Financial Illiteracy is a Disease

A recent viewpoint article by Laura Fisher in the December 2009 issue of Community Banker Magazine stated that many experts compare increasing financial literacy to decreasing obesity rates.  According to the article, both decreasing obesity and increasing financial literacy have behavioral and educational components and a similar goal: using education to help individuals form good habits and/or change the ones that are destructive and often deep-seated.

I have been teaching youth financial literacy classes for over 15 years.  I have done it on behalf of banks, religious organizations and nonprofits such as Operation Hope.  In all the time I have donated my time to teaching financial literacy it never occurred to me to compare financial illiteracy to a disease.  But after thinking about it, I agree.

Ms. Fisher states that "financial education has become our nation's No. 1 defense against another financial crisis."  While it took two to tango - the misinformed and financially illiterate consumer and the overly aggressive financial institutions - removing one of the two from the equation would have eliminated a lot of the pain and suffering. 

While I do not believe that all the damage would have been avoided, I do believe that a more informed consumer would have prevented many of the side effects from this period of easy credit.  Let me make it very clear that the substantial majority of financial institutions - particularly community banks - were not at fault.  It was a small network of large players - most of which are no longer with us - that created the program.  The rest of us - especially the community banks - are now unfairly guilty by association.  But that is a story and rant for a different day.

So how do we as a nation use financial literacy to defend against another similar crisis?  Whose plate should this sit on?  Elected officials?  Educators?  Nonprofits?  Financial institutions?  All of the above!  Creating a financially literate America will be a very difficult task that will require complete and total collaboration.  It will require a long-term strategy that holds all participants accountable for success.  It must also include all segments of society - from low-income participants to those with silver spoons.  Financial literacy is a learned trait that everyone needs.

Ms. Fisher makes another strong point when she says that "a one-size-fits-all approach is not appropriate for a diverse population with different learning styles."  Some people learn through listening, some through watching, some through doing, and most through a combination.  As such, we need to use different ways to deliver the needed information.

If you follow Pan American Bank you've heard that we recently partnered with a nonprofit called LatinoGraduate.net.  Through this partnership Pan American Bank is providing LatinoGraduate.net with rent-free space to establish a "new media" studio.  Part of LatinoGraduate's mission is to establish an advisory board that will guide the creation of financial literacy curriculum that will be distributed to schools and homes across the Country via the Internet.  As of the date of this blog posting the advisory committee included Pan American Bank as well as financial literacy thought leaders from Texas State University, California State University and the University of Notre Dame as well as others from financial institutions and media companies.

While my team and I will continue to conduct face-to-face training within our community, the delivery of financial literacy training via the Internet provides a second approach which reinforces the lessons of financial literacy. 

Which brings me to the next topic: financial literacy is not a one-and-done activity.  While I applaud educators that allow bankers to visit their schools to provide lessons in financial literacy, they have to do more.  Just as history, math, science and the other subjects span extended periods of time, so too should lessons in financial literacy.  To often I visit schools that do not ask for follow up.

My advice to community-minded individuals is to create a collaborative committee comprised of elected officials, financial institutions, nonprofits, educators and other stakeholders.  The collaborative should work together to create a community-based effort to provide ongoing financial literacy education to the local community.  Begin with the 2006 National Strategy for Financial Literacy.  Leverage the tools provided by the FDIC's Money Smart program.   Work with organizations such as Operation Hope.  Through these efforts we can eliminate the disease that is financial illiteracy.

A Sort Of New Year's Resolution

The posting below was taken from an email sent by me on January 1, 2010, to Bank stakeholders.  I thought I would also share it here since it contains some information worth sharing.

# # #

When I joined Pan American Bank in June, I stated that I wanted to make Pan American Bank THE bank of East Los Angeles. Having been born in Boyle Heights and raised in East L.A., I jumped at the opportunity to come back to East Los with the tools I had acquired working around the country. The bulletpoints above are not new year's resolutions because they will not be accomplished in one year. They are, however, goals that I have established for the Bank to work on. Not by itself, but in collaboration with others in the community. We're a very small bank...but with the right partnerships we can create tremendous change.

I know you are busy and have little time for touchy-feely e-mails such as this. But please indulge me for three minutes as I share what 2010 will bring to East Los Angeles from Pan American Bank's perspective.



