M&F Bank has an age problem. It needs millennials to ‘bank black’

By Zachery Eanes zeanes@heraldsun.com

M&F Bank has branch locations in five cities across the state, including two in Durham. The branch pictured is located on Durham-Chapel Hill Boulevard in Durham.
When the influential rapper Killer Mike told his followers last year to put their money into minority-owned banks to show support for the black community, thousands of young African-Americans jumped to open accounts.

At Citizens Trust Bank in Atlanta alone, about 8,000 people applied in the days after the rapper’s comments.

A small bump was even seen here at Durham’s M&F Bank, where the average customer is 60 years old.

Yet the bank’s aging customer base continues to be a real problem, a trend at most black-owned banks in the U.S.

Founded in 1907 as Mechanics and Farmers Bank, M&F Bank is the second-oldest minority-owned bank in the U.S. and has long been a symbol of the Durham’s African-American community. It’s also the only black-owned bank based in North Carolina, with branches in Durham, Raleigh, Charlotte, Greensboro and Winston-Salem.

The bank, along with NC Mutual, made up what was known as Durham’s Black Wall Street, a grouping of black businesses in downtown that became an economic engine for the city’s African-American community during the Jim Crow era of racial discrimination.

But the firm has seen its struggles, like most black-owned banks, in recent years. Last year at M&F, the total number of deposits fell 9.9 percent, from 254,700 to 229,416, according to its annual report, and for the first time in its history the bank lost money during its fiscal year.

Across the country, the number of black-owned banks has fallen consistently for the past 15 years, declining to a total of 23 institutions this year – the lowest number in recent history, according to a report from The Wall Street Journal.

That decline of black-owned banks reflects both financial (the recession hit them especially hard) and demographic pressures, as the number of millennials opening accounts at black-owned banks is smaller than previous generations.

Attracting younger customers is critical, M&F CEO James H. Sills III said. “Eventually our older, extremely loyal customers will not be around, and for any bank (we) need new customers.”

Consulting the next generation

M&F recently formed the “Millennial Advisory Board,” a group young professionals that is recommending changes to its marketing and products.

The volunteer group is led by Marcus Howard, a 26-year-old graduate student at N.C. State University, who also runs a consulting company called Engage Millennials.

Howard was one of the thousands who heard Killer Mike’s “bank black” message and sought to move his savings account to a black-owned bank.

But after visiting a local branch, he found the experience disappointing, and emailed Sills about it. The email led to a meeting and later the advisory board.

Howard thinks the bank’s aging problem is due mainly to its messaging – or lack thereof.

“Millennials are all about social justice and about the meaning of doing things,” he said. “Knowing that M&F bank recycles more than 50 percent of its money right back into the community that they are located in, and that those communities are underprivileged and minorities – that story resonates with millennials.”

Sills agrees that millennials are unaware of all the bank has done over the years.

“(Millennials) don’t know the history and significance of banks from 100 years ago,” he said. “A lot of them are intrigued by that history and to make sure that we preserve the legacy of the institution we need to provide the services and products they are really looking for.”

Sills said the advisory board has already helped update the bank’s website and is changing how it does social media, so it can reach new customers who might not, for example, know that M&F has a mobile banking app.

It is also helping create a “millennial banking account.” It hasn’t been decided what services will be part of the account, but Sills did say millennials want an account that they can access on their phone, comes with a debit card and has free transfers.

Sills added that the bank already offers most of this, and that the new account is more about marketing.

The advisory board isn’t just about raising numbers, however. It’s also about preserving the bank’s future.

“It’s a staple in the community and we want make sure this institution in particular … survives and survives forever,” Howard said. “In order to do that we have to make sure millennials know about it and millennials support it.”

Forgotten history

For black banks to get younger it will require them to reverse a trend that spans generations.

Michael A. Grant – the president of the minority bank advocacy group the National Bankers Association – said he recently gave a speech at Clark Atlanta University where he asked a crowd of young, black business students if they knew Atlanta had three black-owned banks.

“Out of 200 people, 10 hands went up,” he said. Grant then asked how many had their money in one of those banks, and “the number was like three people.”

Black-owned banks have done a bad job reaching young millennials through marketing, he said, but the problem began a generation before them.

“There was a high degree of loyalty for these banks before the integration movement … (then) desegregation wrought a grand exodus,” he said.

The next generation – the parents of millennials – didn’t have the same loyalty as their parents did, he said.

Grant believes now is the time for black banks to win back those lost generations, especially as discrimination in American continues to be a controversial topic during the Trump presidency. But it’s also a critical opportunity for those banks with increasingly elderly customers.

Multiple studies have shown that minority-owned firms are less likely to apply for loans out of fear of reject, and when they do apply, they get turned down more frequently than white-owned businesses with the similar credit ratings.

Black banks should be building relationships with those consumers, Grant added.

“Consumers seek the best quality they can get, but in 2017, there is still a certain amount of discrimination going on,” he said.

“A black business has a far better chance from a black bank (to get a loan) than a majority bank,” Grant said. “If you want to strengthen your community you have to (invest) in your community.”

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