Urban community banker Dorothy Bridges’ Franklin National Bank devotes itself to “socially responsible” banking
 
Dorothy Bridges is sitting in a booth in Loop, a Minneapolis restaurant, sipping at a soft drink. She’s lunching on her bank’s home turf, the North Minneapolis Warehouse District, and there’s little she can’t tell you about the area.

Outside, on this brisk but sunny November afternoon, one can see the streets of the district, also called “The North Loop.” That name comes from long-gone rail and streetcar lines that served the once-bustling industrial enclave of the city, an area that fell on hard times. Much of the neighborhood’s industrial flavor remains, with some still-profitable firms doing business there in the heavy-boned industrial buildings. Some of the businesses are good customers. And, thanks to Franklin National Bank of Minneapolis and other players, the neighborhood has been undergoing a comeback.

For instance, some of the buildings—now sporting names like “The Bookman Lofts” and “The Stacks”—have been turned from vacant or underutilized reminders of a wholly industrial past into condo and townhome buildings, housing a generation of urban pioneers who have helped make the community’s mixed-use future get off to a sound start.
 
Bridges and her bank aren’t “paratroop bankers,” lenders and institutions that dip into urban communities from elsewhere to fulfill this or that short-term mission, and then move on. The fortunes of both banker and bank are tied very much to the Warehouse District and other Minneapolis neighborhoods and ethnic communities served by Franklin. The bank, in an expansion of its territory, moved its headquarters to its new building in the district in 2002. Bridges and her husband, Thomas “Rudy” Grant, and the youngest of her four children, live nearby. They moved to a townhome in the Hawthorne section after spending many years in the suburbs. Both Franklin Bank and its CEO are very much a part of the community.

Socially responsible by design
Bridges, president and CEO of the $116.8 million-assets community bank, chairs the ABA America’s Community Bankers Council for 2007-2008. And though her community’s population dwarfs that of many locales served by her fellow council members, she is as much a community banker as any of them. What sets apart Franklin National and the two other banks in its holding company, Sunrise Community Banks, is their mission. The slogan on Bridges’ business card sums it up: “Leader in Improving Our Urban Community.”
 
“Social responsibility” is part of that mission and a way of doing business at Franklin National, which goes by “Franklin Bank.” Serving nonprofit organizations—hundreds of them—and small businesses, and working with government agencies for community betterment, comprise much of the bank’s strategy towards being a “socially responsible” bank.
 
Franklin Bank makes most of its loans right in its own neighborhoods, and is willing to take prudent risks to support those communities. While many of the organizations that the bank partners with in its community development lending are large, it also makes many loans to inexperienced borrowers who need a start. Management prides itself for underwriting based not only on collateral and cash flow, but also character. A good percentage of the bank’s business loans go to long-term credits for small businesses started by immigrants.
 
Immigrant populations have boomed in Minneapolis. One recent report found that more than 80 languages are spoken in public schools by immigrants’ children in the Twin Cities’ area.

Banking, not charity
“Social responsibility can be read as ‘making concessions,’ ‘settling for a lesser return,’ and for ‘giving away money’,” says Bridges, a veteran banker. But that’s not what she and her institution are about.
 
“The challenge,” continues Bridges, “has always been to get people to understand that social responsibility is not only a great idea, but also a great business. You can do well by doing good.” Indeed, Bill Reiling, chairman of $478.1 million-assets Sunrise Community Banks, reminds the staff: “No margin, no mission.”
 
Franklin has enjoyed steady growth for decades, and respectable returns as well. Return on assets averaged 1.8% from 2002-2006, and 2007 ROA came in at 2.16%.
 
The recipe for “doing good” has many ingredients at Franklin Bank, which specializes in commercial real estate and business lending, with the goal of making those loans and serving those businesses and nonprofit organizations that can help sustain and rebuild the North Loop as well as other neighborhoods.
 
