Tailor-made community banking

Angel Reyes, Centinel Bank’s president and CEO, talks with longtime customer Moises Martinez, a Taos, N.M., businessman and real estate developer. Photo by Amanda Powell

These community banks tailor their products and services not just to their neighborhood demographics but to everyone’s needs, from bank accounts for gig economy workers to microloans for consumers. In short, they do what community banks do best.

By Ed Avis


Centinel Bank of Taos, N.M.


Centinel Bank of Taos specializes in consumer and business lending, with a focus on both real estate and small business loans. Pictured, center, is Angel Reyes, president and CEO, with staff and community members.


The story of Centinel Bank’s founding makes clear why the bank is committed to serving all residents of its diverse community. Eliu Romero, a military veteran, attorney and fourth-generation resident of Taos County, decided to open his own law practice in Taos. He asked the bank for a $50 loan to buy furniture, but his application was rejected. He vowed to one day open a bank himself, and he eventually lived up to that promise when he launched Centinel Bank of Taos in 1969.

Today, the population of Taos County is about 56% Hispanic, according to the Census Bureau, and $395 million-asset Centinel Bank serves that population with care.

“There are many stories where we’ve been able to do things differently and do things that are unique to our market that really have benefited the growth of the businesses.”
—Angel Reyes, Centinel Bank of Taos

“We remain a largely Hispanic population, and we have additional immigration of Hispanic [people], and we are evaluating different ways to serve them,” says Angel Reyes, Centinel’s president and CEO.

Quick Stat

56%

The percentage of Hispanic people in Taos County, N.M., which Centinel Bank serves

Reyes says the community bank’s business is split about evenly between consumer and business lending. On the business side, lending to sole proprietorships, partnerships and small family-owned businesses is the bank’s core proficiency. Very few business clients have more than 20 employees. “In many cases, we were the initial loan for small [things] like a refrigerator or a desk … to loans to develop their own storefront or to buy equipment to make their business more efficient,” Reyes says. “There are many stories where we’ve been able to do things differently and do things that are unique to our market that really have benefited the growth of the businesses.”

Real estate lending comprises the largest portion of Centinel Bank’s consumer lending. Reyes is chairman of the New Mexico Mortgage Finance Authority, which gives him a say in making funding available for housing for those with low and moderate incomes.

In addition to current and former leaders playing important roles at the state and industry level, the bank also serves its community through volunteerism.

“We’re active in supporting our nonprofits, often through direct involvement in that nonprofit, maybe serving as a board member or volunteering for particular events,” Reyes says, adding that employees are encouraged and paid to volunteer during work hours. “We’re part of the fabric of our community and we want to make sure that, as a community, we’re progressing. As noted in our mission statement, we want to do our best to lead and make our community a better place to live and work.”


Ponce Bank, New York City


At far right, president and CEO Carlos P. Naudon at a local community event.


Ponce Bank was born out of the ashes of civil unrest in the Bronx in the middle of the 20th century.

“Ponce Bank started 62 years ago in the South Bronx,” says Carlos P. Naudon, the $2.1 billion-asset bank’s president and CEO. “When the South Bronx was burning and being deserted of businesses, including banks, a number of our local business leaders and Latino community advocates determined that they needed to have a source of funding. That’s how they started the bank.”

The focus on serving that community has not changed in the decades since. Four of Ponce Bank’s 13 locations are in the Bronx, whose population is about 55% Hispanic, according to U.S. Census data.

“We do quite a bit of loans to taxi drivers and owners of vehicles who drive for Lyft and Uber. … We also do a lot of delis and mom-and-pop stores, and a lot of professionals. If you walk down the streets of the Bronx, you could see on the left and on the right side the kind of businesses we [bank].”
—Carlos P. Naudon, Ponce Bank

Perhaps more indicative of Ponce Bank’s character than the demographics of its community is the fact that the bank continues to serve businesses and residents who might not be well served by other financial institutions.

“For example, we do quite a bit of loans to taxi drivers and owners of vehicles who drive for Lyft and Uber,” Naudon says. “Generally, they have difficulty [securing] bank accounts because of the nature of their business. We also do a lot of delis and mom-and-pop stores, and a lot of professionals. If you walk down the streets of the Bronx, you could see on the left and on the right side the kind of businesses we [bank].”

Ponce Bank judges the creditworthiness of these businesses based on their cash flow more so than on the credit score of the business owner, Naudon says. From Ponce Bank’s perspective, for example, consistent credit card revenue is a good indicator of a business owner’s ability to repay a loan.


Ponce Bank’s banking and outreach efforts for underserved and minority communities across the South Bronx earned the New York City-based community bank a community development financial institution (CDFI) designation five years ago.


Ponce Bank’s ability to serve its community was given a lift in 2017 when the bank earned community development financial institution (CDFI) designation from the U.S. Department of the Treasury. CDFI designation means it is eligible to tap funds from government programs aimed at helping communities in need. The effort to get CDFI designation was led by Madeline V. Marquez, the bank’s senior vice president and chief external affairs officer.

“When I joined the bank in 2015,” says Naudon, “one of the things that we looked at was what governmental advocacy and support programs existed for banks that were like us. Madeline came in to help us go through the process. And essentially, we are an easy qualification, because all of our lending essentially meets the CDFI requirements.” He adds that today, about 86% of Ponce Bank’s lending is in low- and moderate-income communities.

In addition to its business lending, the community bank assists customers with several consumer lending products. For example, CDFIs can offer nonqualified mortgages, which serve some Ponce Bank customers who are self-employed and may not be able to demonstrate the ability to repay a loan in the conventional fashion.

