Minority Depository Institutions: State of Knowledge, Sector Summary, Lending Activity, and Impact, 2010–2022

By Anthony Barr (National Bankers Association Foundation) & Mac McComas (Johns Hopkins 21st Century Cities Initiative) | Research sponsored by the National Bankers Association Foundation

Johns Hopkins 21st Century Cities Initiative partnered with the National Bankers Association to examine the state of the nation’s 147 Minority Depository Institutions (MDIs), mission-driven banks that provide access to credit for marginalized communities, explore how the MDI industry has changed since 2010, identify their lending geography and coverage, discuss their potential impact, and highlight the current state of knowledge on MDIs. A growing body of research establishes that MDIs originate a greater share of loans across all loan types to minority borrowers and are located in places with higher poverty rates and non-white populations than places served by non-MDI financial institutions including non-MDI community banks. This report includes two distinct analyses of the MDI sector, one using publicly available data to examine the state of MDIs and examine the zip codes where they have physical branches, and a second using lending data for 2021 from a sample of 10 MDIs.

Topline findings from our analysis of the overall MDI sector include the following:

• Most MDI branches (62%) are located in zip codes with poverty rates higher than the national average, compared to just 38% of non-MDI branches.
• The median MDI branch is located in a zip code that is 49% non-white, compared to 21% for non-MDI banks. 
• 25% of MDI branches are located in zip codes in which the MDI is the only bank with physical presence in that zip code. This means that MDIs are the only bank branch in 174 zip codes that are home to 3.5 million people.
• Deposits held at MDI branches grew by 110% from $134 billion in 2010 to $282 billion in 2022.
• Assets at MDIs grew by 34% from 2010-2022, from $246 billion to $329 billion. A significant amount of that growth occurred between 2019 and 2021.
• Zip codes with an MDI branch have higher climate risk exposure, especially for heat and wind risk, but also for flood and fire risk.

Topline findings from our analysis of the lending sample include the following:

• The 10 banks in the sample deployed 3.38 billion dollars in more than 6,000 zip codes in 2021.
• These banks collectively issued more than 20,000 Paycheck Protection Program loans to support small businesses amid the pandemic.
• Over half (52.5%) of the population is minority in the zip codes that received lending dollars and slightly more than 77% of all loan dollars flowed to zip codes with a minority population share that was 52.5% or higher.
• More than 70% of loan dollars went to zip codes that have higher poverty rates than the nation when measured at both 100% and 125% of the federal poverty line.
• Places that received lending dollars have higher rates of recorded and forecasted rates of unemployment and bankruptcy and greater risk from climate change compared to the nation as a whole.

Our analysis demonstrates that MDIs continue to serve a crucial role in increasing financial inclusion for underserved individuals and communities. As mission-driven banks, MDIs are key institutions in the broader work of closing the racial wealth gap particularly through creating opportunities for homeownership and entrepreneurship. These institutions can also serve as stabilizing forces for households and firms during times of crisis such as we witnessed with the COVID-19 pandemic. And we remain confident that MDIs and other mission-driven banks will continue to generate substantial impact in the decades to come.