A Thanksgiving Wish

Dear Friends,

I hope your Thanksgiving was a great one and that you were able to spend it with family and friends.  During this time of year it is common for us to reflect on and appreciate what we have.  I am personally grateful for having a job I absolutely love, a family that I could not live without and that supports my every move, and a staff and board of directors that believes that the activities of Pan American Bank are not just part of a job, but part of a movement.

I recently read Tribes by Seth Godin.  In his book there is a passage that could have easily come out of my mouth, "It took me a long time to figure out why I was so happy to be checking my e-mail in the middle of the night.  It had to do with passion.  Other than sleeping, there was nothing I'd rather have been doing in that moment - because I'm lucky enough to have a job where I get to make change happen."  As President and CEO of Pan American Bank, I truly believe that Pan American Bank can make change happen.

I have attached the latest newsletter from Bienvenidos CEO Ritchie Geisel.  Those of you that live and/or work in East Los Angeles are likely very familiar with Bienvenidos.  Bienvenidos is a top tier nonprofit that serves East Los Angeles.  I am proud to say that I am not only a fan of Bienvenidos, I am also a Director.

I am attaching Ritchie's recent newsletter because it succintly speaks to the challenges of East Los Angeles as well as the many efforts currently being undertaken to move East Los Angeles out of the "Forsaken Five Percent," a term used to describe communities such as East Los Angeles in the "2011 A Portrait of California."  I ask you to read it and share it with others that may have an interest in the empowerment and transformation of East Los Angeles.

As Ritchie states in his update, "it would be easy to become discouraged in the current economic and political environment."  Ritchie and I, however, are hopeful that we do not become discouraged and that we find ways to continue to support the activities of Bienvenidos and the many other wonderful organizations that serve the East Los Angeles community.  His update speaks to the many collaborations currently focused on boosting the socioeconomic status of East Los Angeles.

Again, I hope you had an amazing Thanksgiving.  I definitely did.   If you would like to keep informed on the work of Bienvenidos and the efforts of the community to move East Los Angeles out of the Forsaken Five Percent, please send your email toinfo@bienvenidos.org to join the Bienvenidos mailing list.

Best,

Jesse Torres

President and CEO

Pan American Bank

East Los Angeles, CA 90063

Edward James Olmos - The Economic Engine That Will Stabilize Latino Communities

If you are Latino or have been around for a while it is a good chance that you recognize the name of actor Edward James Olmos.  Having made his career with movies such as Zoot Suit and Stand and Deliver, Edward James Olmos became a major force within that Hollywood ethnic click beginning in the early 80's and continues to carry a wallet full of cachet.

Ok, sure, Edward James Olmos had some great roles but what does that have to do with economic stabilization?  Back in the 80s - nothing.  Today, everything.

About two months ago I was having a discussion with Armando Sanchez, the Executive Director of LatinoGraduate.net and one of East L.A.'s resident visionaries.  Armando and I were talking and brainstorming like we usually do on Thursday afternoons before he tapes his weekly global webcasts.  The challenge he put up was how we could help the burgeoning cadre of Latino authors.  While some authors such as Alisa Valdes-Rodriguez have "made it," others, most others, are still having a tough time getting into the literary mainstream.

I suggested that the Bank host a fundraiser to help Edward James Olmos' nonprofit organization, Latino Literacy Now! and its Latino Book & Family Festival.  The LBFF was going to be returning to Cal State L.A. in October and needed funds to make it happen.  So on August 7, 2010, we did it.  And it was awesome!

About a week after the event I was sitting and thinking about Pan American Bank's mission of empowerment and transformation....and then it hit me!  A key to economic transformation of communities such as East Los Angeles is not dependent on hand outs or tax breaks or any of the many political promises made lately.  And the key is also not financial literacy - though that is one key.

Instead, I realized that if I really wanted to do my part to elevate the local economy over the long-term, I needed to start by getting those Latino authors back to Pan American Bank.  But this time, instead of reading to funders and financial supporters, I needed them reading to the most cash-strapped members of our community - the kids.

The idea goes something like this:

"Parents (Adults) That Read to Kids = Kids That Love to Read = Good Readers = Good Students = High School Graduates = College Graduates = Latinos With Good Jobs = Latinos With Financial Power = Latinos With Political Power = Latinos Breaking the Stereotype = A New Chapter"

I know, I know, this is not much of an epiphany.  People have been pushing reading for decades.  The difference for me was the economic angle.

