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Beneficial State Bank 2016 Scorecard

The scorecard is divided between basic requirements, quantitative factors supplemented with brief explanations, and qualitative elements. These sections provide details of a bank’s mission and transparency; builds on this with carefully selected data that highlights the extent to which a bank is engaging in sustainability as its core activity; and explains how a sustainability agenda translates into the everyday work of a bank and its co-workers.

Basic requirements

Basic Requirements

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Quantitative factors

Quantitative Factors

Show the Quantitative Factors

Qualitative elements

Qualitative Elements

Show the Qualitative Elements

Regulated financial institution

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The bank provides evidence that it is a regulated financial institution including:

  • Where it operates
  • Under what regulatory framework it operates
  • Evidence of client deposit and financing relationships

Beneficial State Bank is registered with the FDIC. FDIC Certificate number 58490. Beneficial State Bank offers banking services in California, Washington, and Oregon. It is a full-service bank in that it takes deposits, makes loans, and does other types of ancillary services that a regular commercial and consumer bank does.

Mission Statement

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Mission Statement as published on its website or in any official document with specific relevant references to it value-based banking strategies

Our Mission

The mission of Beneficial State Bank is to build prosperity in our communities through beneficial banking services delivered in an economically and environmentally sustainable manner. We seek to change the banking system for good.

Our Vision

Our vision is of a banking industry that is fair to the person with the least bargaining power; provides access to financial services for all our communities, particularly the traditionally underserved; results in the long-term prosperity of responsible consumers; promotes financial system stability; and contributes to the sustainability of the environmental commons. We call this vision beneficial banking.

Reporting Transparency

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Annual Reports must be publicly available

Further proof of engagement in transparent reporting practices is encouraged

In addition to the Federally-required Consolidated Report of Condition and Income (Call reports) Beneficial State Bank also chooses to take the B Impact Assessment and get certified as a B Corporation (ranking Best for the World in 2013 -2016), share our social justice practices via the voluntary Just Label, and participate in the National Community Investment Fund (NCIF) BankImpact Dashboard (96.1% mission intensity ranking). Beneficial State Bank completes an annual impact report and maintains an Impact website, both of which publicly share our social and environmental impact, as well as our financials. Our goal is for 75% or more of our portfolio to be mission-focused loans while 0% are contra mission. We are a certified Community Development Financial Institution (CDFI) through the United States Treasury Department.

These factors are related to the Principles of Values-based Banking and provide insight into three key elements of a bank’s activity linked to its:

  • financial viability,
  • focus on the real economy and
  • focus on a triple bottom of line of people, planet and prosperity

Bank Resiliency through Earnings – 3 year Average Return on Assets 0.71%

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Return on Assets tell you how profitable a bank is. It is a good measure of a bank’s operating performance relative to the total amount of money it manages. This is important because values-based banks need to be resilient financially to deliver long term, positive impact.

It’s also reasonable to assume that if a bank’s profits are excessively high they may be taking inappropriate risks and may be enjoying unreasonable profits at the expense of their customers.

To really understand how profitable a bank is, and to avoid comparing ‘apples with oranges’, it’s important to compare a bank’s profitability with other banks in the same market. Therefore this measure is compared with a peer group selected and transparently described by the bank.

Return on Assets 2016: 0.18%

Return on Assets 2015: 1.60%

Return on Assets 2014: 0.36%

Return on Assets 2013: 0.27%

Explanation: Community Development Bankers’ Association (CDBA):
Member Banks’ average from CBDA Peer Scorecard Q4 2016 p8

Market Comparison – 3 Year Average Return on Assets 0.69%

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Return on Assets tell you how profitable a bank is. It is a good measure of a bank’s operating performance relative to the total amount of money it manages. This is important because values-based banks need to be resilient financially to deliver long term, positive impact.

It’s also reasonable to assume that if a bank’s profits are excessively high they may be taking inappropriate risks and may be enjoying unreasonable profits at the expense of their customers.

To really understand how profitable a bank is, and to avoid comparing ‘apples with oranges’, it’s important to compare a bank’s profitability with other banks in the same market. Therefore this measure is compared with a peer group selected and transparently described by the bank.