As one learns more about Franklin Bank, it comes as no surprise that it received an “Outstanding” CRA rating from the Comptroller’s Office in its most recent exam, in 2003. The report termed its community development lending “excellent.” The bank has twice been designated a federal community development financial institution, and received two consecutive $500,000 awards from the Bank Enterprise Award Program.

From drug zone to drug store
It was understatement to say that the seven-and-half-block area along East Franklin Avenue, about two miles from the bank’s present headquarters, had gone bad. Rampant crime had become everyday news. The rental truck yard of a gas station had become a makeshift hotel for prostitutes and their customers. The Franklin Circles Shopping Center nearby had become, in the words of a city government report, “an open drug bazaar,” dominated by businesses—such as a liquor store—that tended to encourage troublesome traffic. Another nearby building was a porn theatre. The strip held the dubious distinction of being one of Minneapolis’ top 911 call destinations.
 
The American Indian Neighborhood Development Corp. (AINDC), a tribal commercial real estate development nonprofit organization, stepped in, hoping to turn the situation around. The group’s overall mission is working to improve opportunities for Native Americans, many of whom live in the area, and others in distressed Minneapolis neighborhoods through commercial business development. It worked with the police and city government, a law firm, Franklin Bank, and other organizations.
 
The shopping center was revamped and rechristened the Ancient Traders Market, in recognition of the AINDC Native American roots. The corporation acquired area properties that it didn’t already own with city assistance, to form a strong nucleus that it could control, and began bringing in a more appropriate mix of businesses. This included better neighborhood anchors, such as a supermarket, a pharmacy, a Native American gifts store, a medical clinic, and a restaurant, Maria’s, that has become a popular destination since this redevelopment effort started in 1999.
 
The center also provided free space for a public safety center, to encourage police presence.
 
As AINDC and its partners continued to improve the shopping center and surrounding properties, other private and public players stepped up. They added apartment buildings, improved library facilities, and street improvements.

“A perfect storm of development, managing the business mix, infrastructure investment, enhancing public safety, stabilizing the housing market, and creating great spaces converged around Franklin Avenue to transform it from a place of open drug dealing to a place that meets the retail and gathering needs of residents, and draws people from around the city for breakfast and pottery,” stated the city report. “Now that Franklin Avenue has stabilized, crime is counteracted in the most effective way possible—the presence of people shopping, eating, and observing goings-on in the public realm of the street.”
 
Theresa Carr, executive director at AINDC, says the project has brought around 50 new businesses and 600 new jobs to the neighborhood. Carr credits Franklin Bank’s involvement for helping move the project to completion at least a year faster than would have been the case otherwise.
 
The favorable experience that the foundation and Franklin Bank had with the Ancient Traders Market and environs has encouraged both to work together again on another project that has been in development for several years. Built around a “Y,” the North Minneapolis multi-use project will involve approximately 50 businesses, as well. Franklin Bank is participating in the $60 million project as a lender, and AINDC has been gathering grant funding. The effort is in its early stages, with $50 million still to be raised.
 
“It’s a massive undertaking,” says Bridges.

Catalysts and ripple effects
Indeed, as the Ancient Traders and “Y” projects illustrate, community development activity is rarely a one-organization game, rarely a simple deal. Partnerships, alliances, and more all prove necessary to accomplish such improvements.
 
To Bridges, it is important that the bank be a “catalyst.” Sometimes, it is not so much the “how much” that is important to a project’s success, but the “when.”
 
Frequently, the role Franklin Bank plays is financing the “site contract.” This means the upfront money necessary to acquire the site, be it building or vacant lot. Bridges explains that this is often one of the most challenging aspects of putting a deal together.
 
“As a lender,” says Bridges, “you are buying in based on a hope, a plan.” Furthermore, she says, the lender is counting on the builder-developer, often a nonprofit organization, being able to keep the project moving along and completing it on time, so the bank’s loan is repaid timely. Such lending is considered speculative, but without it, many worthwhile projects wouldn’t begin.
 