1) LatinoGraduate.net: In January, LatinoGraduate.net, a new media nonprofit focused on getting Latino youth into college and keeping them there until graduation, will be moving into Pan American Bank's corporate headquarters. The Bank will be donating a portion of its space to permit LatinoGraduate.net to tape and broadcast its shows. The Bank will host a Open House Celebration on Friday, February 5, 2010, from 6:00 pm to 10:00 pm. RSVP to Tony Ramirez if you did not receive an e-mail invitation.

2) VELA: January brings a second nonprofit to Pan American Bank. VELA, an East Los Angeles-based powerhouse nonprofit, will be operating a technical assistance center from the Bank's headquarters. The program will provide technical assistance to both nonprofits and small businesses. This effort will be a collaboration between not only VELA and Pan American Bank, but many other organizations that will bring essential resources to bear.

3) Institute for Nonprofit Leadership: Pan American Bank, VELA and the Riordan Volunteer Leadership Development Program will launch in September 2010 the Institute for Nonprofit Leadership. The Institute for Nonprofit Leadership will train young professionals from eastern Los Angeles County on how to serve as leaders of nonprofits, with a focus on serving on nonprofits located in eastern Los Angeles County. The Riordan program has been extremely successful with participants from downtown and the westside and will now collaborate with Pan American Bank and VELA to roll out a similar program at the Bank's corporate headquarters in East Los Angeles.

4) Financial Services Advisory Council of East Los Angeles: In January the Bank will kick of its Financial Services Advisory Council of East Los Angeles ("FSAC-ELA"). The role of the FSAC-ELA will be to bring together local stakeholders to develop strategies that address the shortcomings cited in the FDIC's recent Survey of Unbanked and Underbanked Households. As the only bank headquartered in East Los Angeles, Pan American Bank is taking a leadership role in working with the offices of elected officials, nonprofits and residents, to bring mainstream banking services to as many East Los Angeles households as possible. The FSAC-ELA will be comprised of representatives from throughout the East Los Angeles community.

5) UCLA School of Urban Planning: At the end of this email is an e-mail to me from Raul Lugo. Raul is a graduate student in the UCLA School of Urban Planning. Raul will graduate in June. He and a team of classmates have formed a company that will be attacking some of the issues we face in East Los Angeles. Raul and his associates will bring to East Los Angeles energy, enthusiasm and a new set of eyes. When I was fresh out of UCLA someone took a chance on me and provided me with the mentorship that helped me succeed in my professional career. I hope to do the same. But more than that, I encourage you to read his email and engage him in thought provoking discussion. Only through such discussion will issues and challenges surface and get worked out. If the Bank has any shot at achieving the goals above, it will only come through collaboration.

There is much more in the works but I'll save that for another day. While 2009 was a challenging year for banks, it also provided tremendous opportunities. As a bank we have a lot of work ahead of us. Just the daily challenge of bringing in new deposits and making new loans is enough to fill our plates. But Pan American Bank is not just any bank. It has a mission that is unique and a story that needs to be told if we are to be THE BANK OF EAST LOS ANGELES.

Before I conclude, I would like to publicly congratulate the team at Pan American Bank. In 2009, the Bank did not foreclose on a single borrower and in 2008 it had only one foreclosure. While the Bank did modify some loans, the Bank's goal was to do everything possible to keep our customers in their homes. We don't know what 2010 will bring but we look to have similar successes this time next year.

Best wishes to you all in 2010. On behalf of the employees, shareholders and customers of Pan American Bank, Thank You for your continued support. May all of our goals be achieved this year so that we can look back on this year with a smile.

Jesse Torres
President and CEO
Pan American Bank
3626 East First Street
Los Angeles, CA 90063
(323) 264-3310
(323) 264-8057 fax

"The mission of Pan American Bank is to transform and empower Latino communities through banking relationships built on trust, service, respect, communication, and guidance."

---------- Forwarded message ----------

From: raul lugo
Date: Thu, Dec 31, 2009 at 8:14 PM
Subject: New Year Resolution
To: jtorres@panamericanbank.us

Jesse,

We will create a movement with inventive and diverse approaches to the rebuilding of our community. This will be done through targeted investments, which will need to be meticulously and assertively planned for success due to the present scarcity of resources. Our efforts are aimed to creatively effect change in East Los Angeles. These investments will be made in a broad range of areas such as housing, small business formation and development, and economic development at large.