Return on Assets 2016: 0.76%

Return on Assets 2015: 0.54%

Return on Assets 2014: 0.78%

Return on Assets 2013: 0.75%

Bank Resiliency through Capital – Equity to Total Assets

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The Equity to Total Assets ratio tells you how strong a bank is. The Equity of a bank represents the money invested by its owners to cover any losses it may incur. This ratio uses the total balance sheet of the bank, which means it provides a transparent and conservative measure of a bank’s resiliency. This is important for values-based banks which are focused on lasting benefits to society, and so want to develop strong capital positions that make them stronger over the long-term.

Other measures, such as risk weighted assets capital ratios, can be used for the same purpose but they are both more complex and less transparent, so the Scorecard has chosen to use Equity to Total Assets. As a guide the Scorecard currently recommends this level to be at 8% or higher.

Equity to Total Assets 2016: 11.8%

Equity to Total Assets 2015: 11.48%

Equity to Total Assets 2014: 11.45%

Equity to Total Assets 2013: 11.32%

Bank Resiliency through Asset Quality – Low-quality Assets to Total Assets

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Low quality assets (such as loans to enterprises that struggle to repay them), at levels significantly above the market average, are generally a bad thing for banks because they represent the risk of financial losses in the future.

Values-based banks should have strong customer relationships, and have a deep understanding of their activities and the sectors they work in. Together this will limit the chances of loans and investments going wrong and should make working through challenges with clients easier when problems do occur. Meaningful relationships with customers and precisely this expertise, is at the core of a values-based approach to banking.

The quality of a bank’s assets should be compared with banks in the same market to understand how it is doing relative to market conditions. Therefore this measure is compared with a described peer group.

Low-quality Assets to Total Assets 2016: 1.64%

Low-quality Assets to Total Assets 2015: 1.64%

Low-quality Assets to Total Assets 2014: 2.85%

Low-quality Assets to Total Assets 2013: 4.52%

Market Comparison – Low-quality Assets to Total Assets

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Low quality assets (such as loans to enterprises that struggle to repay them), at levels significantly above the market average, are generally a bad thing for banks because they represent the risk of financial losses in the future.

Values-based banks should have strong customer relationships, and have a deep understanding of their activities and the sectors they work in. Together this will limit the chances of loans and investments going wrong and should make working through challenges with clients easier when problems do occur. Meaningful relationships with customers and precisely this expertise, is at the core of a values-based approach to banking.

The quality of a bank’s assets should be compared with banks in the same market to understand how it is doing relative to market conditions. Therefore this measure is compared with a described peer group.

Low-quality Assets to Total Assets 2016: 1.46%

Low-quality Assets to Total Assets 2015: 2.36%

Low-quality Assets to Total Assets 2014: 1.60%

Low-quality Assets to Total Assets 2013: 1.73%

Bank Resiliency through Client Based Liquidity – Client Deposits to Total Assets

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Banks finance their assets (such as loans, investments and their wider activities) with money that is:

  • deposited with them by customers,
  • and/or borrowed from others (mostly other banks) and then lent on to clients,
  • or sourced from investors.

A large amount of borrowing from the markets to finance a bank’s activity is, by definition, riskier because markets are more volatile. Banks are both stronger and more values-based when more of the money they use to finance their activity comes from customers.

High levels of funding from customer’s deposits also suggests a strong connection with clients and the real economy – both important elements of a values-based bank. Ideally 75% of a bank’s assets are funded through clients.

Client Deposits to Total Assets 2016: 81.5%

Client Deposits to Total Assets 2015: 80.60%

Client Deposits to Total Assets 2014: 82.17%

Client Deposits to Total Assets 2013:  81.15%

Assets Committed to the Real Economy to Total Assets

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Values-based banks are strongly and directly connected to financing the real economy because that’s where they can have a positive impact on people’s lives and safeguard the environment.

Real economy assets in a values-based bank should, therefore, be relatively high. By the same token financial economy assets should be relatively low because their impact on people’s lives is, at best, indirect. The Scorecard seeks to have the level for this ratio above 50% and ideally close to 65%.

Assets Committed to the Real Economy to Total Assets 2016: 82.00%

Assets Committed to the Real Economy to Total Assets 2015: 78.00%

Assets Committed to the Real Economy to Total Assets 2014: 48.48%

Assets Committed to the Real Economy to Total Assets 2013: 69.00%

Revenues from the Real Economy to Total Income

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If a bank is earning more of its revenues from the real economy, it is both making more of a difference to people’s lives and is a more resilient institution.

