A Q&A with Carl L. Hairston, Executive Vice President and Chief Lending Officer for City First Bank
Close your eyes and imagine there was a bank whose mission was to create a society in which every individual, family, and community had the opportunity, access to capital, and resources to allow them to improve their well-being and prosper. There's no automated system making credit decisions, but individuals trained to see possibilities. Its purpose isn't centered around maximizing shareholder profits, but meeting economic justice head-on, serving its clients, and making a significant impact in the community.
Now open your eyes. What if I told you that that bank exists and it’s called City First.
I recently had the pleasure of meeting Carl L. Hairston, Executive Vice President and Chief Lending Officer for City First Bank at an event co sponsored by B Local Mid Atlantic.
City First is a local bank focused on the local community. Since its founding in 1996, City First has channeled over $1 Billion in mission lending where it’s needed most (with low- and moderate-income communities) in the Washington, D.C and Mid-Atlantic region. City First, a for-profit bank and certified B Corporation, reinvests most of its profits in its community development mission, which includes the development or preservation of affordable housing, the construction or renovation of community facilities as well as loans for nonprofits and mission-driven businesses. Depositors not only receive all the benefits they would from any other bank, but they also get the added benefits of knowing their money is working for them as well as the community.
What follows is a transcribed Q&A from a follow up conversation I had with Mr. Hairston (slightly edited for length and clarity). His insights are worth reading from top to bottom as you’ll be wise to learn a framework for deepening your company’s impact and service to its customers.
Additionally, I’ve included Five Key Takeaways for Building a Business that Works for the Community.
Ryan Rudominer: What can you tell me about City First’s mission and about why it was formed?
Carl L. Hairston: City First was formed almost 25 years ago by a group of business- and community-oriented individuals. They noticed that different wards in D.C. had access to different amounts of capital, so they decided to form a task force and a working group in a local church basement in order to get a national banking charter. Today, we have both a national banking charter and the community development financial institution (CDFI) designation. In order to maintain our CDFI designation, at least 60% of the money we lend has to be granted to low and moderate income census tracts, which is how City First Bank got started.
RR: What do your customers get from City First that they would not otherwise get from larger commercial banks?
CH: That's a good question. To follow up on our meeting from earlier, I can say that, having run a line of business at a larger regional bank, and having managed a cost center in a commercial lending capacity, customers of City First Bank will receive much more one-on-one tailored support than they would at a larger institution.
Our mission is to go to whatever prudent and reasonable lengths we can in order to help those individuals access the working capital that they need for viable credit opportunities. If it means getting a mission deal done, we are also willing to incur much greater costs underwriting a loan than many larger institutions.
At larger institutions, automated systems will immediately decide on your request: if you don't fit their box, you're out. This, unsurprisingly, leads to many more applications being declined.
We deliberately don't have an automated system. We look for other ways to be efficient, and even if we were to turn to increased levels of automation, we will always have individuals make the credit decisions. Our motivation is not just profit, our motivation is our mission and our clients. We do need to pay staff and keep the lights on, of course, but our primary focus is not maximizing shareholder profits.
RR: That's very powerful and I love how you said about how the mission is in the DNA over at the bank. That’s not something you hear every day from bankers.
CH: Yes I know. It's very different here because individuals who choose to work with this organization are committed to it. Considering that on average in aggregate at least 80% of our loans are made in geographies that many larger banks do not service, it becomes very obvious if you're not committed to the mission.
RR: At the B Corp event where we met, you cited some extremely compelling figures about the comparison between your impact and some of the commercial banks. Do you have those numbers handy by chance?
CH: We stated that for every $100 that you put in a bank like City First Bank (which does not lend outside of the area), we create $60 to $70 worth of neighborhood investment. Whereas if you put the same $100 in a larger institution with a regional, national, or even international footprint, it would probably result in less than a dollar's worth of investment in the surrounding area.
CH: Think about this: 98% of bank deposits in D.C. are placed in 24 banks, and those 24 all make more investments outside of the D.C. market than they do within it. Basically, they leverage deposits from this very deposit-rich region of the country and use them to lend in other parts of the country.
Those were two of the hard-hitting statistics were on that slide that I had referenced.
RR: Those figures certainly blew my mind! What would you say are the main differences that you've seen at City First Bank make in bringing capital into smaller developments? What did you hear from your customers?
CH: We are extremely prudent about taking on risk, and make sure to always operate within the Constitution.
That said, since we reach those citizens that the larger banks won't touch, we come across people those banks may not even know about! Banks that are out only to make a profit see our customers as risky, but we think they offer the kinds of value the larger banks just don't understand.
RR: In terms of your engagement with the customers: have they told you what these loans mean to them and their businesses? I imagine many of them are social enterprises creating local jobs.
CH: What we hear is that we bring a level of creativity to the market that through our loan structures that others are unwilling or unable to bring. We just worked with a well-known community organization in D.C. to close on a large community health center expansion for them. They were shocked that we were able to come up with a creative structure that large regional banks were unable to match.
And remember that, beyond the bank, we also have a related nonprofit entity called City First Enterprises, which is a nonprofit loan fund. We were able to put together a structure for this organization that not only leveraged the bank's capital but did so alongside our nonprofit loan fund. This is the kind of thing we can do that the larger banks cannot. We have structures in place that allow for creative approaches to problems, and I am certain that no other institution that I have been a part of would have been able to put together the kind of package we did.
