By David Reiling, CEO, Sunrise Banks
Compassion is our motivation
Our mission is to Empower
Our spirit is to Achieve
Whether you call it impact investing, community and economic development or values based banking, I believe that Sunrise Banks can open the doors of financial inclusion to help the unbanked and under banked – as well as the unsatisfied – gain access to convenient, transparent and reasonably-priced financial services nationally – globally – at scale. What’s more, I believe it’s our duty. And what I’m learning along the way is that, as a community development bank, you have to have the infrastructure, the talent and the willingness to innovate in the face of economic, regulatory and competitive challenges that tend to thwart even the biggest, most successful regulated financial institutions.
Why Infrastructure Matters
Experimentation is the key to creating products and services that millions of underserved people will trust, let alone use to meet their daily financial needs and help them achieve their goals and dreams. Creating a pioneering product that’s also responsible and upholds the letter and spirit of rigorous and ever-changing state and federal regulations, at a time when any bank’s net interest margins are razor thin, requires dedication to a level of infrastructure that many banks don’t have. Of particular importance is quality control, from approval processes for artwork and marketing tactics to contract reviews, and systems that enable adherence to strict policies and procedures.
Sunrise Banks, which historically operated as University Bank, Park Midway Bank and Franklin Bank in the inner-city neighborhoods of Minneapolis and St. Paul, had the infrastructure to earn its track record of innovation, solid financial performance and empowering underserved consumers and small businesses. While we focus on banking products and services, rather than investments, we have been able to implement scalable initiatives with extensive local community impact, from our Socially Responsible Deposit Fund and our Somali mall micro branch to our New Markets Tax Credit loans that have created jobs and transformed blighted industrial properties into thriving inner city enterprises.
These success stories spurred the notion that by uniting our three banks, we could strengthen internal processes and technology to amplify what each bank was accomplishing individually. After months of strategizing, preparing internal systems and communicating carefully with our key stakeholders, last April, University, Park Midway and Franklin banks opened for business under one charter as Sunrise Banks. The combined bank, with assets in excess of $750 million, has eight branch locations in low and moderate income neighborhoods throughout the Twin Cities and a national products production office in Sioux Falls, S.D. Uniting the three community banks under a single brand creates a solid social enterprise platform; and while our lending may still be local, our community development scope is now national.
To further strengthen our long-term ability to carry out our mission, Sunrise continues to be owned by the St. Paul-based Reiling family; and I have been blessed with a father, Bill, who has passed ownership of the organization to me through a long-established succession plan that maintains a constant focus on doing well by doing good. The succession, combined with the bank consolidation, has enabled Sunrise Banks to evolve our brand to “The Most Innovative Bank Empowering the Underserved to Achieve.”
Talent and Willingness – The Other Key Ingredients
Vision and leadership are required attributes for any banker or banking institution that seeks to effect positive social change while, at the same time, creating products and services that enable the bank to grow. Nowhere is this mixture of talent more evident than in the members of the Global Alliance for Banking on Values, a network of 20 of the world’s leading sustainable banks from Asia, Africa, Latin America, Europe and North America. From providing finance facilities and skill development workshops to a small business owner in Bangladesh to securing housing for vulnerable adults in Minneapolis, the Alliance showcases what can be achieved for society when the creativity of entrepreneurs — business owners and bankers alike – is unleashed.
As one of the Alliance’s newest members, Sunrise Banks possesses an overt desire to incubate and test programs that serve the needs of unbanked and underbanked families, no matter where they live. We have, therefore embarked on an Underserved Empowerment Journey that aims to provide responsible and affordable financial products to one million traditionally underserved consumers.
For example, Sunrise Banks is testing a nationally scaled, domestic microloan product to combat payday lending. In this particular model, an employee can access a loan of up to $2,000 through his or her employer’s benefits intranet site. So, in addition to logging on to the employer site to access information for more traditional benefits such as healthcare and retirement accounts, an employee can apply for a microloan. If approved, loan repayment spans a 12-month period, is payroll deducted and has an interest rate that is far, far below the 400- to 1,000-percent charged by payday lenders. While in test stage right now, this microloan product has the potential to be a significant game changer for consumers.
In another nationally-scaled initiative, Sunrise Banks, working with business partners, has created a portfolio of more than 100 prepaid products that promote financial services to individuals throughout the country who are looking for an alternative to traditional bank accounts and to businesses looking for ways to reduce costs related to payroll, commissions or incentive programs.
Closer to home, the New Market Tax Credit (NMTC) program is launching projects and jobs that would have never left the ground otherwise. The program, established by Congress in 2000, aims to revitalize low-income communities by providing investors a federal income tax credit in exchange for equity investments in specialized financial institutions called Community Development Entities. As a U.S. Treasury certified Community Development Financial Institution, Sunrise Banks is authorized to administer NMTC loans.
Without the NMTC program at Sunrise Banks, the nonprofit Habitat for Humanity would have been challenged to build its new 27,000 square foot headquarters in St. Paul, Minn. Instead, it would have had to take on more debt or assume the burden and expense of an additional capital fundraising campaign, which would have substantially delayed the organization’s ability to build its urgently needed new head office.
Another example of the NMTC positively impacting the community comes in the form of ice cream. With an NMTC loan, Izzy’s, owned by the husband and wife team of Jeff Sommers and Lara Hammel, is transforming a vacant lot in a distressed section of Minneapolis into a vibrant 5,000 square foot ice cream making plant. When pursuing financing for the project, Sommers faced numerous refusals from banks, who said it was too filled with risk. However, the NMTC program allowed Sunrise to create a seven-year interest only loan package at a below market rate. While this description of New Market Tax Credits loans sounds simple, they are complicated to understand and administer. However, they facilitate community transformation where none may otherwise be possible.
Actively managing a successful bank system in the wake of the nation’s economic woes, increased regulatory challenges and new wave of non-bank competitors is enough to keep any traditional banker working 36-hour days. Where can one find the will to innovate for positive community, much less global, impact? Measurement is the key.
As one of approximately 700 certified B Corp organizations, Sunrise is able to access the Global Impact Investing Rating System (GIIRS), a comprehensive and transparent system for assessing social and environmental impact. Using key performance indicators to benchmark data in areas such as governance, civic engagement, employee work environment, and socially- and environmentally-focused business models, GIIRS is similar to Morningstar investment ratings. Based on our evaluation, Sunrise Banks was named last April to B Corp’s global list of 67 “Best For The World” companies for creating the most overall social and environmental impact.
Call it impact investing or banking with values; it’s my hope that the Sunrise story of realizing national and global social change from America’s Heartland inspires other financial services organizations to move beyond mere profit making. It is not easy. But it is necessary and worthwhile. And, at least for me, it’s fun.
Article by David Reiling, CEO of Sunrise Banks based in St. Paul, Minnesota. Sunrise Banks is certified by the US Treasury as a Community Development Financial Institution, a designation given to only 90 banks nationwide. Sunrise also is a member of the Global Alliance for Banking on Values and is a certified B Corp for its demonstrated commitment to transparent corporate governance and positive community impact.
For more information go to- www.sunrisebanks.com