So by now you're asking, how does this related to Edward James Olmos?  Simple.  If the formula above is correct and parents reading to children = economic empowerment then a good way to get parents to read to their kids in East Los Angeles is by putting a cadre of authors in front of them with similar looks and backgrounds.  In other words, get the Latino authors to inspire the Latino children and their Latino parents.  And that's where Edward James Olmos' Latino Literacy Now! organization come in.  The organization is a promotor of Latino authors.  Latino authors beget Latino readers and Latino readers beget Latino success stories.

After thinking through the process I called the organization's promoter and author Reyna Grande.  She loved the idea. Within a week she recruited eight authors, and it was on!

On September 11, 2010, we launch week one of the series.  Before even launching the first session, we already have nearly another eight authors excited to work with the kids - so look for round 2.

I am so excited for Pan American Bank, the authors and the families.  I really do believe that through this series of readings we will be able to change lives and improve the economic footing of the community.  The greater the number of college graduates in the community the better its economic prospects and the easier it becomes to bootstrap this community into the middle class.

It is not going to happen overnight but it will happen.

With Election Day Coming...

Well, it's been a while since I last checked in.  But I'm back and happy to be here.

With the California state primary election only a couple days away (June 8, 2010) I thought I would dedicate this post to the California Latino electorate.  This topic is especially appropriate given all the activity taking place in Arizona relative to SB1070 and the fact that the Bank serves the Latino (mostly Mexican-American) niche.  I was curious what role Latino voters would have on the outcomes in California.  I was both impressed and depressed by the actions of the Latino electorate.

My research is based on the 2010 Latino Electoral Profile Report issued by the National Association of Latino Elected and Appointed Officials (NALEO) Educational Fund.

 

My first question was to determine the Party of Choice of Latino voters.  While many believe that Latinos are mostly registered democrats, the fact is that Latinos back both sides of the aisle.  Yes, the percentage of Latino democrats outnumbers Latino republicans by a ratio of three-to-one.  However, the percentage of Latino republicans is still substantive.  According to the NALEO report, registered Latinos are 58% democrat, 19% republican and the remainder decline to state or have another party affiliation.

Interestingly, non-Latino registered voters are also more likely to be democrats, though the differences are not nearly as wide.  Among non-Latino registered voters, 41% are registered democrats and 34% are registered republicans.

 

Having seen the percentages, my next question was the impact that registered Latinos had on elections.  I found some interesting data.  According to the NALEO report, there are 16.5 million registered voters in California of which 19% are registered Latino voters.  In Fresno, San Bernardino, Los Angeles and Sacramento counties, Latino voters comprise 30%, 28%, 27% and 23%, respectively, of total registered voters.  That is a powerful segment in those communities.  In other counties the percentages are fairly small.

 

But of course, as with anything else, the proof is in the pudding.  And with any voting block, it doesn't matter if you are registered to vote, it only matters if you vote.  And there is the problem.  According to the report, while Latinos represent a significant portion of voters - especially among those four counties noted above, Latinos are significantly more likely to skip the polls than their non-Latino counterparts. 

Election analysts used terms such as High Propensity, Mid Propensity and Low Propensity to label groups' likelihood to vote on election day.  According to the data, 55% of registered Latino voters are likely to skip the polls compared to only 41% of non-Latino registered voters.  And only 27% are likely to make it to the polls, rain or shine, compared to 42% of non-Latino registered voters.

The NALEO report contained much more information.  I encourage anyone with an interest in this segment to download it.

At the end of the day, it seems that the Latino electorate is well positioned to have an impact on the 2010 elections.  The key is to get the voters to the poll.  Hmmmm, any ideas?

Latino or non-Latino, get to the polls this week.  Assert your right to vote.  Make yourself count!

Census Day 2010

Back on November 22, 2009 I posted an entry ("Community Banks and the 2010 Census") about the importance of the Census for communities such as East Los Angeles and Santa Ana - the Bank's two service areas.  Since Census Day 2010 is one month away (April 1, 2010) I thought I would provide an update to my earlier commentary.

As I stated back in November, the Census count determines how approximately $400 billion is disbursed across a multitude of federal programs.  The larger the population, the larger the portion of the pot.  As such, communities benefit by an accurate count and are penalized by an undercount.  The City of Los Angeles estimated that it lost out on roughly $20 million per year as a result of the 2000 Census undercount.

In the January/February issue of Hispanic Business Magazine Rob Kuznia addressed the challenges faced in obtaining an accurate census count ("Census Budget Bigger Than Ever, But Some Officials Predict a Miscount").  According to Mr. Kuznia, "at about $15 billion, the outlay for the once-a-decade event is nearly three times the amount of the Census budget in 2000.  Still, prominent experts predict that the 2010 Census will overlook many more people than the one in 2000, which undercounted the U.S. population by millions."  Yikes!  Three times the budget but fewer counted?  What's up with that?