Investors look first for the formal investment targets due to their familiarity. The traditional channels offer a formal infrastructure friendly to business that simply does not exist in the inner cities of America. As a result, these communities suffer from diminished services and struggling institutions. Private investment in these communities often comes from the people who live there themselves. These entrepreneurial ventures emerge as a result of necessity due to the lack of support and disinterest from mainstream investment. The goal is to identify many investment targets with a strong potential for profits. We need to create a new paradigm of profitable, sound and constructive investments outside of traditional channels. We need strong leaders who have decided that they will take the chance with us and place their valuable investment in this energetic community.

We are currently learning the limits of government involvement. California faces bankruptcy amidst the worst budget crisis, and public funds are simply insufficient to meet the needs of the population. The aid and subsidies that trickles down through a complicated bureaucratic process is proving to be ineffective. This means our team will have to shift the level of sophistication and inventiveness to be the group that seeks investments for the community of East Los Angeles.

The business sector is an integral partner in the economic development of East Los Angeles. As grants and donations diminish in economic downturns like the one we are experiencing, agencies that seek to fill gaps in services need to tap into their entrepreneurial capabilities to survive. Financial institutions are of particular importance because they need to broaden their perspective on the types of investments they are willing to consider. Promoting small business creation, we can create sound and profitable deals, even with people who have little or no education about conventional business establishments. In this process, we will need to inform the population about the importance of civic participation to build transparency, and trust through dialogue between different community stakeholders that would have otherwise never exchanged ideas with one another. We will harness a conscious smart growth movement in East Los Angeles to make the United States free enterprise system responsive to the needs of the community by building a resilient and sustainable network to support new enterprises.

Happy new year, let's make it a good one.

Raul

Oh No You Didn't!

Before I get hot and heavy in this post, let me make one thing clear - I have nothing but respect for Wells Fargo Bank. I admire its leadership and I have many friends within its ranks that I consider best in breed.

I was recently paging through an industry magazine that featured an interview with a top ranking officer at Wells Fargo. This article was essentially a profile of a very accomplished Wells Fargo banker. As I read the article I was feeling good about this person and Wells Fargo Bank. Then it happened...

"Leading the COMMUNITY BANK [emphasis added]...blah blah blah."  What?! Community bank?  Wells Fargo?  At that point I let out a loud "are you kidding me!?" (I figured it was loud because everyone outside my office was staring at me and wondering if I was upset with someone on the phone).  "Nothing to see here folks.  Get back to work."

Again, I have no problem with Wells Fargo. In fact, thoughout this whole mess I think they have managed their affairs better than most of the big guys. I love their marketing, their strategy and they seem to train well (two of my top performers are Wells Fargo alumni). I do, however, have a problem with a bank that calls itself a community bank that has total assets of $548 billion, $325 billion in deposits and 3,429 branches in 24 states (as of 9-30-09).

Unfortunately for me there is no clear cut definition of what "community bank" means. And as such, I can't call out Wells on it.  And I'm pretty sure they know that.  In a twisted way, I suppose I appreciate that.

Back in October 1997, Steve Cocheo tried nailing down a definition in his ABA Banking Journal article, "Musing toward a definition of community banking." According to Steve, "community banking" can include mega-banks as well as local home-grown institutions. It all depends on your point of view and interpretation.  As a small bank operator that is deeply vested in its community, I find that fact very disappointing.

In my perfect world community banks are not titles bestowed simply for doing good deeds in a community.  To me and many of my community banker friends (as defined by me of course), community banks are just that, banks that serve a particular community. In my opinion, if your footprint spans the western United States you are not a "community bank." I don't care how you divide the empire. You're not a community bank. Plain and simple.

Over the past year and a half the banking industry has taken it on the chin. Surveys conducted during this period have shown a steady reduction in consumer trust of banks. With billions in bailouts, foreclosures at record levels and the whole regulatory reform mess, it is clear why consumers are not happy. While I will agree that some bankers took a few liberties with consumers, for the most part bankers and their banks were also brought along for the ride. In particular, community banks, who generally stayed away from the practices that created the whole mess.