Revenues from the financial economy tend to be more volatile, are more removed from most people’s lives, are highly unlikely to be sustainable and mean a bank is less resilient over the long term. Ideally 75% of a bank’s revenues will be from the Real Economy.

Revenues from the Real Economy to Total Income 2016: 83.00%

Revenues from the Real Economy to Total Income 2015: 83.00%

Revenues from the Real Economy to Total Income 2014: 75.78%

Revenues from the Real Economy to Total Income 2013: 79.96%

Assets Committed to the Triple Bottom Line to Total Assets

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This figure provides the best indication of a bank’s commitment to a values-based banking model. Triple Bottom line assets don’t just mean assets in the real economy. They specifically refer to money invested by a bank in individuals and enterprises that deliver positive social, environmental and economic benefits to society.

Not all intermediated money will be committed, however, because some liquidity needs to be available for the bank to support its clients in case of disruptions in the market. Therefore the Scorecard targets this factor to be between 25% and 55%.

Assets Committed to the Triple Bottom Line to Total Assets 2016: 73.00%

Assets Committed to the Triple Bottom Line to Total Assets 2015: 63.00%

Assets Committed to the Triple Bottom Line to Total Assets 2014: 58.00%

Assets Committed to the Triple Bottom Line to Total Assets 2013: 55.00%

Leadership

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Leadership

The bank’s leadership and governance is focused on values-based banking, and the diversity of its leaders reflect this culture.

The bank’s leadership and governance is focused on sustainability, and the diversity of its leaders reflect this culture.

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The bank’s leadership and governance is focused on values-based banking, and the diversity of its leaders reflect this culture.

Beneficial State Bank’s governing board, Co-CEOs, and senior management are dedicated to proving, improving, and spreading the triple-bottom-line model of banking. We seek to change the banking system for good. Beneficial State Bank seeks to hire and develop leaders that are top of the industry, passionate about our mission, and reflective of our community.

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The bank’s leadership and governance is focused on values-based banking, and the diversity of its leaders reflect this culture.

Internally, the CEO, board and executive team lead staff to support mission-aligned and financially-sound businesses and nonprofits by setting a goal that 75% or more of the bank’s loan portfolio be dedicated to entities that are positive mission-changemakers and/or owned by underrepresented communities, and 0% goes to contra mission activities. This messaging is delivered by the senior management team at all staff meetings and corporate events. Externally, senior management and many other employees participate in and/or have leadership roles in most of the major good money related organizations and events in the United States.

Our Approach

 

Inside and out of the bank, we support a new ecosystem for beneficial banking. Our work includes

  • Collaborating with Other Banks to develop and inspire new social, environmental and ethical standards for banking.
  • Engaging with Community Members, including individuals, businesses, clients and others to encourage people to demand more from their banks and to move their money if their institution doesn’t share their values.
  • Regularly surveying our customers and colleagues with product, service, culture, and alignment questions.
  • Informing & Assisting Businesses As they forge their paths toward greater environmental and social responsibility.
  • Cultivating the Next Generation of socially-minded leaders that believe that banking is a powerful and necessary tool to make the world a better place.
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The bank’s leadership and governance is focused on values-based banking, and the diversity of its leaders reflect this culture.

Internal results: Our 2016 loan portfolio was 87% mission, 0% contra mission.

 

External results: Beneficial State offers guidance and thought leadership in the following organizations, in addition to GABV:

  • National Community Reinvestment Coalition, where we’ve participated in and spoken at the national conference, completed the NCIF Scorecard, and helped enhance the BankImpact Dashboard to include new social and environmental metrics
  • Community Development Bankers Association, where we have served on the Board of Directors, led convenings, participated in and spoken at conferences, and participated in legislative efforts to advocate for CDFIs and community banking at large
  • B Corporation, for which we publicly and regularly share our certification status to help spread the word, host local convenings, sponsor and provide volunteer support for the annual conference, and lead development of the annual BLD B Corp Leadership Day.

