Extending a branch:
Three Banking Development Districts in Buffalo bring financial services back to areas that lack them
In the eight years since New York created Banking Development Districts to bring services to people who have limited access to banks, 28 have been formed.
Three districts are in Buffalo.
The first was established in 2002 at the request of Greater Buffalo Savings Bank for the city's Masten District and a portion of the University District.
Corporate headquarters for the bank were moved from Court Street downtown into the former Braun Cadillac Oldsmobile dealership at 2421 Main St. within the district. A branch office also opened.
The second banking district, also at Greater Buffalo Savings Bank's request, was approved in late 2005. It covers several blocks on the city's West Side, including a stretch of Connecticut Street where the bank expects to open a branch at 364 Connecticut St. in October.
The third and most recent district - created in July for M&T Bank - covers a section of Jefferson Avenue where M&T moved its branch last month from 1490 Jefferson Ave. into a new retail plaza at 1300 Jefferson Ave.
In each case, the reason for seeking special banking district designation was basically the same: The program was beneficial to the banks as well as residents living within the district's boundaries.
The designation provides financial support to branches that open in low- or moderate-income areas where branches don't otherwise exist, and by being there, the offices provide needed services to the neighborhoods that state regulators deem to be unbanked or underserved.
Financial support for the branches comes in the form of deposits that could not be otherwise generated from within the branches' service areas. That gives them valuable assistance when most needed - when they are new and trying to carve out a piece of the market.
For residents, having a neighborhood branch means they needn't have to travel a distance to the closest branch which might be blocks or even miles away.
The Banking Development District program was launched Jan. 1, 1998. To get banks to participate, it has incentives that include making the branches eligible for deposits at below--market rates. Commercial banks such as M&T can accept these lucrative deposits, but savings banks cannot unless the branch is in a Banking Development District.
Additionally, banks reap benefits from long-term property tax exemptions, Community Reinvestment Act (CRA) advantages, workforce development provisions and financial education assistance that is available under the district program.
Before the Banking Department will approve a bank's application, the host municipality must demonstrate its support by signing on as co-applicant. Sometimes non-profit community development corporations also are involved.
New York claims to be the only state with a program of this type.
The largest cluster of Banking Development Districts is in metro New York City which has 18. Buffalo has three. Most, but not all, serve inner-city neighborhoods.
Seven other banking districts are dotted throughout upstate New York in small communities like Holland Patent and the towns of Mentz and Mount Hope.
"Banking Development Districts have given communities one of the most powerful tools to attract banks into their neighborhoods. That's what the program is all about," said Edward Kramer, the banking department's deputy superintendent for consumer services.
Most unbanked or underbanked neighborhoods have large concentrations of minorities, immigrants and low- and moderate income working poor.
"The program provides incentives for banks eager to come back or to go into a neighborhood for the first time," Kramer said.
M&T Bank's new branch is the anchor tenant in a new plaza that includes three small businesses - a print and design operation, a millinery boutique and urban fashion store.
The plaza is the result of a joint venture involving Bethel Community Development Corp. and Jeremiah Partnership, a group of African-American pastors active in Eastside economic development.
The city's Buffalo Economic Renaissance Corp. has targeted the Jefferson Avenue commercial strip for assistance.
"We see (the banking development district) as not just helping a branch, but the retail project and by extension the community as a whole," said Brad Dossinger, M&T vice president of community development in Western New York for CRA.
Louis Sidoni, director emeritus and board secretary at Greater Buffalo Savings Bank, says that while the state program began in 1998, it is still relatively new and not widely understood by financial institutions.
"It is essentially a work in progress. In areas that have been in decline for a long time, a banking development district won't solve it in a matter of days," he said.
Eric Gadley, a Greater Buffalo Savings Bank vice president and its community development officer, said a real benefit for a bank having a branch in a banking development district is what it provides in terms of fulfilling CRA requirements.
Enacted by Congress in 1977, the Community Reinvestment Act (CRA) encourages banks and other financial institutions to meet the credit needs of communities where they operate.
Banks are examined every two years to ensure that they are upholding the standards established under CRA.
"CRA says that financial institutions have to lend to low- to moderate-income geographic areas and individuals," Gadley said.
"One pitfall if a bank wants to grow is that if they do not meet CRA requirements, their growth can be stopped. Branch applications can be denied," he said.
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