Back in November I stated that "as a local corporate citizen it is in our best interest to maximize investment dollars in our community. Investments boost the standard of living of our customers, attract additional investments into the community and generate the need for financial products and services provided by community banks."  In his article Mr. Kuznia quoted Clara Rodriguez, a sociology professor at Fordham University and author of "Changing Race: Latinos, the Census and the History of Ethnicity in the United States," who concurred.  According to Ms. Rodriguez, "There's always been a lot of activity around this, but that activity in the past has been in the background, not at the forefront.  Now it's much more in the open.  I think more and more people are realizing how important the Census is."

Census officials estimate that the 2010 edition of the Census will show 306 million Americans of which 46 million will be Latino.  If accurate, that figure will show a rise in Latinos from 12.5% at 2000 to 15% in 2010.  Further, Census predictions show Latinos growing to between 21 and 31 percent of the total population by 2050.  That means up to one-third of the U.S. population will be Latino in 40 years. 

With roughly 40% of Latino household unbanked or underbanked, according to a recent FDIC study, I'd say this little Latino bank has its work cut out for it.

2W3DN5PDERGH

Hear Ye! Hear Ye!

On February 23, 2010, I had an opportunity to testify before the Los Angeles CIty Council's Jobs and Business Development Committee.  Councilmember Richard Alarcon is proposing a city law that will divest public funds from banks that do not have a strong record of social responsibility.  As a community bank that is extremely active in the low- and moderate-income communities of East L.A. and Santa Ana, we are 100% in favor of this piece of legislation.  The proposal requires banks to jumps through additional hoops, which we are not keen on.  However, the spirit of the legislation is something I support.

I have included below the written testimony given to the Committee.  Bottom line, city councils should reward with deposits those banks that are doing all the right things.  Have a read.

Written Statement

Jobs and Business Development Committee

Hearing on Council File Number CF 09-0234

Jesse Torres

President and Chief Executive Officer

Pan American Bank

February 23, 2010

Chairman Alarcon and members of the Committee, I am pleased to submit testimony to the Los Angeles Committee on Jobs and Business Development on the topic of community re-investment and the potential divestiture of City funds from banks that have not demonstrated a positive track record of community responsibility.

My name is Jesse Torres and I am the President and Chief Executive Officer of Pan American Bank. We are a 45 year-old Latino-owned community bank headquartered in East Los Angeles. We are California’s oldest Latino-owned bank and the second oldest Latino-owned bank in the United States. Pan American Bank was established in 1964 by Romana Acosta Banuelos, the first Latina Treasurer of the United States. Pan American Bank was founded for the express purpose of serving the unbanked and underbanked Latino communities of Los Angeles and Orange counties.

As of December 31, 2009, $27 million of Pan American Bank’s $32 million loan portfolio was comprised of residential mortgages. Nearly every residential loan was made to low- or moderate-income borrowers. Pan American Bank’s mission is to transform and empower Latino communities through banking relationships built on trust, service, respect, communication, and guidance. Consistent with that mission, in 2009 Pan American Bank did not foreclose on a single borrower and modified 100% of borrower modification requests.

My testimony today is going to focus on the role community banks play in stabilizing communities during difficult times - a role that is largely ignored by larger regional and national organizations that do not have a close tie to specific communities and as such, do not feel compelled or are unable to assist communities that need help the most.

During the mid part of the last decade, money was cheap. Large regional and national banking organizations utilized cadres of local loan brokers and the Internet to make use of the vast amount of cheap dollars and to grow their organizations to unseen levels. As the supply of traditional borrowers dried up, alternative borrowers were cultivated - many of whom were ill-prepared for the challenges of homeownership but were intoxicated by the dream of owning their own home. Unfortunately, when the party was over, many of these financial institutions and their armies of brokers were nowhere to be found and borrowers were left to deal with the hangover effect all on their own.

As a seasoned banker I understand the economic and financial rationale for seeking economies of scale and market share. As a community banker, however, I also know the long-term damage that is inflicted on a community when financial institutions focus solely on short-term profit and ignore the long-term financial and economic health of the community. 

For the past two years our communities in Los Angeles – particularly the low- and moderate-income communities, have been decimated by foreclosures. Initially lured by the dream of homeownership, many in our communities have been living a nightmare that began when they were offered financial products that made no sense for the borrower or the banks. Fortunately for the too-big-to-fail banks, relief came in the form of federal bailouts. Unfortunately for the borrowers, the too-big-to-fail banks were unable or unwilling to do the same.

