Financial Viability: A Descriptive Study of African American Banks’ Efficiency

Abstract

African American community banks appear to be losing ground in their communities. The number of African American community banks continued to trend downward during the past two decades, suffering closure of 12 banks. As of 2017, only 23 banks remain. This trend forces the question: “Do African American community banks possess adequate financial viability to serve their communities?” The survival of African American Community Banks between 2006 and 2017 was examined using the efficiency ratio as the key measure of their financial viability. Results showed that African American banks managed to produce 1 year where they outperformed the peer banks in managing assets to produce profit. The most glaring discovery was that it cost the African American banking sector close to or more than US$1 to generate US$1 of revenue. Findings suggest that African American community banks were unable or unwilling to control the components that contribute to how successful the bank used its assets and liabilities to generate income during the study period.