Franklin also provides construction financing to some projects, both commercial and residential. For instance, it has often been involved in new housing subdivisions and apartment projects of various sizes, with affordable units frequently part of the mix. One project currently pending, Heritage Park, is turning a former public housing site into a 900-unit mixed-ownership neighborhood that will include rental units, affordable housing units, and public housing units for the elderly. Franklin Bank extended the development loan to the project’s public and private organizers, and has also financed the construction of affordable single-family homes there.
 
Overall, the bank has a strong preference for owner-occupied properties. Bridges explains that Franklin Bank does not want to encourage absentee ownership, which can cause problems for neighborhoods. Because most individuals who acquire property with Franklin Bank credit are first-time property owners, for commercial or residential needs, Bridges likes to refer to Franklin as their “on-ramp.”

Picking up the ripples
Other opportunities for the bank to make loans while supporting the community can result from the ripples of larger projects. For instance, in place of the errant gas station mentioned earlier, a large commercial bakery firm agreed to build and operate a new bread factory on the site.
 
Franklin Street Bakery, which opened its factory in late 2003, produces everything from famous hamburger rolls to ciabatta and other artisan breads. Thousands of items are baked in the 24/7 factory daily, chiefly for the commercial market. The bakery employs 120 bakers and other workers in a substantially automated, high-volume plant. It ships to approximately 20 states right from Franklin Ave.
 
Some of its equipment was financed by long-term credit from Franklin Bank. For instance, to save on the cost of bagged flour, the bakery needed to install two huge flour silos, each large enough to hold 50,000 pounds of flour, pumped in from arriving tanker trucks.

Involvement for improvement
Bridges serves, or has served, on perhaps more than the normal banker’s share of commissions and boards, because of the bank’s community development focus.
 
“The nature of the work that we do sometimes gets me into the arena of trying to play a role in developing policy,” says Bridges. She sits, for instance, on the Mayor’s Housing Advisory Committee. She is not particularly political on a personal level, she says, but she works with many public leaders in order to help move along community improvements.
 
“I see it as more of a community advocacy role, a nonpartisan approach,” says Bridges.
 
Her expertise, and that of her staff, is known, and respected.
 
“We work closely with Franklin Bank in doing deals throughout the city,” notes Mike Christenson, director of City of Minneapolis Community Planning and Economic Development.
 
One private nonprofit on whose board Bridges has served  on for more than seven years is the Minneapolis Foundation. “We count on bankers like Dorothy to work with parts of the community that need special attention, areas that other banks aren’t always interested in serving,” says Sandra Vargas, the foundation’s president and CEO. “Dorothy is one of my first three calls when there’s an issue of community development in Minneapolis.”
 
Bridges’ volunteerism is broad, and a longtime habit. It is also something that bankers at Franklin Bank find essential to be in this part of the banking business. Typically, Franklin bank lenders serve on at least one nonprofit board, according to Rich Esquivel, vice-president-commercial lending. “You join things that will get you involved in the community,” he explains. The bank’s lenders say getting to know the nonprofit community in this way is much more effective than simply knocking on doors.
 
While this approach gets Franklin bankers closer to their customer base and their potential mission partners, it comes with some baggage. Some deals don’t pencil out. So saying “no” sometimes is part of the territory, admits Albert Alexander, vice-president-commercial loans, but that doesn’t mean things have to be unfriendly. He points out that Franklin bankers know of advisors who can help organizations build themselves up in weak areas, with an eye to trying again. Michael Anderson, senior vice-president and senior lending officer, puts it plainly: “We like your business, but we are still a bank, and still have to live by various rules and regulations.”

Deposits on a mission
Another part of the bank’s base is “socially responsible” individuals. These customers aren’t borrowers, but depositors who like doing business with a bank whose mission in corporate life is working for community betterment. And one of the key points where these customers and Franklin Bank’s affairs come together is the “Socially Responsible Deposit Fund.”
 