I understand that too-large-to-fail organizations maintain highly complex financial arrangements with mortgage investors and other parties that may make modifications difficult. However, based upon these organizations’ influence, their history of financial innovation and inventory of immensely talented human capital as well as the modest cost of mortgage modifications relative to the high cost of foreclosures, I do not understand the hesitation to provide relief – particularly in light of the billions of dollars of public bailout funds that these large, too-big-to-fail firms received.

Pan American Bank is only a $40 million community bank and has very limited human and financial resources when compared to the too-big-to-fail banks. However, Pan American Bank has a perfect record when it comes to mortgage modification requests. Most of us can agree that the economic downturn is temporary and that jobs will return and income will increase in the future. Pan American Bank believes strongly that its 45 year existence is directly tied to the community’s support of the Bank. As such, now is the time for bankers to return the favor by treating customers with dignity and respect and by finding ways to assist customers in need.

Unlike too-big-to-fail banks, community banks are vested in the local communities they serve. Community banks survive and thrive only if the local community thrives. Community banks such as Pan American Bank owe their success to the community. Without local community support, community banks would cease to exist. As such, community banks are the first to assist the community and the last to say “no.” Community banks cannot ignore the needs of its local community, as opposed to large regional and national banks that can shift focus from one region to another. Community banks are woven into the fabric of the local community. Through good times and bad, community banks serve the needs and are the first to do what can be done to stabilize and improve the local communities.

City councils are also vested in the communities they govern. Cities thrive only if their communities thrive. As such, city councils and community banks share common goals and serve common constituents. Large regional, national and multinational banks with headquarters outside the community have no vested interest in the local community other than to generate income and export deposits to the most financially attractive region.

Given the mission of city councils, consideration must be given to how to best deploy deposits to enhance the standard of living of the residents served. Based on the similarities between city councils and community banks, city councils must include local community banks when determining how to allocate public funds. City council and community bank survival is dependent upon successfully meeting the needs of the community served. This is not the case for large regional and national banks that are able to change geographic focus based upon factors such as return on investment. As such, social responsibility is an inherent characteristic of community banks. A characteristic that may or may not exist within large regional and national too-big-to-fail banks.

If there is one lesson that should be taken away from this troubled economic period it is the effect that banks can have on stabilizing communities during severe economic downturns. Over the course of the past two years entire neighborhoods have been evicted by banks unwilling to make the effort to provide relief. The result is the further collapse of neighborhoods and the financial and psychological ruin of families whose dreams were quickly turned into nightmares.

City councils must consider the record of all financial institutions holding public funds. City councils must divest such funds from institutions with poor or superficial community reinvestment performance. City councils should use the power of their deposits to reward those institutions that act in a manner consistent with the council’s social responsibility objectives and that address the most urgent community needs.

Cities will benefit by rewarding banks that take social responsibility seriously. While certain large regional and national banks may provide benefit to certain areas within their footprint, the community bank model is specifically tailored to meeting the needs of the local community served and to provide financial and economic stability to the community. As such, community banks must be rewarded for their effort and noncompliant banks must be penalized for their lack of support. Within the banking industry, deposits provide a powerful incentive for compliance. A policy that rewards socially responsible banks will create substantive benefit for the city and its constituents. Thank you.

The Latino Middle Class

Back in December I read an article on LATimes.com about the Latino middle class.  In the article entitled "L.A. Needs a Healthy Latino Middle Class," Hector Tobar highlights three recent reseach studies from USC, UCLA and the Pew Research Center.  All three focused on Latinos and all three were released in either November or December 2009 (odd, no?).

 The three studies are contained below:

• The State of Latino Los Angeles - UCLA Chicano Studies Research Center - November 2009
• Between Two Worlds: How Young Latinos Come of Age in America - Pew Research Center - December 2009
• The Mexican Origin Middle Class in Los Angeles - USC - December 2009

According to Mr. Tobar, Latinos make up a plurality of both Los Angeles County and Greater Los Angeles.  "With this year's census likely to show a Latino majority in both the city and county of Los Angeles, it's obvious that our collective future is linked to the social health of that group of people."

Mr. Tobar highlights the December 2009 report of Dr. Jody Agius Vallejo.  The USC researcher looked at the "pathways to success" that allow even people of humble immigrant origins to reach middle-class status. Her work rebuts the widespread perception that Mexican immigrants and their offspring are following a trajectory of downward mobility into a permanent underclass.

