An accidentally effective CDFI faithfully serving small-town communities in Southern Mississippi
In our last article, we talked a little bit about why there’s such a concentration of CDFIs in the deep south. Citizens Bank is one of those CDFIs which was originally formed as a community bank for a small town but evolved into a community development institution to meet the needs of a population with higher poverty rates than most of the country.
Mississippi specifically is the state with the largest percentage of its residents living under the poverty line, presenting some particular challenges to the banking institutions which work in the state. When there is a general lack of capital in a community, it's harder for smaller banks to stay open, as the costs of operation may be too high and there are generally fewer deposits for them to make loans with. This is why it’s so important to invest in small-town banks and credit unions which work in low-income communities, because these communities may not have enough capital to keep their neighborhoods well-funded through lending.
Citizens Bank is an exceptional CDFI not only in that they work in small towns in Mississippi, but that they have a century of history to inform their direction as a community bank, and the lending portfolio to back up their sentiment. Their headquarters are still in Columbia, MS, where they formed in 1913 with the express purpose of being a locally-focused institutions, fulfilling the credit needs of their specific community. Citizens Bank was originally a company depository intuition, where Rankin Company employees could make deposits and cash checks. But throughout the 1960s and 1970s as the president, Harry Rankin, invested in computer banking technology that other banks neglected until much later on, their membership grew outside the company, and they opened their first branch outside of company property in 1979, which is now their mortgage loan office.
After merging with another small bank in the area in 1999, they had three more locations and continued to open four more throughout the decades, with their most recent location opening in April 2016 in Laurel, MS. All of their locations are still in relatively small towns, with only two of their locations serving a town with a population greater than 5,000. Although they offer modern banking technologies such as 24-hour ATMs and online and mobile banking, they still maintain a small town feel, calling their particular brand of banking “family banking” and prioritizing personal service above all else.
Although they didn’t set out to specifically invest in low-income neighborhoods, they naturally evolved into a CDFI because they knew their community well enough to know there was a lot of need in those households for good banking and loan products. This is reflected in their lending portfolio, where nearly 40% of their housing focus (which makes up 30% of their lending) goes to housing loans for low- and moderate-income households. They also invest in their community making small business and farm lending a priority--27% and 8% of their portfolio, respectively. Small farm lending is particularly important in Southern Mississippi, where an above-average portion of the population makes their living in agriculture. Additionally, they have a positive return on assets, a satisfactory CRA rating, and a net-loans-to-deposits ratio of 88%, all suggesting they’re highly effective both as a depository institution and specifically as a CDFI.
This particular Better Banking Option is interesting to us because it demonstrates that banks can be highly impactful without setting out to be, just by understanding and fulfilling the needs of the communities they serve. While they’re ultimately a locally-focused bank, they offer online and mobile banking options, so anyone looking to make their bank deposits effective in fighting poverty in this region can do so. If you’re interested in investing in small towns in Southern Mississippi, check out their website to get started.