Impact of the 2008-2009 recession on African-American owned US banks

Abstract

Purpose – The purpose of this paper is to contribute to the literature on minority-owned commercial banks in the USA. Design/methodology/approach – The authors examine performance differences between African-American (AA) commercial banks and other minority (OM)-owned banks. Also, the authors compare AA bank performance with that of their peer-group banking institutions. Findings – Employing data both before and after the recessionary period of 2008-2009, the authors find significant performance differences between minority ownership categories. For example, prior to 2008, AA banks held a significant advantage over OM-owned banks in net interest income as a percentage of average assets. This competitive advantage was somewhat offset by relatively weak loan portfolios and failure to contain costs. The 2008 crisis served to exacerbate the negatives of African-American banks while their positive differences essentially disappeared. Originality/value – The focus is different than the previous studies on minority-owned banks. The authors are especially interested in how AA banks have fared – relative to banking industry peer institutions, but also, relative to OM-owned banks.