A new multiracial bank takes off quickly

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There are over 140 minority depositories in the United States, but only two are designated as multiracial.

The last is Genesis Bank, a de novo that opened in August. The Newport Beach, Calif., Based company is already considering raising additional capital as it sees more loan demand than it can meet.

Genesis funded its first loans this week, well ahead of the timeline established during its organization phase. But the bank has also had to turn down deals “that exceed what our capital or our balance sheet can handle,” CEO Stephen Gordon said in an interview. “It makes me miserable.”

A new call for capital is “highly likely” for Genesis, which raised $ 57 million ahead of its August 4 start date, Gordon said.

“We don’t want to turn down high quality and great business deals,” said the veteran CEO. Genesis is the third Californian community bank that Gordon runs, after Opus Bank from 2010 to 2018 and Commercial Capital Bancorp from 1998 to 2006.

Banks that receive the MDI designation are eligible for support from government and private sector donors. In March, for example, the Treasury Department announced its intention to invest $ 9 billion in MDIs and community development financial institutions affected by the coronavirus pandemic. Last week, FDIC President Jelena McWilliams announced the creation a $ 120 million mission-focused bank fund that plans to invest in MDIs and CDFIs.

While Gordon, who provided half of Genesis’ initial capital and is also its chairman, is Caucasian, the company’s board of directors and management teams are diverse, reflecting the demographics of his footprint in southern California.

As a result, Genesis is categorized as a multiracial minority depository institution, making it the second de novo bank to achieve the multiracial classification, after the two-year bank. Piermont Bank At New York. Most banks with an MDI designation received it due to ties to a particular minority community.

A total of 116 of the 144 banks recognized by the Federal Deposit Insurance Corp. MDI.

Multiracial MDIs, on the other hand, must pass a two-pronged test: they must serve a majority-minority population footprint, and their board of directors must be made up primarily of minority directors.

For her part, Gordon has not attempted to tie Genesis’ MDI status to the boom in commercial activity she is experiencing, but the two may well be linked according to Chris Zingo, executive vice president for the Americas. of the London-based consulting firm. Finastra. pp

“Many mission-driven consumers are passionate about choosing a bank that matches their personal values,” Zingo said Monday. “When banks qualify for designations as a minority depository institution or as a financial development institution for community development, it can be a powerful competitive advantage. “

According to Gordon, Opus Bank’s footprint, which included San Diego, Los Angeles, San Francisco, Portland and Seattle, was diverse enough to qualify it for consideration for minority custodian status – except that its board of directors did not have the required diversity.

“We had a nine-member board and I think at one point we had a minority. Shame on us, ”Gordon said.

Genesis Bank’s footprint is concentrated in Los Angeles and Orange counties, as well as the western sections of San Bernardino and Riverside counties. This time, Gordon said he made sure that Genesis’ board of directors reflected the diversity of that market, appointing Asian, black and Hispanic directors.

“We intentionally made sure that a majority of our board – four out of seven – was representative of the communities where we focus on doing business,” said Gordon.

Pavel Chernyshov, co-founder of Arkview Capital, a private equity fund in Stamford, Connecticut, which owns a stake in Genesis, was among the early investors in Opus.

“What else do you need as a board of directors of a bank than to have a pulse on the communities you serve,” Chernyshov said. “It’s fantastic the direction [Genesis is] socket.”

Chernyshov and his partners Joon Chang and Vihay Mehta claim that Genesis’ multiracial MDI status makes it even more appealing.

“We think we have a better business model because we’re not excluding anyone,” Mehta said. The bank “doesn’t focus on one group or another, it focuses on the full diversity of the population of the greater Los Angeles area.”

Piermont, who has just crossed the threshold of $ 300 million in assets, did not initially realize that he qualified as a multiracial MDI. “It was a surprise,” CEO Wendy Cai-Lee said in an interview.

Since opening its doors in July 2019, more than half of Piermont’s loans have been loans to low- and moderate-income census tracts or to minority borrowers, a trend which is largely due to diversity among the bank’s top executives, Cai -Lee said.

“When you have a very diverse board and management team, you naturally hire a more diverse workforce and you are more willing to understand the weak spots of minority borrowers,” said Cai-Lee.

At Genesis, minorities could ultimately represent 75% of the customer base, according to Gordon.

Gordon and Cai-Lee have both said they hope their banks will start a trend and more institutions will seek the multiracial designation.

“If we could convert 10% [of banks] to a more multiethnic and multiracial model, that would be great for our industry, ”said Cai-Lee.

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