation’s economic growth, including a healthy and productive labor market, innovation and access to capital. The banking system in the United States has long been an essential source of capital for the nation’s economy, and here in the Tenth Federal Reserve District, many businesses and consumers rely on community banks to access credit.

Having adapted over the years to significant economic and regulatory changes, as well as technology disruption, the community bank business model has retained its unique focus on relationship banking. These banks, their owners and the people who work for them are generally members of the communities they serve. The relationships are long term, and the incentives of the bank and the borrower are well aligned.

Whether the community is a small rural town or an urban neighborhood—this business model features local bankers who are immersed in their communities, understand the economic drivers of their communities and often serve as leaders in their communities. Those of you who are bankers recognize this critically important role, and your financial institutions have recognized that this requires diverse staff reflecting the communities they serve.

However, diverse talent in banks is just one aspect of serving a community from a base of understanding and personal engagement. Diverse ownership of banks is also important. Yet, there are very few minority-owned banks in the United States today and their numbers are declining. Over the 10-year span since 2006 to the end of 2016, the total number of FDIC-insured minority depository institutions has declined from 194 to 157.[1] Within this category, the number of institutions classified as Native American or Alaska Native American has held relatively steady, falling from 20 to 18, while the number of Hispanic American banks has dropped from 48 to 39. The sharpest decline has been in the number of African American banks, which has fallen by almost half to 24 institutions, according to FDIC data.

Throughout the history of our financial system, the inability to access credit often spurred the establishment of a local bank. These banks often proved to be innovative lenders that considered the unique characteristics of local communities. Minority-owned banks emerged for the same fundamental reason, and their history tells an important story about access to the financial system.

In the Tenth Federal Reserve District, Centinel Bank of Taos, N.M., is a great example. Centinel is generally believed to be the first mainland U.S.-based Hispanic bank, and has been led by its chair and CEO, Rebeca Romero Rainey. In 1959, Rebeca’s grandfather, who had served in the military and then earned a law degree, was denied a $50 loan to purchase office furniture. At that point, he vowed to create a bank that would provide equal access to credit for everyone. After gathering support from about 300 investors, the bank opened for business in 1969.

More recently, the first bank owned or controlled by a Native American tribe was created in 1987 when the Blackfeet Tribe of northwestern Montana took over a failed bank in Browning, Mont. Blackfeet National Bank later became Native America Bank, NA.

With some of the earliest African American banks, loans were primarily to mutual aid societies and entrepreneurs.[2] The number of African American-owned banks increased substantially after 1900 and, between 1900 and 1914, the number of African American business enterprises doubled, with more substantial increases in some business segments, particularly retail merchants.[3] This was a notable expansion of opportunity compared to the late 1800s when the primary occupations held by African Americans were blacksmith, tailor, barber and similar jobs.[4]

The first banks with African American ownership opened during the Reconstruction period in our country. The first to receive a charter was The Savings Bank of the Grand Fountain of the United Order of True Reformers. In 1890, the bank’s founder, William Washington Browne, explained his goal: “The True Reformers sounds like reformers of character, but we are hunting for people who are already reformed. The church of God has the other kind of reformation in hand; mine is financial reform. I want to go forward reforming our people financially. We are throwing away money enough to buy this country.”

Browne’s bank, and the others that soon followed his model, sought to provide services to customers who had suffered in many ways, including being exploited financially. Prior to that bank’s creation, the government had established the Freedman’s Bank in 1865 specifically to serve the nation’s African American population. Although the intentions were honorable and branches were opened in several states in an attempt to connect to local populations, the bank’s leadership was not aligned with the needs of its communities. Instead, corruption and high-risk investments made with bank deposits resulted in its failure (despite the best efforts of Frederick Douglass, who had fought to save the institution after the damage had been done). In this era before deposit insurance, the collapse took with it the life savings of 61,000 savers who were struggling to become established in the United States.

Browne’s life story is itself very much about the ability to overcome challenges and is as inspirational as any in American history. At the age of 13, he escaped slavery and eventually joined the Union Army. After gaining an education in Wisconsin, he returned to the South as a teacher and served as a minister. Influenced by his experiences, Browne established the Grand Fountain of the United Order of True Reformers, a fraternal organization with the stated goals of taking care of the sick, burying the dead and providing other assistance.

Browne had not necessarily sought to establish a bank to achieve personal goals. Instead the bank was created in response to the needs of his organization, which reflected the needs of the community. A Virginia chapter had been unable to organize because of difficulties safely storing its treasury of about $100. Denied access to a traditional banking institution, the group had to instead rely on the safe of a local storekeeper, which had proven problematic. The chapter was ready to give up, but Browne encouraged them forward. Creating a bank provided a degree of security for the organization by meeting a very fundamental financial services need—in this case, the bank was literally a response to the need for a safe place to store funds—but Browne knew, as we know today, that banks also foster opportunities. It was to be an economic win/win —a place to pool the resources of savers to meet the needs of borrowers.

In the words of one of Browne’s associates: “We mean to encourage … people to get homes and means upon which they may independently subsist.”

Browne kept his word. Throughout the panic of 1893, which saw nearly 600 banks nationwide either fail or suspend operations, it is recorded that Browne’s bank was the only bank in the entire state of Virginia that continued paying out all checks. During the crisis, at least one local public school was able to obtain the funds necessary for paying salaries from Browne’s bank after being denied by other financial institutions. Similarly, the bank loaned money to the City of Richmond in the early 1900s when the city was also unable to obtain funds from other sources. 

     This is also the story of community banks today. An institution that is local enough to understand and meet the credit needs of a community determines whether that community thrives or withers.

     This history is a reminder of the importance of access to credit and the role it plays in the prosperity of households and the vitality of businesses. In the words of one of Browne’s contemporaries, “Banks are the life blood of trade and progress, whenever they may be established.”[5]  It is as true today as it was in 1890. And the health and diversity of our banking system remains key to the promise of delivering broad-based economic gains for thousands of communities.

This text is adapted from the keynote address President George delivered Sept. 28, 2017, at the Kansas City Fed’s “Banking and the Economy: A Forum for Minority Bankers.”

[1] Data Source: FDIC-Insured Minority Depository Institutions data, year-end totals. Accessible via: www.fdic. gov/regulations/resources/minority/mdi.html. Minority status is defined either by the concentration of ownership status among a certain minority group or the concentration of board membership by a minority group of an institution that serves primarily that minority group.


[2] Ammons, Lia. “The Evolution of Black-Owned Banks in the United States Between the 1880s and the 1990s.” Journal of Black Studies, Vol. 26, No. 4 (Mar. 1996).


[3] Meier, August. “Negro Class Structure and Ideology in the Age of Booker T. Washington.” Phylon. Clark Atlanta University. Vol. 23, No. 3. (Q3, 1962).



[4] Ibid


[5] Burrell, William Patrick, and D.E. Johnson, Sr., “Twenty-Five Years History of the Grand Fountain

of the United Order of True Reformers 1881-1905.” Grand Fountain, United Order of True Reformers. Richmond, Va., 1909.