The vehicle, originally called the Urban Partnership Fund, is a concept launched and marketed by all three Sunrise banks. David Reiling, Sunrise Community Banks’ CEO, and son of founder Bill Reiling, says the program was one of the first joint efforts launched by the three-bank organization, in part as an effort at branding their unusual social responsibility business model. Reiling says the program has appeal for those individual and business customers who are also attracted to socially responsible mutual funds, shareholder advocacy efforts, and other attempts to blend capitalism and altruism.
 
All depositors—including individuals, organizations, or businesses—can open any type of deposit account and designate it to be part of the balances of each Sunrise bank’s Socially Responsible Deposit Fund. (Governmental units can also use the program; the city of Minneapolis, for instance, is a depositor in the fund.) The bank, in turn, pledges to use those insured deposits to finance loans that help small businesses; create affordable housing; and develop community service facilities. Franklin Bank’s Socially Responsible Deposit Fund stands at approximately $8.9 million.
 
Such accounts can be “sticky.” David Reiling acknowledges that many depositors are rate-sensitive, today, but that their Socially Responsible Deposit Fund CDs, or other accounts, tend to be the last accounts that they will move, because of their community commitment.

Securitized development
Another source of funding for community development efforts is the secondary market. Prior to joining the bank, Bridges worked for Community Reinvestment Fund, USA, which purchases community development and affordable housing loans and securitizes them for secondary market investment. Her old boss, Frank Altman, president and CEO, sits on the bank’s board, and the bank makes use of the private nonprofit’s programs to generate greater activity from the funding it obtains through ordinary channels.
 
One of the strengths of the CRF approach, notes Altman, is that it underwrites loans it is considering purchasing in tandem with community development lenders like Franklin Bank. The organization buys various business-purpose and residential single-family and multi-family affordable housing loans, and also provides various services to community development lenders. The asset-backed notes and investment funds structured of purchased credits are sold by CRF to institutional investors, including some banks, through private placements.
 
In Franklin Bank’s case, most deals have been structured as 50%-50% participations, though CRF more recently has been “table funding” some loans. The relationship enables the bank to find some borrowers lower-cost funds than it otherwise could provide.
 
“Some of our deals wouldn’t have gotten done if Frank and CRF hadn’t been involved,” says Bridges.

ABA council priorities
Competition in business is one thing; competition in Washington is another.
 
In addition to her ABA post, Bridges holds a seat on the Federal Reserve’s Consumer Advisory Council through 2008. (In January, Bridges was named to the board of the Federal Reserve Bank of Minneapolis, as well.) That has given her perspectives on pending government relations matters that other community bankers don’t get, directly. Many of her fellow advisory council members are not bankers, but representatives of groups that often butt heads with the bank lobby. This, plus her onetime stint as a regulatory consultant, have given her a deeper appreciation of the compliance burden. She knows how bad things could get if banks didn’t resist the views of activists.
 
Bridges believes industry unity is crucial, especially with the fallout from the subprime debacle raining new troubles on the industry. “Things are only going to get more onerous,” says Bridges. “Going in separate directions only weakens our purpose.”
 
So unity is her top goal. Coming just behind that is one more.
 
“It’s a tall order,” she says, “but I would like to plant some seeds.” Those seeds, she says, would blossom such that more women and minority bankers would find themselves in the CEO’s seat in more community banks. She sees this as a natural benefit to an industry that needs strong leadership and talent in the presidents’ chairs.
 
“The more we can do this,” says Bridges, “the more successful we’ll be as an industry.” BJ

A true-life “rags to banker” story 

Dorothy Bridges’ unique connection to a famous Norman Rockwell painting was just the start of a long road.
 
The path that brought Dorothy Bridges to the presidency of a bank, and to the chairmanship of the ABA America’s Community Bankers Council, is one that few bankers have trod, and it has influenced her approaches and viewpoints.
 
Bridges grew up in the south, chiefly in New Orleans. Much of her childhood was spent around two family focal points.
 
