Money Multipliers

By Melby, Todd | Independent Banker, February 2002 | Go to article overview

Money Multipliers


Melby, Todd, Independent Banker


Spurring economic development that mirrors real communities

Radio broadcaster Garrison Keillor spends most Saturday nights waxing poetic about the good people of Minnesota on his weekly entertainment program "Prairie Home Companion." Keillor delights listeners with tales of Norwegian Lutherans and German Catholics in the fictional small town of Lake Wobegon.

While there are plenty of stoic Northern Europeans in Minnesota, Dave Reiling, president and CEO of University Bank in St. Paul, counts more recent immigrants as his best customers. During a tour of the bank's accomplishments, Reiling shows visitors "before" and "after" images of neighborhood buildings the bank has financed. Hmong entrepreneurs who came to University Bank for financing to seed their businesses now own many local retail shops such as Ha Tien Oriental Market and Hmong Arts, Books & Crafts.

Reiling and University Bank represent the economic vitality community banks generate across the country. They point to the substantial investments community banks make-both in time, deposits and money-to build small businesses and local economies together. Yet their efforts reflect the needs of their individual communities.

"I strive for the double bottom line," Reiling says. "I believe you can grow a healthy community bank and help a community socially at the same time."

That's something his predecessors may not have taken to heart. When Reiling and his father, William, bought the bank in 1995, it had just received its second straight "Needs to Improve" Community Reinvestment Act rating. A mere 14 percent of University Bank's loans were made in the low-income neighborhoods surrounding the bank.

After 18 months of new ownership, 60 percent of the bank's loans went to area businesses and individuals. Today that number has jumped to 73 percent and earned University Bank an "Outstanding" CRA rating from regulators.

That high percentage of loans within the bank's low-income service area helped it secure funds from the Community Development Financial Institutions Fund, a U.S. Treasury program. Congress created the CDFI Fund in 1994 to "expand the availability of credit, investment capital, and financial services in distressed urban and rural communities." Fewer than 60 banks nationwide have won CDFI certification.

In January 2002, University Bank received $750,000 from the CDFI Fund and an additional $750,000 in matching funds. That infusion of capital will allow the bank to grow even more, Reiling says.

Making more neighborhood loans wasn't the only change Reiling instituted at the bank. He also changed the name, added a bright sunshine logo that matches the Minneapolis banks owned by his father (the banks share some services), recruited a diverse group of board members that are active in the community, and purchased a check cashing store. Reiling slashed check-cashing fees in half and brought the service into the bank's office, causing change in the process. Other area check cashing businesses lowered their fees to match University Bank. In the end, the bank converted more than 100 people to DDA accounts.

Change of Heart

At first glance, Reiling seems an unlikely candidate to lead a bank in a low-income neighborhood. During a seven-year stint with First Interstate and Citicorp in Los Angeles, Reiling was more concerned with the wealthy than business owners struggling to make ends meet. Reiling's clients were millionaires who didn't quite have enough yet to qualify for private banking, but wanted more than teller lines could offer.

Since returning home to Minnesota, Reiling has caught community bank fever. "I get to run my own shop and I feel good about doing it," he says. "We're financially sound and we're making an impact."

There are other ways to foster economic development in a community. …

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