We also participate in pledges and the development of principles in which banks fight for social and environmental rights and practices. We

 

  • Contributed to development of the Center for Financial Services Inclusion’s Compass Principles to guide the financial industry’s ethical design and delivery of products and services.
  • Endorsed the Small Business Borrower's Bill of Rights Bill by the Responsible Business Lending Coalition, declaring fundamental rights that all small business borrowers deserve
  • Took the Paris Pledge to Quit Coal
  • Committed to the Fight for $15 for $15 minimum wage
  • Commented on the U.S. Consumer Financial Protection Bureau’s open comment period for payday loans
  • Endorsed Seattle Housing Levy
  • Endorsed Yes on Affordable Homes – Portland OR's first affordable homes bond

 

We host a variety of mixers, events and student tours to promote responsible business and beneficial banking, including:

  • B Corp Leadership Day and Champions Retreat
  • NewCo – Social Impact Business Open Studio
  • Money on a Mission
  • Move Your Money Workshops
  • Women in Social Innovation
  • Impact Evaluators Roundtable
  • Lending to Co-ops with Laboral kuzta
  • Mixer with Consumer Financial Protection Bureau
  • CoCap and CommCap Community Capital Conferences
  • CDBA Peer Forum

 

We participated in the Good Local Money for your Good Local Business guide to encourage businesses to seek financing from mission-driven sources.

 

Over 50 speaking engagements per year with organizations such as Conscious Capital, SoCap, EARN, Social Venture Network SRI Conference, and more.

 

Host an intensive summer fellowship program, providing college and graduate students a Beneficial Banking Curriculum & Speaker Series as well as capstone projects that support real bank needs.  In 2016 Beneficial State hosted 8 summer fellows, and have hosted 64 since the program’s inception.

 

Our employee diversity JUST label scores for 2016 are:

Non-discrimination: 3 /3

Gender: 3/3

Ethnicity: 2/3

 

Our diversity in leadership starts at the top: our bank is led by two Co-CEOs, a female and a male person of color.  More broadly, the current leadership team of the bank, bancorp, and foundation bank holding company is comprised of individuals who embody and model the mission both inside of the bank and in the community through their volunteer and board work.  This collective leadership team has a diversity ratio of 69% with 20 of the 29 team members being a woman or person of color.

Organisational Structure

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Organisational Structure

The bank is organised to support its mission focus.

The bank is organised to support its mission focus

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The bank is organised to support its mission focus.

Beneficial State Bank strongly believes that ownership and profit structure drives decision-making in all aspects of an organization, and these structures are powerful ways that banks and corporations can ensure mission.

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The bank is organised to support its mission focus.

Beneficial State Bank is owned by a nonprofit foundation that must distribute any profits back to the communities in which the bank serves.    Our structure consists of Beneficial State Bank itself, Beneficial State Bancorp, and Beneficial State Foundation, a bank holding company with 100% of the economic shares of the bank, and 90% of the shares of Albina Community Bank. The bancorp helps to lead product development, mergers, and acquisitions, developing and implementing triple-bottom line principles and guidelines to ensure that all of these activities are not only financially sound, but further our social and environmental mission. In its role as a bank holding company, the foundation helps protect and strengthen the social and environmental mission of the bank. Specifically, the foundation helps lead measurement and management of social and environmental impact, building of the beneficial banking movement, engagement in our communities, and our sponsorships

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The bank is organised to support its mission focus.

As a result of this structure, the bank does not distribute profits to any individuals and is not motivated by short term profits;

rather, products and pricing are determined based on customer

need and bank financial sustainability and avoid high or hidden prices that are designed to maximize profit at the expense of customers.

 

This leads to results that illustrate how we can maximize people and planet over profit:

 

  • Fair and transparent fees
  • Special programs and requirements to incentivize car dealerships to avoid common predatory practices in order to maximize profit
  • Proactive collections teams that work to keep people in their loans and cars, rather than maximize late fees
  • CEO Wage Ratio of 10:1, compared to 1:100+ for many large bank and Fortune 500 CEOs in the U.S. compared to industry
  • A minimum wage of 1.5 the area living wage, compared to the U.S. banking industry where 1/3 bank tellers make so little that they are on government assistance.

 

Through the foundation, Beneficial State Bank provides sponsorships to 501(c)(3) nonprofit organizations each year. In 2016, we provided $316,000 in sponsorships to community organizations, or the equivalent of 17.5% of our net income. That’s more than 17 times the U.S. average corporate giving of less than 1% (.76%).

Products and Services

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Products and Services

The bank’s core products and services are fair, transparent and directly contribute to its values-based mission.

