Liberty Bank CEO Alden McDonald said an investment from JPMorgan Chase announced on Tuesday would mean its 49-year-old community bank will be able to provide at least $ 150 million more in loans to customers traditionally underserved by his bank.
The $ 16 million investment by JPMorgan Chase, the nation’s largest banking group, is significant for a New Orleans-based bank the size of Liberty, with current assets totaling around $ 700 million.
“The importance of the investment is that it will allow us to increase our lending capacity and expand and reach $ 1 billion in assets sooner than we might otherwise,” said McDonald. “This will help us move the economic needle for homeowners and small businesses in the communities we serve.
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In addition to New Orleans, Liberty operates branches in Baton Rouge; Detroit; Forest Park, Illinois; Jackson, Mississippi; Kansas City, Kansas; Kansas City, Missouri; Louisville, Kentucky; and Montgomery and Tuskegee, Alabama, according to its website.
The investment is made in the form of “equity-like” instruments, including perpetual preferred stock – a kind of loan with an indefinite term. It’s part of a $ 30 billion initiative launched last October by JP Morgan CEO Jamie Dimon to “advance racial equity.”
Liberty Bank is one of the top four “Diverse-Led Minority Depository and Community Development Financial Institutions” chosen by JP Morgan for equity investment. The others are the M&F Bank of North Carolina, the Carver Federal Savings Bank of New York, and the Broadway Federal Bank of Los Angeles.
Equity-type investing counts as so-called Tier 1 capital, which allows banks to leverage it to borrow more cheaply and lend much more to their customers.
JP Morgan’s move last October came after a summer of protests against the deaths of George Floyd and other unarmed black men and women by police. The protests have highlighted long-simmering issues of racial inequality in all areas, including financial services where studies have supported the fact that mainstream banks have systematically discriminated against black customers and other minorities.
Launching the program, Dimon said that “systemic racism is a tragic part of America’s history,” adding that “it is high time for society to address racial inequalities in a more tangible way. and significant ”.
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In addition to direct investment in Liberty Bank, the JP Morgan program also routes funds to banks through new market tax credits, as well as an investment sharing program that gives companies like Google the opportunity to contribute.
McDonald said he was doing business with JP Morgan long before last year’s resurgence of Black Lives Matter protests and viewed the latest investment as just a bargain.
“We partnered with JP Morgan before the Black Lives Matter sensitivities emerged and they were leading initiatives in the community long before it became popular,” said McDonald.
“We’ve been a profitable institution for a very long time, so (investing) makes good economic sense,” McDonald said.
In New Orleans, the city’s economic development agency, the New Orleans Business Alliance pointed out that 40% of small businesses in the city are black-owned but only 2% of total sales revenue. They identified lack of access to capital as one of the main reasons holding back black-owned businesses.