The first was around her immediate family of eight children, herself and seven younger siblings. They lived in a large old house that had been converted into multiple units, where cousins, aunts, and uncles lived. “Altogether, there must have been close to 50 people living in this one house,” recalls Bridges, “with only a couple of bathrooms and a shared kitchen.”
 
One of those cousins was Ruby Bridges, one of the first four black students to attend a formerly all-white elementary school in New Orleans. It’s an episode of late 1960 that Norman Rockwell immortalized in a famous painting for Look magazine, of six-year-old Ruby. Little Dorothy Bridges was one of a somewhat larger group of black students who followed Ruby the next year, when they became of age. Later, the banker served on the board of a foundation that Ruby Bridges Hall started to combat racism.
 
The second focal point was summers with siblings and cousins, spent as free labor for her grandparents, sharecroppers in rural Tylertown, Miss., which is where Dorothy Bridges was born.
 
While much of her childhood was happy, Bridges spent a good deal of it poor beyond the imagination of most people today. Toys were scarce. Bridges and her female cousins would make dolls using corn silk, lipstick, and pop bottles.

Following opportunity northward
In her speeches, Bridges often tells stories of these years, not as a “sob story,” but to illustrate how banks can reach out.
 
Her parents worked at manual-labor jobs that paid poorly.
 
“We didn’t have a lot of money,” Bridges recalls, “and what we did have, we didn’t keep in a bank. It wasn’t that we had anything against banks. It’s just that we didn’t know anything about them. In the communities where I grew up, banks were nonexistent. I cannot remember ever even passing a bank within a five-mile radius of my home.”
 
There were other rough times, but Bridges persevered. Among the mentors she has had in her life was her mother, Gertrude, and a high-school math teacher, Alloyd Harris. Her mother inspired her through her example, raising eight children while working hard, physical jobs for years. Regarding Harris, she says, “he encouraged me to go to college and to want something more than a high school diploma and a future of menial jobs.”
 
Bridges went to the University of Montana, Missoula, on a scholarship, graduating in 1980. At the time, she was a single mother, and she recalls receiving much help from people for whom she was often one of few African-Americans they had ever met. She was recruited out of college as a management trainee for what was then First Bank System, Minneapolis, after initially hoping just for a job as a part-time drive-through teller to earn money while figuring out what to do after graduation. There she met another mentor, Myrtle Leuschen, head of human resources—“the first woman in a management position that I’d seen.”
 
Bridges worked up to president of a branch. Along the way, she did what she could to make a difference. One deal involved a local couple whom other banks had turned down for a loan to start a coffee shop. She was impressed with their plan, and worked with the Small Business Administration. Today that “coffee shop” is Caribou Coffee,  second-largest specialty coffee company in the U.S.
 
In 1993 she became a compliance consultant for Barefoot Marrinan & Associates, Inc., and from 1995-1999, vice-president and chief credit officer for Community Reinvestment Fund, Inc., which joins lenders and investors. In 1999, she returned to banks as Franklin CEO and president.

African-Americans in banking
Bridges is a big believer in community banking. This goes back to  experiences when banking was not part of her parents’ life. They found alternatives to banks, “sometimes with really terrible results.”
 
At the time the Franklin National opportunity came up, Bridges did not see herself returning to a bank. “There is still a sense that minorities have to prove that they can think like bankers,” says Bridges. She says there are many businesses where minority employees don’t feel that way, “so, many of us choose to leave.”
 
However, she found that the views of Bill Reiling, chairman of $478.1 million-assets Sunrise Community Banks, which owns Franklin and two other area banks, fitted perfectly with her own views of what banking was about. This commonality of views overcame her concerns.
 
“I went back into banking with the belief that this would be a way to combine my banking skills with my community relationship skills,” says Bridges.  — Steve Cocheo
 
The electronic version of this article available at: http://lb.ec2.nxtbook.com/nxtbooks/sb/ababj0208/index.php?startid=28

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