The bank’s core products and services are fair, transparent and directly contribute to its sustainability mission.

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The bank’s core products and services are fair, transparent and directly contribute to its values-based mission.

Beneficial State Bank exists to provide fair and transparent financial products and services that support socially-responsible and sustainable businesses, nonprofit organizations, and underserved communities.

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The bank’s core products and services are fair, transparent and directly contribute to its values-based mission.

The bank offers commercial loans of $10k to $10 million for small and medium-sized businesses and nonprofits, with rates at market.  Bank staff take significant time and care to understand borrowers’ operations and missions, working to find solutions to support them where traditional banks likely would not.  In order to serve businesses with smaller loan needs and/or those that are not ready for our core commercial loans, Beneficial State developed the Business and Nonprofit Builder Loans. These loans feature a streamlined application and credit process that enables staff to support these potential borrowers while still having time to spend on the larger borrowers.

 

As a result of our merger with PanAmerican Bank, we now offer consumer loans -- primarily auto loans -- to pre-prime (often called sub-prime) borrowers.   Our lending practices and partnerships with mission-aligned dealerships help keep our customers in their cars and create much lower total cost of loans to credit-challenged borrowers than they can get from typical lenders in the sub-prime market.

 

Checking and savings accounts offer transparent pricing and incentives for healthy and environmentally-friendly behavior; the bank passes on its savings to customers. Seniors, students, and service men and women get discounted pricing. Bank staff members make personal phone calls to customers when they notice a potential overdraft or other issue to avoid unnecessary charges or problems for the customer.

 

Additionally, the bank offers credit cards that generate revenue for social and environmental nonprofit organizations and matched and incentivized savings accounts (IDA accounts) that support asset-building for low-income individuals and refugees.

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The bank’s core products and services are fair, transparent and directly contribute to its values-based mission.

At 2016 year-end, Beneficial State Bank had $327 MM in deposits from over 3600 depositors, $456MM in Original Commitments to over 400 commercial loan borrowers; 87% of the loan commitments were mission, 13% were conventional, and 0% were contra mission.

The bank also had 11,800 auto, furniture and other consumer loan commitments for low-income and credit-challenged individuals with an average FICO score of 580, totaling $82MM.

The bank provided over $380,000 in support to 12 Nonprofit organizations such as Sierra Club, Green America, B Corporation and League of Women Voters receive funding through our fee sharing on the purchases of over 7,500 affinity cardholders, since program inception.

 

As of 2016 year-end, Beneficial State served approximately 200 participants in our IDA program, which is designed for low income individuals to grow their savings to assist with critical life and asset-building needs such as tuition or purchase of a car or home. Collectively, these IDA participants have saved over $300,00 and the average savings of the participants at the end of the year was over $1700.

Management Systems

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Management Systems

The bank’s management systems are transparent, include values-based criteria and exist to increase the institution’s positive impact.

The bank’s management systems are transparent, include sustainability criteria and exist to increase the institution’s positive impact.

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The bank’s management systems are transparent, include values-based criteria and exist to increase the institution’s positive impact.

Beneficial State Bank strongly believes that we must work to ensure that we are sustainably profitable; that a preponderance of our loans improve social justice and environmental sustainability and that none should cause harm. With this in mind, we manage liquidity, sales pipelines, assets, and liabilities accordingly. We define metrics and goals to monitor and manage both financial and mission risk.

We also seek to ensure that our capital, risk, and corporate expenses align with our mission through our unique ownership structure, its comprehensive procurement policy, and by targeting benchmark financial returns representing average or better returns that an investor would expect in the banking industry over many economic cycles.

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The bank’s management systems are transparent, include values-based criteria and exist to increase the institution’s positive impact.

Our structure mandates that any investor that provides equity capital to the bank must be or distribute 100% of any dividends to a 501(c)3 nonprofit organization whose mission is to support low-income communities and/or environmental sustainability. sell their stock except by prior permission and only even then to another non-profit entity.

From an asset management standpoint, our principal goal is to migrate a minimum of 75% of our assets to mission-oriented lending sectors. In terms of asset liability, our goal is to generate deposits to the degree possible from local and mission-oriented investors.

Rather than seek to maximize profit and ROE, we set a benchmark return target of 6-10% ROE in order to ensure our safety, soundness and resilience, and our ability to fund ongoing pursuit of our mission.