Dr. Vallejo's study focused on individuals that possessed at least three of these four characteristics:

1. College educations,
2. Higher than average income,
3. White-collar jobs, and
4. Home ownership.

According to Dr. Vallejo, each person who achieves social mobility improves the overall well-being of the community. Social climbers show others behind them the way forward.  It is these individuals upon which the future of Los Angeles hinges.

According to Dr. Dowell Myers, a healthy middle class with Latin American roots is critical to the entire country's future too. This is the thesis of Dr. Myers book, "Immigrants and Boomers: Forging a New Social Contract for the Future of America."

As I read Mr. Tobar's article it reminded me that Pan American Bank is not just a community bank.  It is also a tool for the families of the communities we serve to use to bootstrap themselves into the middle class.  Apart from viewing our business as a collection of assets, liabilities and equity, we need to view it as a platform from which transformation can occur. 

When I was in school one of the first lessons I was taught was the importance of the mission statement.  Pan American Bank's mission is to transform and empower Latino communities through banking relationships built on trust, service, respect, communication, and guidance. This means we have a direct responsibility to operate our business in a manner that is consistent with that mission.  There is much that we as a community bank and community leader can do to contribute to the improvement of our communities.  I am happy to say that every day we are closer to fulfilling our mission.

Bank, A Four-Letter Word

Sometime around the time I was a sophomore or junior at UCLA I decided that I wanted to pursue a career in banking.  At the time, I envisioned something along the lines of investment banking.  It was around 1988-1989.  I remember sometime afterwards reading about Michael Milken, Drexel Burnham Lambert and a whole lot of chatter about greed, abuse and other related activities.  It was right about that time that I decided I instead wanted to work for a regulatory agency like the SEC or the FDIC.  I graduated at the tail end of the savings and loan debacle and joined the Treasury Department's Office of the Comptroller of the Currency as a bank examiner.

It was during my time with the OCC that I started to get an understanding of the differences between mega banks (those that are today too-big-to-fail) and "true" community banks.  I will forever be thankful to the OCC for giving me the opportunity to experience examinations at the largest banks in the country as well as the smallest.  These opportunities served to shape my career as a community banker.

If you know anything about "real" community banks you know that they are not run by Wall Street types.  You won't find them having a power breakfast with Donald Trump or meeting with Tim Geithner for dinner.  The CEOs of "real" community banks know banking and they know how their banks can and do best serve the local businesses and families within their communities.  The CEOs of "real" community banks know the owner of the local strip mall down the street and its many tenants.  The CEO of "real" community banks greet you at the little league fundraiser or the local Rotary Club or chaperone at the local high school dance.

So you can imagine how sickened I felt when I read the results of the 2009 Edelman Trust Barometer.  The report found that in no country is trust in a more dismal state than in the U.S., where government, business and media are not trusted to do what is right. But more specifically, in the U.S., in just one year the trust in banks among 35-to-64 year olds dropped nearly in half, from 69 percent to only 36 percent.  And the worst part of it is that no matter how much community banks have done to support local businesses and families, all banks have been painted with the same brush that should be specifically reserved for those banks too-big-to-fail.

Last week, in an attempt to escape banking, I picked up a copy of the recent issue of Sports Illustrated (January 25, 2010).  The cover showed my hero Brett Favre on the cover.  Excitedly, I began reading the issue (note: I have an odd habit of reading magazines from the back to the front...don't ask).  Within two minutes, Selena Roberts in "Coming Clean: It's Complicated" starting taking pot shots at bankers in an article that was supposed to talk about baseball, steroids and Mark McGwire ("He must calibrate his words like an artful banker").  Are you kidding me!  Is there no escape!

Banking was once a trusted and respected business. Bankers were the pillars of their local communities.  No longer.  After Congress rewarded mismanagement and bad behavior by banks and financial institutions that are too-big-to-fail by bailing them out with more than a trillion dollars of taxpayer money the public has become outraged.  Unfortunately, most people and the media never had the opportunity I had to work for the OCC.  They don't know that the differences between "real" community banks and too-big-to-fail mega banks are significant.  Night and day significant.  Black and white significant.  Life and death significant.  Right and wrong significant.

One of the biggest challenges for "real" community bankers, then, is to regain public trust and to make clear to the community that all banks are not cut from the same cloth.  "Real" community bankers must build an understanding that community banks provide not only vital financial products and services but also serve social needs.

Directors, CEOs and senior executives of "real" community banks need to show their communities that they are accountable, responsible and good citizens. They need to show appreciation for being able to continue in business thanks to the patronage of the community. And, they need to continue to show how "real" community banks differ from the too-big-to-fail mega banks.