The media and others are starting to recognize the role that community banks played or did not play. Not only did community banks generally not play a role in creating the banking debacle, they have generally been the only group lending during all the chaos. So when some regional bank comes along and calls itself a "community bank," I'm sorry, but I take offense.  I respect you, but I take offense.

My problem is that community banking cannot be easily defined.  For me, community banking means a bank that is focused on a particular "community."  For example, I have three branches - two in East Los Angeles and one in Santa Ana.  Those two communities are my focus.  Nice and tight.  When I can call the entire state of California my community I think I've gone beyond community banking.  Perhaps a better guide is how much time your bank management spends on Wall Street versus Main Street. 

I will be the first to admit that I don't know the right definition of what makes a community bank.  But something I've learned as a banker is that your gut is usually right.  And on this one my gut tells me that if you run a bank with branches in nearly half of all U.S. states, you're not a community bank.



What do you think?  What does community bank mean?  Let me know.  I'm interested in hearing your opinion.  Maybe I'm all wrong on this.

Stop Acting Like A Bank. You're Embarrassing Me!

As I was paging through the November 2009 issue of Bank Technology News I came across the following news blurb:

"A poll of 18 to 29 year olds in the U.S. funded by Microsoft found that about half feel the banking industry is in touch with their generation; and about 60 percent say their level of trust in financial services has decreased over the past year. When asked how banks can improve trust, 27 percent said blogs would be very important, while 42 percent said it would be somewhat important. And 75 percent were in favor of monthly email updates."

As you can imagine, I was pleasantly surprised to know that we were on the right track when we decided to launch this blog.

I have been a banker for most of my adult life. When I wasn't a banker I was a bank examiner or a bank consultant. As such, banking has been at the center of my professional life for nearly 20 years. During this time I have focused almost entirely on community banking.

Based on my experience, what I can tell you is that community bankers are Main Street, not Wall Street. We coach the local AYSO team, we shop at the local Walmart, we eat hot dogs at the local little league games, we hang out at the local pub and we drive our own cars. And most importantly, we do not single-handedly threaten the viability of the American banking system. Unforunately, the everyday bank customer does not know the difference between a community bank and a big bank




When I started this blog a couple months ago I wanted to share a little bit of the Bank in an informal setting. Along the way I hoped to give readers a glimpse into the "personal" side of the Bank. I hope I am doing that. But more importantly, I hope that readers are starting to see that community banks are more like the corner drugstore than the trillion dollar bank. We TRULY stand behind the community. But more importantly, we thrive only if the local community thrives. So we are fully vested and all in.

Through this blog, therefore, I hope to accomplish a couple things. First, I wish to reach out to the millenials who feel we have no clue. We get it. We know you demand more than what your dad's bank gave you. And community banks are here to let you know we get it. Some of us move faster than others, but we get it.

Second, I hope to show you that community banks make a REAL difference in the community. We may not have the budgets that big banks have but you can always count on us to support the community and its various efforts. We are built around the community, through good times and bad. We don't just close the doors and move to the next town when things get tough. We stay and struggle with everyone else to get things back on track.




So, the next time you need a loan or need to open a new deposit account, ask yourself if having a branch on every corner in every state is better than supporting the local bank that is a part of the local fabric.  And if you're a millenial, feel free to send out a tweet about it.

Take Credit Where Credit Is Due

The end of December 2009 (27th) marks my six month anniversary as the CEO of Pan American Bank. In my original draft to this post I used the term "leader" instead of CEO. But I have very specific criteria for what makes a "leader" and as such, I will hold off on calling myself this organization's leader...for now.

As the CEO of a community bank it is not only a "good idea" to get out into the community - it is ESSENTIAL for our survival. I need to be out there for reasons such as business development, needs assessment, etc. But I am learning that the most important reason for me to represent Pan American Bank is because we are so reflective of the Latino communities that that we serve.

It did not take me long to figure out how this 45 year-old organization assumed some of the traits of its Latino customers. We are a small, feisty and proud bank. We are loyal to our customers and our community. We are full of energy and the will to do great things. But unfortunately, we are the last to let others know about our accomplishments.



