2021 CSBS Community Bank Case Study Competition Journal

2021 COMMUNITY BANK CASE STUDY COMPETITION

the Economic Policy Institute, they still face higher rates of poverty and have the lowest real median household income relative to all races (Wilson). As a mission-based community bank serving in minority areas, this often means taking greater credit risks and enduring higher expenses—Liberty has been embracing these challenges since 1972. Liberty faces challenges, starting with servicing many, but small deposits, the number of “unbanked” community members, the geographic dispersion of their branches, and their customers’ continued need for costly physical branches as their peers save money by using technology to downsize footprints. There are burdens on non-interest expenses from having dispersed branches across numerous states where there are steep learning curves to understand the economic drivers, a challenge most community banks don’t face. Additionally, there is no market for fee-generating trust departments within their minority communities to manage wealth. These challenges are just part of the deal Liberty committed to in 1972. Liberty spearheads some of these problems by conducting free financial literacy programs and educating those in the minority community about financial well-being and personal wealth-building. Liberty has help to offset the challenges in their public-private partners and funding reserved for MDIs and CDFIs. Equity investments in the form of common stock and preferred share purchases from JPMorgan Chase, Wells Fargo, CitiBank, Bank of America, and federal funds help Liberty promote and preserve their mission (Cloy). Liberty also

maintains partnerships with organizations who desire to extend Liberty’s mission for financial equity, including Black Chambers of Commerce in Liberty’s local market areas, the National Banker’s Association (NBA), FinTech lending platforms, such as Upgrade and Prosper, Tulane University, and a mentoring collaboration with JPMorgan Chase. Together with these partners, Liberty’s vision of financial freedom for all continues to grow. Part One: Financial Analyisis A Global Outcry: BLM and #BankBlack Generate Wall Street Equity Investments and Influx of Deposits to Drive Asset Growth Team Southeastern uses a free version of Qaravan®, a web-based application, to access call report data. Southeastern focuses on the drivers of Liberty’s asset growth. For a cross- sectional and time-series analysis, we construct two peer groups for Liberty from 2016 to 2020. The bank peer groups consist of banks with asset sizes between $200 million and $800 million, have similar allocations in their loan portfolio, and serve customers near urban communities. “Minority Peers” consists of black- owned banks. 1 The “Majority Peers” include banks not minority-owned. 2 Table 1 provides the summary statistics for Liberty along with the two peer groups in 2020. Figure 2 shows from 2016 to 2019, Liberty’s asset growth lagged behind both peer groups; particularly in 2018. Liberty’s 2018 negative asset growth is attributed to a repayment of Troubled Asset Relief Program (TARP) funds received

42