The community bank also has an app that provides microloans to consumers. Launched in 2020, it has provided small loans to 60,000 individuals.

Quick Stat

60,000

The number of microloans Ponce Bank has made since 2020

Because the app is not limited geographically, Ponce Bank created an advisory panel of 14 nonbank CDFIs across the country to act as a governance board that represents the target population of the app; the panel keeps the bank in compliance with CDFI rules regarding the nature of the community being served.

The bank also serves its community through the Ponce de Leon Foundation, which it established in 2017 as part of its conversion from a mutual to a stock institution. The foundation owns some of the bank’s stock; so far, it has granted $1.3 million to a variety of groups.

“It could be anything from a youth program that’s going to help a child do better in school, to a senior program that’s going to help them get acclimated to the new technology,” Marquez says.

Ponce Bank’s influence in its community is primed to grow. It received $225 million from the Treasury Department’s Emergency Capital Investment Program in June, and that money, combined with funds raised by two rounds of IPO, has bumped up its capital from about $80 million in 2016 to $500 million today, Naudon says.

“The responsibility that we as the management team and the board of directors have is: How do you invest that capital and how do you deploy it to be impactful in the communities?” Naudon asks. “We think that it’s an obligation. We also have the fiduciary duty to ensure that we do so thoughtfully and with understanding that you still need a return to investors.”


International Finance Bank, Miami


Miami-based International Finance Bank is a minority depository institution (MDI), serving customers across south and central Florida as well as in New York City, Latin America and Europe.


The community that International Finance Bank serves stretches far beyond the borders of Miami, where it’s headquartered.

Quick Stat

50%

of International Finance Bank’s face-to-face interactions
are bilingual

The $950 million-asset community bank, which is majority owned by a Spanish foreign national, serves clients in south and central Florida, New York City and throughout Latin America and Europe who desire a bank based in the United States for certain transactions.

“We have sister banks in Guatemala, Peru, Ecuador and other countries in Latin America, and there are always referrals from them and opportunities to work together,” says Jose E. Cueto, the bank’s president and CEO.

A large percentage of the domestic clients of International Finance Bank are also Hispanic. But that’s due more to the demographics of Miami—which is about 72% Hispanic, according to the United States Census Bureau—than to the fact that the bank is a minority depository institution (MDI), Cueto says.

“The Hispanic community is huge here, especially the Cuban community,” he says. “By default, if you’re in Miami, you’re going to have Hispanic clients.”


Staff members at a Habitat for Humanity build sponsored by the community bank.


Over the past three years, the community bank has launched a wealth management division and an insurance subsidiary. These new products help keep more of their clients’ business in house and generate “sticky” income that’s not interest driven, Cueto notes.

But helping clients manage wealth is not the only way International Finance Bank serves its community, financially supporting Habitat for Humanity, Big Brothers Big Sisters of America and dozens of other community organizations.

“As a community bank, it’s in our roots to give back,” says Cueto, who is a Miami native of Cuban descent. “We’re out there all the time. Giving back is on top of our priority list.”


The power of language

Being able to transact business in Spanish is a key customer service issue for many banks in areas with large Hispanic populations. Not only does it make it easier for customers who prefer that language, it also shows respect for that part of the community.

“We have Spanish speakers in the bank and we’re evaluating what more we need to do, such as translating our website and other documents, so that we can continue to meet the needs of all who we serve, but with a particular emphasis on the Hispanic community and those who don’t speak English,” says Angel Reyes, president and CEO of Centinel Bank of Taos in Taos, N.M.

Likewise, Jose E. Cueto, president and CEO of International Finance Bank in Miami, notes the large number of his customers who prefer Spanish. “Most of our employees are bilingual, and I would say about 50% of face-to-face interactions are in Spanish,” Cueto says.

Demographics are driving the need for banks to conduct business in Spanish. Nearly one in five people in the United States is Hispanic, according to U.S. Census data analyzed by Pew Research Center, and 70% of them speak Spanish at home. Nearly all immigrants from Mexico and other Latin American countries—94%—speak Spanish at home.

Those statistics mean banks located in areas with large Hispanic populations probably see many clients who are more comfortable speaking Spanish than English, and being able to converse with customers in their preferred language can only be good for business.


Let’s keep the money flowing

Some banks that serve minority and/or low-income communities can tap government sources of capital, ranging from the Bank Enterprise Fund to the Emergency Capital Investment Program (ECIP). The value of those funding sources has become especially clear over recently, notes Carlos P. Naudon, president and CEO of Ponce Bank in Bronx, N.Y.

“The value of minority banks and the value of CDFI entities was discovered as a result of the pandemic and some of the social injustices that were brought to light,” Naudon says. “[It would be a shame] if the funding that has been opened up because of this new discovery begins to dry up again, as the urgency of the pandemic and the urgency of the social injustice begins to wane.”

Madeline V. Marquez, Ponce Bank’s senior vice president and chief external affairs officer, explains that the mission-driven expertise of community banks has become essential to communities facing the challenges of the pandemic and its ramifications, such as workforce problems and inflation. Larger, better-capitalized banks do not always share the commitment to community, she notes.

“It’s a given fact that some of these community banks are really hands on, but they are the smaller of the industry,” Marquez says. “Therefore, funding sources and/or capital sources like the ECIP clearly need to be enhanced for another four or five years. Right now, we’re not in a normal pattern, and it’s going to take a lot more of these mission-driven banks to get our communities back on their feet. ECIP is a one-shot deal. We’re hoping that something else comes into play that allows us to take advantage of the opportunities that we can expand upon if additional funding were to come into play.”


Ed Avis is a writer in Illinois.