Back in November 2009, CNN ran a series of video essays called Latino in America. According to CNN, by 2050, the U.S. Latino population is expected to nearly triple. CNN explored how Latinos are reshaping U.S. communities and culture and forcing a nation of immigrants to rediscover what it means to be an American.

The research conducted by CNN highlighted some great achievements by Latinos. But despite the strides made by Latinos, we continue to struggle with tooting our horn. As a result, many great people and efforts go unrecognized. People and efforts that can significantly enrich the fabric of our incredible nation.

Over the weekend I was asked to sit on a panel for a California Assembly Town Hall meeting. The portion of the meeting I sat in on had to do with the housing crisis, foreclosures and loan modifications. I could tell from the onset that this meeting had the potential to sting, as the seats were filled with consumers, consumer advocates and others looking to let me know how horrible a person I am for being a banker.



The session was started by Speaker of the California Assembly Karen Bass. The Speaker then passed the floor to me for an introduction. As I began my introduction I could hear the clicking of bic lighters getting ready to ignite the torches. But within minutes the crowd quieted down and began nodding their head in support. At the end of the meeting, as I exited the stage, I was approached by many people - consumers, advocates, political representatives and others. All seemed amazed at what they had heard. Many almost could not believe their ears. And why would they, we have not tooted our horns to let anyone know.



So what was it that was so amazing? Well, without going into too much detail, here's a quick rundown. You tell me if this is something the world should know about.

1) Pan American Bank was founded in 1964, making it California's OLDEST Latino-owned Bank and the Country's second oldest. In 2010 the Bank will enter its 46th year of operation. We've been around longer than most California banks, period.

2) Pan American Bank was founded by Romana Acosta Banuelos, a woman born in Arizona in 1925, who was "invited" by the U.S. Government to relocate to Mexico in 1933 during the Great Depression, only to return in the 1940's to launch one of California's most successful food companies, Ramona's Mexican Food Products, Inc.

3) Mrs. Banuelos, founder of Pan American Bank and Ramona's Mexican Food Products, was appointed in 1971 to the post of U.S. Treasurer - the first Latina to hold that prestigious position. At the time, Mrs. Banuelos was the Country's highest ranking Latino.

4) Pan American Bank is headquartered in East Los Angeles - an example of the Bank's commitment to its mission of serving the Latino community. No other bank is headquartered in East Los Angeles.

5) Eighty-five (85) percent of Pan American Bank's loans are 1-4 family mortgages. Pan American Bank has foreclosed on only one (1) borrower during the past two years, showing the banking industry that minority lending can be done prudently. Pan American Bank has not originated a single subprime loan.

So there it is. My top five reasons why Pan American Bank is worthy of praise. It is my mission to ensure that Pan American Bank is no longer the Latino community's best kept secret. The secret is out! Let the world know. Hear me toot our horn! Let me hear you toot our horn!

How Well Do You Know East L.A.?

If you have been a reader of this blog you know a few things about Pan American Bank. You know that Pan American Bank is the only bank headquartered in East Los Angeles. You know that Pan American Bank has been in East Los Angeles since 1964. You know that Pan American Bank was founded by Romana Acosta Banuelos, the first Latino Treasurer of the United States. And you know that Pan American Bank's mission is to serve the Latino communities of East Los Angeles and Santa Ana. What you may not know is where East Los Angeles is located and what it is all about. So this post today is about sharing a little something about the East L.A. community.



East Los Angeles or East L.A. or East Los, is an unincorporated area of Los Angeles County, California that spans a total area of 7.4 square miles. East Los Angeles is bounded by the city of Los Angeles to the west, the unincorporated area of City Terrace to the northwest, the city of Monterey Park to the northeast, the city of Montebello to the east, and the city of Commerce to the south. The unincorporated area of East Los Angeles was once known as "Maravilla" and also "Belvedere Gardens".

According to the 2000 census, the area had a total population of 124,283 with 29,844 households, and 25,068 families residing in the community. There were 31,096 housing units and a whopping 96.8% of the population was Latino.

Of the 29,844 households, 51.7% had children under the age of 18 living with them, 53.1% were married couples living together, 21.7% had a female householder with no husband present, and 16.0% were non-families. Only 12.5% of all households were made up of individuals and 6.4% had someone living alone who was 65 years of age or older. The average household size was 4.15 and the average family size was 4.42.

