Banc of California, in conjunction with Mayor Villaraigosa and the California Reinvestment Coalition, will develop an improved paradigm for community development and commits to creating a public welfare fund that will capitalize on the expertise of Californias community leaders to evaluate the potential of community investments to address community needs to ensure maximum community benefits. Through this commitment, the bank will recruit a seven-person independent community benefits panel with representation throughout California to evaluate investment opportunities based on the prospective community benefits they offer. The panel will be vetted and jointly appointed by the co-chairs. This community benefit analysis will be coupled with financial and credit assessment to determine the appropriate mix of investments made. This community benefits panel will be co-chaired by Mayor Antonio Villaraigosa and Paulina Gonzalez of the California Reinvestment Coalition. Chairs will convene the Community Advisory Board but will not evaluate investments or serve as the liaison to the investment team.
Over the next three years, Banc of California is committing to seek partnerships with at least twelve other leading banks within California reinvestment target areas, to raise and invest from a Public Welfare Fund with at least $200 million in capital to be deployed consistent with this commitment giving a new voice to Californias communities in community development investments. In an effort to comprehensively address the root causes of poverty, the capital raised by the fund will focus on affordable housing, community development, small and micro business lending and asset building and financial education. Banc of California will seek to raise funds from other banks serving the California marketplace through various efforts including marketing roadshows and senior level meetings. Additionally, third-party investment bankers will be engaged to support the process. The funds raised from Banc of California and other partner banks will be above and beyond their existing CRA commitments.
Specifically, the public welfare fund will focus on four key community reinvestment priorities within low- and moderate-income communities to attempt to meet the needs of those who have often been underserved or inequitably served:
1) Affordable housing, including for people who are currently homeless;
2) Small business initiatives to create and retain jobs for people of color, women and those living in low- and moderate-income areas, including loans and investments, credit enhancement and guarantee solutions, and technological assistance to strengthen small businesses;
3) Banking services to decrease the number of households who are unbanked and underbanked;
4) Asset building strategies, including financial education to improve household financial capacity, credit scores, access to capital, entrepreneurship training, and financial literacy among youth and grade school students.
This commitment and its new framework moves far beyond checking a box on a regulatory form to having community partners with specific local knowledge to drive investment that will improve local economies. The investment process will be driven by formal assessments of community needs and of the potential impact of investments to meet those needs, guided by community input that will be used by the investment team to meet the funds requirement of a double bottom line. A liaison from the Community Advisory Board will serve as a non-voting member of the investment team and will be elected by members of the Community Advisory Board to represent the Board's recommendations to the investment team. Side by side with the investment, partner banks will have a service hour commitment agreement to support fund-related events and actively participate in community town hall meetings and other engagements. The fund views community partners as an integral part in the decision-making process for community development investments.
By assessing needs of low-income communities on the front end, providing community input to evaluate investments based on this need, and then evaluating impact of the fund on meeting these needs, the fund will provide an opportunity for banks to partner with community leaders to better align priorities in order to have a greater impact on addressing the needs of historically underserved communities in California.
Banc of California commits to create a Public Welfare Fund
Banc of California will partner with Mayor Antonio Villaraigosa and the California Reinvestment Coalition to create Community Benefits Advisory Panel and develop a systematic process for including community input and voice into the investment evaluation process for public welfare investments.
Banc of California will secure commitments from at least 4-6 founding bank partners
Banc of California will raise the necessary capital commitments to exceed $200 million in total capital from at least 12 bank partners.
Banc of California will make commitments to deploy at least 40% of the commitments secured.
Banc of California will hold a High Impact Community Event in furtherance of the Public Welfare Fund objectives.
Banc of California will make commitments to deploy at least 80% of the commitments secured or at least $200 million in capital.
Banc of California will complete the deployment of over $200 million in commitments and seek to secure new commitments at the same or higher levels for new Public Welfare Investments from its partners.
The state of California has the nations highest Gross Domestic Product (GDP) and would be considered the 8th largest economy in the world if it were a standalone country. California also has the nations highest poverty rate with nearly a quarter of its 38 million residents living in poverty, including over 2 million children. Californias Latinos and African Americans have higher poverty rates than any other group at 23.6% and 24.2%, respectively, as well as significantly higher unemployment rates within the state.
Poverty dramatically varies in accordance with educational levels within California. The poverty rate among families headed by an adult lacking a high school diploma is over 36%. At the other extreme, in families headed by a college degree holder, the poverty rate was just over 5%. For families in which the highest level of education is a high school diploma, the poverty rate was approximately 20%.
Additionally, nearly 8% of California´s 12 million households have no bank account, leaving them largely unable to participate in most of the US financial system.
To improve these dire economic conditions, in 2014, Banc of California set a new gold standard for bank Community Reinvestment Act (CRA) activities, when it announced its Community Benefit Goals. These goals were developed after significant dialogue, multiple meetings and lengthy debate in conjunction with numerous community leaders and organizations including the California Reinvestment Coalition regarding what low- and moderate-income (LMI) communities needed to help them prosper. During this process, it became clear that community leaders believed that bank investment related to CRA in community development activities often were sub-optimally tailored to the needs of the targeted LMI communities. In fact, community organizations felt that certain community investments had limited benefit for the communities and that often times bank community development funds were used for profit maximizing strategies instead of strategies focused on the double bottom line of social and financial returns.