RR: That example certainly shows a lot of imagination and creativity. How important is the role of storytelling and public engagement in what you do? What are some of your biggest challenges?
CH: Great question. Obviously, anybody in any kind of business, whether non-profit or for for-profit, needs to be equipped to tell their story in a concise and impactful way, which is something we continue to refine.
One of the key ways we do this is by designing marketing materials that showcase our approach and the way we impact the market and our clients. We tell the story visually so that people have a clear idea of the kinds of value we create. Go online to our website and take a look at our annual report: it is probably one of the most creative annual reports I've ever seen.
RR: Yes, it really is cool, I did look at it before this. It's like a comic book; it's a great read.
CH: Exactly and that's why we wanted to say that those clients that we assist, they are the real heroes.
RR: That’s such an important point. Too often, companies’ inclination is to portray themselves as the heroes in their marketing materials. It shows great restraint that as a bank you're saying no, it's the customers that are the heroes, we're the ones that are the guides in facilitating that.
CH: Yes, at the end of the day we're only able to make impact because they make impact.
RR: Right on!
CH: We facilitate impact, but we're not necessarily the creators of it.
RR: I'm also a big fan of the video that's on your site. Obviously, not everyone is going to read your annual report. How do you reach different audiences and who are the main audiences that you need to get the story out about City First?
CH: Great question, many of our primary targets are governmental and economic development officials.The primary audiences we're trying to reach through our marketing efforts are community facilities, not for profit organizations, sole businesses, charter schools, those in the healthcare space, and real estate developers, especially those in the areas of affordable housing. Beyond the annual report, the events that we partner with and sponsor are all aligned within those areas.
RR: As a Certified B Corporation, can you describe what it means to be a business committed to being a force for a good?
CH: Frankly, it was a no-brainer because, while we never used the phrase "force for good," that's really what we're about in our local communities. Our goal is to be a force for good by making sure that we create an environment where everyone who's looking for capital has a fair shot at accessing it.
RR: That makes sense and it sounds like it's very consistent with your founding mission.
CH: Yes, there’s no question, it really is.
RR: Are there any other areas that you want to touch on as we look to 2018?
CH: In light of the current political debate, we're concerned about the potential impact of tax changes on the communities that we exist to serve and support.
There's going to be a greater need than ever for unified advocacy amongst those of us who are forces for good. We're going to have to elevate our voices and do everything within our power to make sure we can save as many programs as possible.
We're affiliated with the Community Development Bankers Association, which really plays a lead role in driving advocacy efforts relative to the Community Development Financial Institution Fund, and which also advocates to try and ensure that we save some of the funding for CSI. A lot of lobbying right now is focused on keeping things like the historic tax credit program and the low-income housing tax credit program intact. The loss of those would be a major setback.
RR: Do you have any advice for someone with an extensive background in strategic communications, brand storytelling, and advocacy looking to transition into the social sector?
CH: I would focus on organizations that can measure their impact, because in the current climate, those who can't show measurable impact face an uphill battle. As a network, we spend a lot of time focused on data to try and let the data tell the story, but it is still very difficult, and difficult for many other organizations, too.
Given the increasing pressures in the sector, I think we are going to see a lot of consolidation as there will not be enough money to go around.
Five Key Takeaways for Building a Business that Works for the Community
- Empathize and relate with your customer better than anyone. The advantages pay for itself. As Hairston put it, “Since we reach those citizens that the larger banks won't touch, we come across people those banks may not even know about. Banks that are out only to make a profit see our customers as risky, but we think they offer the kinds of value the larger banks just don't understand.” It additionally makes a big difference that at City First, “customers deal with real live people who care about them, their needs, and goals. If you have a question or concern, you always talk to a person, not a machine.” How refreshing is that in this day and age?!
- Make your customer the hero, not your company. Too often, companies’ inclination is to portray themselves as the heroes in their marketing materials. At City First, they make clear that “it's the customers that are the heroes, we're the ones that are the guides in facilitating that.”
- Tell stories about how you make your customer’s lives better. Adds Hairston, “Our marketing materials showcase our approach and the way we impact the market and our clients. We tell the story visually so that people have a clear idea of the kinds of value we create. Go online to our website and take a look at our annual report: it is probably one of the most creative annual reports I've ever seen.”
- Make sure your organization also uses data to show measurable impact. As Hairston recommends, "I would focus on organizations that can measure their impact, because in the current climate, those who can't show measurable impact face an uphill battle.”
- Differentiate your business through impact in the local community: According to Hairston, “for every $100 that you put in a bank like City First Bank (which does not lend outside of the area), we create $60 to $70 worth of neighborhood investment. Whereas if you put the same $100 in a larger institution with a regional, national, or even international footprint, it would probably result in less than a dollar's worth of investment in the surrounding area.”
Images from cityfirstbank.com
**Special thanks to Gloria Nauden, Vice President Marketing & Communications at City First Bank; Cynthia A. Newell, Director, Impact & Strategic Partnerships; and Eugene Kim, Development Manager for their contributions to this piece.