The age distribution of the community was as follows: 34.6% under the age of 18, 12.6% from 18 to 24, 30.7% from 25 to 44, 14.2% from 45 to 64, and 7.9% who were 65 years of age or older. The median age was 26 years. For every 100 females there were 101.6 males. For every 100 females age 18 and over, there were 99.2 males.

According to the 2000 census, the median income for a household in the community was $28,544, and the median income for a family was $29,755. Males had a median income of $21,065 versus $18,475 for females. The per capita income for the community was $9,543. About 24.7% of families and 27.2% of the population were below the poverty line, including 35.0% of those under age 18 and 13.5% of those age 65 or over. East Los Angeles has a very large Latino population that consists of Mexicans, Guatemalans, Salvadorans, and Hondurans.



As East Los Angeles is an unincorporated community, it does not have a local government, and relies on the County of Los Angeles for local services. Despite multiple failed attempts in the past, residents are currently campaigning for cityhood for East Los Angeles.

The East Los Angeles Latino Walk of Fame was inaugurated in April 30, 1997 to honor outstanding leaders who have made historical and social contributions. East L.A. was both the origin and destination of Cheech Marin in both the song and the movie Born in East L.A.

Famous people born in East Los Angeles are many including Constance Marie, Edward Olmos, Lee Baca, Oscar De La Hoya, and Paul Renteria.

Over the course of the next couple months I will discuss initiatives that the Bank has undertaken. Many of the initiatives are driven by the 2000 census as well as current events such as the Cityhood for East Los Angeles.

I hope that this information gives you a better understanding of our community. It should also explain why our mission is so important. I am excited to share these developments with our readers and look forward to the feedback received as we continue on this journey together.

Toy Drive Organizers Did What?! Are You Kidding Me!

I don't have to tell anyone that this year has been a tough year for everyone. The news on a daily basis goes on and on about unemployment rates, foreclosures, recession, depression, etc. What very few of these reports do is touch on how the current economic disaster has affected the lives of the children of those families.

Beginning in October of this year the Bank began to get approached by community groups asking for donations to cover the toy drives they were running for which they expected a record number of kids. Given our mission of assisting the local Latino community we serve, we signed up for several local toy drives. In one case we hosted an after-hours toy drive fundraiser that saw over 300 people come through with toy and financial donations. With others we made financial donations to ensure that kids in our communities of East Los Angeles and Santa Ana received at least a little cheer during a year that saw their family's finances decimated, their home lost or worse. All in we've supported around six toy drives that run in various segments of our community.


So I wake up this morning and see the following headline in my morning news update: "Some Toy Drives Check Immigration Status." To say I was sickened is an understatement.

Obviously I understand that there are two very distinct camps in this country regarding immigration and immigration status. This post is not about who is right or who is wrong. This post is about being humane.

What I am about to say is a generalization so please treat it as such. Toy drives are originated by people with warmth in their hearts and the desire to do what is humanely right. Toy drives are USUALLY not started by people with agendas. Sometimes, however, people with agendas do start toy drives or the warm people who started a toy drive are replaced over time by people who have been given the responsibility to keep a toy drive going. These people treat the toy drive as a task. They do it not for a particular mission but because they have to. To those people I say, please examine why you are doing what you are doing and consider if what you are doing is consistent with the Christmas (or holiday) Spirit.



As I noted above, there exists a major battle over immigration. But I remind everyone that even battles and wars have rules. Even in the heat of major wars we have rules such as the Geneva Convention which protect those providing aid to those in trouble. Our children, regardless of their origin or their parents origin, are victims of an economic war. To inflict pain and suffering upon them by not letting them participate in a toy drive is an inhumane act and should be a violation of some kind of law of political war.



Again, I'm not telling anyone who is right or wrong in this battle over immigration. What I am telling those who are in charge of toy drives this year is to invoke your own form of Geneva Convention and protect the children that are the victims in a war they played no part in.

So screen you families and make sure they are truly needy. But please, do not base your decision on immigration status. These kids have no choice. They are non-combatant prisoners of war, or more appropriately, innocent bystanders. Please treat them as such and let them feel the love and kindness that your toy drives are intended to deliver.