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Cascade: No. 62, Summer 2006

Banks Open Branches in Low-Income Areas

Linda Figueroa, executive director of the nonprofit Community Action Commission (CAC), explained that the South Allison Hill section of Harrisburg, Pennsylvania, was a self-contained, working-class neighborhood during the 1930s and 1940s. “It was bustling. The residents rarely went to ‘downtown Harrisburg’ because there were drug stores, grocery stores, banks, barbers, and entertainment right in the neighborhood.” In the 1950s and 1960s, she said, “the neighborhood began to decline. Many residents moved to the suburbs and the businesses followed.” 

Today, the neighborhood is in a low-income census tract in which 32 percent of residents are below the poverty line and the 2005 estimated median family income is $28,474. Of the total population, 46 percent are black and 26 percent are Hispanic.2 Figueroa notes that the area is racially and ethnically diverse, with people from many different nations. In addition, of the total housing stock, 48 percent are rental units and 22 percent are vacant. Since 1996, CAC has been working to revitalize this neighborhood.

The neighborhood’s last bank branch, at 13th and Derry streets, was closed in 2002 by Wachovia Bank, which donated the building to CAC. Wachovia continued to operate an ATM outside the building. Figueroa knew that having another bank in the neighborhood was essential to any revitalization effort. After unsuccessful discussions with six banks and four credit unions, Figueroa approached Christopher Rockey, vice president of community development banking for PNC’s central Pennsylvania region. Rockey shared Figueroa’s vision for revitalizing South Allison Hill and thought this would be a great opportunity.

At Rockey’s initiative, a PNC team conducted extensive market analysis and concluded that this was a viable branch opening. “PNC did not open this branch because of CRA requirements,” Rockey explained. “Rather, we knew it had the potential to be profitable. We also wanted to have a key role in the economic development of the community and be a catalyst for change in this neighborhood.” Rockey, who has moved his office to the branch, said the bank received commitments from municipalities, nonprofits, and other organizations in the area to open accounts at the branch.

PNC opened the branch in October 2005. It is open on Saturdays so that residents can bank on weekends. PNC also hired a bilingual staff, ensured that materials would be available in both English and Spanish, and programmed nine languages in the ATM outside the building. 

In addition, PNC offers its Foundations of Money Management program through the branch. The program enables many people who have had credit problems to open a bank account after they complete a two-hour PNC course. As part of the program, PNC teaches participants to budget, limits daily ATM withdrawals, and monitors the new accounts.

Since the opening last October, Rockey said the South Allison Hill branch has outperformed expectations for new account activity in PNC’s peer group of LMI branches in the bank’s nine-state service area.

Allentown, PA

Other banks have opened branches in LMI areas. In September 2003, Nazareth National Bank and Trust Company opened a branch at 9th and Hamilton streets in downtown Allentown. While there are several other banks downtown, Nazareth National was the first bank to open a new branch there in over 30 years. In October 2003, shortly after the branch opened, Nazareth National merged with Keystone Savings Bank, forming Keystone Nazareth Bank and Trust (KNBT). [Also see the sidebar to the right.]

The branch is located in The Plaza at PPL Center, which was formerly the site of Hess’s department store. This area is part of a low-income census tract in which 56 percent of residents are below the poverty line and the 2005 estimated median family income is $15,970.

In partnership with the city of Allentown and PPL Corporation, Liberty Property Trust redeveloped the entire site and approached Nazareth National about opening a branch. Scott Fainor, a Lehigh Valley native who was previously the president and CEO of Nazareth National Bank and is currently president and CEO of KNBT, wanted the bank to be part of revitalization efforts in downtown Allentown.

David Kennedy, regional president at KNBT, noted: “It was Scott Fainor’s vision and support for the city of Allentown that led to the branch opening. The branch was an important investment in the community and made good business sense.” Kennedy said the branch was meeting expectations and, as of the end of the first quarter of 2006, had approximately three times the amount of deposits as the South 4th Street branch, which opened a month earlier in another part of Allentown.

Two of the six staff members at the downtown branch are bilingual, and other staff members are beginning a six-class course to learn conversational Spanish. A KNBT team is exploring how it can better serve the Spanish-speaking community throughout KNBT’s service area, including downtown Allentown. Joyce Crosby, vice president and branch manager, explained that much of the interaction with customers is through informal one-on-one financial literacy training. In addition, KNBT allows nonprofits and city officials to use meeting room facilities at the branch. KNBT’s downtown Allentown branch is not currently open on Saturdays, but the bank continues to evaluate this aspect of its facility.

York, PA

Integrity Bank opened a branch on South George Street in downtown York in February 2005, offering banking services from Monday through Saturday. The branch is in a low-income census tract in which 18 percent of residents are below the poverty line and the 2005 estimated median family income is $29,579.2  James Gibson, president and CEO of Integrity Bank, said that at the time of the opening there were at least eight other branches in downtown York, but none were open on Saturdays.

Part of Integrity’s business strategy is to offer more convenient banking hours, including extended hours during the week and on weekends. Gibson and his team recognized a need in the downtown York market for residents to be able to bank on Saturdays. Gibson said that “after being open for only 120 days, the branch had obtained profitability and had by far exceeded expectations.”

Other banks have also opened branches in LMI areas. Karen Whitehill, senior vice president and CRA officer at KNBT, had these comments for banks when they evaluate branch locations: “You should not assume that if an area is low income, it will be low volume. There are a lot of good business opportunities in LMI areas, including first mortgage and small business loans.”

Cascade asked Alan Jennings, executive director of the Community Action Committee of the Lehigh Valley, about bank branch openings in low- and moderate-income (LMI) areas in the Lehigh Valley, including the KNBT branch opening in downtown Allentown. 

“KNBT deserves tremendous credit for going where so few other banks were bold enough to go and the downtown Allentown branch is performing well. A striking aspect is that no other banks have learned from KNBT’s experience and followed their lead in the Lehigh Valley. All is not good in LMI areas as far as branching is concerned. For example, it is very troubling that the borough of Emmaus, with its 12,000 residents, has about a dozen branches while south Bethlehem, with 18,000 residents and nearly $1 billion in actual or planned investment, has just two branches. The difference is that more LMI and minority residents live in south Bethlehem than Emmaus. Why is it so difficult to get new investment in neighborhoods where it has been proven that a bank can make money? Check-cashers are making money in these neighborhoods. Are check-cashing store owners better business people than bankers?”

For information, contact Christopher Rockey at PNC (717-231-3783; Christopher.Rockey@pnc.com), Karen Whitehill at KNBT (610-807-5837; Karen.Whitehill@knbt.com), or James Gibson at Integrity Bank (717-920-4900; jgibson@integritybankonline.com).

  • 1 John Wackes, community development specialist, provided research and data analysis for this article.
  • 2 All census data cited in this article are from the FFIEC Geocoding/Mapping System, http://app.ffiec.gov/geocode/default.htm. All values are based on the 2000 census. 

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