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Native-owned banks exceed industry averages

WASHINGTON - Growth rates and capitalization ratios indicate that Native-owned commercial banks are doing well for themselves, according to a North American Native Bankers Association analysis of comparative figures released by the Federal Deposit Insurance Corporation.

Native-owned banks showed an average asset growth rate of 14 percent for the one-year period ending June 30, a full 3 percent higher than the average asset growth rate of all U.S. commercial banks. The average Native-owned bank has $73 million in assets, with Lumbee Guaranty Bank of Pembroke, N.C., topping the list at $153 million in assets.

Native-owned banks also have a higher capitalization ratio than their commercial counterparts for the same one-year period. (In layman's terms, capitalization ratio refers to a bank's liquid capital as compared to its total assets. Capitalization is considered an important measure of a bank's flexibility in navigating negative market conditions if these should arise, and of its ability to respond to such opportunities as the acquisition of other banks or other asset growth options.) Capitalization at commercial Native-owned banks stands at 9.87 percent, two points above the 7.84 percent average for all U.S. commercial banks.

"Native American bank ownership is a relatively recent development," said J.D. Colbert, president of the North American Native Bankers Association and a consultant to Bank2, the Chickasaw Nation-owned institution in Oklahoma City. "The superior asset growth rates and capitalization ratios are a reflection of the continued maturation of Native-owned banks as well as an indication of overall strong management."

Native-owned banks that were profitable as of June 30 mirror the average profit for all U.S. banks. The return on assets for all 18 Native-owned commercial banks equaled 1.12 percent as compared with 1.39 percent for U.S. banks in general. But that gap in the most important measure of conventional banking closes to 1.33 percent against the 1.39 percent all-bank average when only the 17 profitable Native-owned banks are considered.

The exception, Native American Bank in Browning, Mont., with executive offices in Denver, has posted $3.4 million in losses over six consecutive financial quarters beginning in January 2002. John Beirise, president and chief executive officer of Native American Bank, pins the losses on the bank's unique business plan, which calls for serving reservation communities in remote rural areas where conventional banking relationships may not have been readily available in the past. Native American Bank is adequately capitalized, and Beirise has stated that the bank board (composed of representatives from those tribes that capitalized the bank) is willing to absorb losses for the sake of serving Native communities that can't access fair banking services otherwise. It is not altogether unusual for any start-up bank to lose money in its initial years.

More than half of the Native-owned banks have been established within the past 10 years. More than half of them, or 10 of the total 18, are located in Oklahoma.

Bank2, 100 percent owned by the Chickasaw Nation, is the latest success story in Native banking. It began operations with adequate but somewhat meager capital in 2002, turned a small $60,000-plus profit in its first year, and is on pace to earn almost a quarter of a million dollars in 2003, its second full year, according to President and Chief Executive Officer Ross Hill.

"Our initial projections indicated that we would lose money for the first four years of our start-up period," Hill said. "I attribute our early success to strong market acceptance of our products, superior customer service at all levels, as well as the strong strategic vision of our board of directors."

Bank2 ("Twice the Bank" is its motto) has always had a mission of returning a profit to the Chickasaw Nation while evolving an affiliated non-profit Community Development Financial Institution, or CDFI, as a service to tribal members and others who may need tutelage in establishing a banking relationship. Colbert, whose consulting duties with Bank2 have included taking part in the lengthy process of planning the Native CDFI, said the project is proceeding.