Commercial Lending: Our loan officers and credit team currently review and write up each loan for financial viability and mission alignment and mission risk, which is then reviewed by at least two Senior Credit Officers depending on their Delegated Lending Authority. The Credit Policy Committee reviews requests in cases where the total exposure exceeds our Senior Credit Officers authority.

Credit policy issues, problem loans and policy exceptions are reviewed and voted on by our Loan Policy Committee, which meets weekly.  This committee is comprised of our President, Board, Chief Credit Officer, Chief Lending Officer, and is reviewed by the Chief Impact Officer at the foundation at the same time.   Our foundation team reviews the existing loan portfolio deeply and on an ongoing basis to better understand and measure the mission elements of each borrower and activity.

To support our triple bottom line focus, when feasible the bank chooses to work with cooperative borrowers who maintain good assets rather than foreclose.  The bank manages this process by keeping the lines of communication open, keeping control of past dues before they reach a more critical delinquency.

Consumer Lending. Our consumer lending team has developed a customized automated underwriting model that learns based on historical performance data. This model allows the bank to provide loans based on more data than just credit scores, and therefore serving more people with low or no credit scores. The model provides interest rates based on this data. The Consumer Credit Committee has the ability to review loan applications and credit decisions when needed.

The consumer division also has a skilled, active and humane customer retention team that reaches out to consumer borrowers  immediately after a payment due date passes to maximize the borrower’s chance of repaying before becoming delinquent and staying in good standing.  This proactive collection process helps to reduce loss rates for the bank as well as to keep borrowers in their cars and in good credit standing.

Overall: Management tracks and reports our Adverse Asset ratio, PAR and Delinquency Ratio, defined as [All Loans More Than 30 Days Past Due] / [Total On-Balance Sheet Loan Portfolio Outstanding], a more conservative indicator than PAR.

Our Credit Administration team looks at the Texas Ratio as a key measure of the bank’s comprehensive risk relative to capital.

In December 2016, our Board approved an ALLL percentage change  to 1.63%, appropriate given the blended risk of our portfolio and within regulatory guidelines. We have not had many losses historically, but rapid growth and historically lower earnings, combined with classified loans, have meant that we have maintained reserves slightly higher than our peers.

Beneficial State Bank's procurement policy includes company preferences and specific guidance in several areas including reducing overall consumption of material goods; purchasing supplies and services from locally-owned, Fair Trade, B Corp Certified, Green certified and other mission aligned businesses; reducing travel where possible; and choosing environmentally-friendly alternatives for all office and event expenses.

The policy also encourages prudence to ensure that spending is focused on mission over luxury or lavishness. This guideline does not mean always choosing the lowest cost, but paying for products and services in which the costs reflect the vendor’s fair wages and/or better environmental and social practices.

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The bank’s management systems are transparent, include values-based criteria and exist to increase the institution’s positive impact.

Our Adverse Asset ratio improved from 67% in 2013 to 16% in 2016.

PAR: Delinquencies in 2016 were 3.9%; this increased due to our acquisition of PanAm, which serves higher risk, low-income, credit-challenged individuals.

Our Texas Ratio has gone down from 33% at the end of 2012 to 9% at the end of 2016, comparing very favorably to a CDFI peer bank average of 16.29%.

Our 2016 mission loan ratio was 87%.

While our 2016 ROE was 1.56% due to our acquisition of Pan American Bank and a significant initial investment in a new core bank technology platform, our average over the past 5 years has been within our 6-10% target range at: 8.16

 

Our 2016 results are as follows:

 

Loans to Deposits ratio 87%

Efficiency ratio 93%

Liquidity ratio 24%

 

The bank has not, to date, distributed dividends, choosing instead to reinvest the profits to grow the bank in order to increase our social and environmental impact. Instead, we have capitalized the Beneficial State Foundation such that it can provide funding that is the equivalent of 5 to 10% of the bank's profit to support sponsorship of community based non-profits at the direction of each local branch office team.

 

The bank's primary vendor is our core banking technology provider. The bank makes few purchases beyond office and kitchen supplies, event hosting, and marketing materials; the vast majority of these are purchased from B Corporations and local independent providers in our communities. Our 2016 sustainability report finds that procurement-related activities (Shipping & Mail, Purchased Paper, and Solid Waste) account for 11% of our greenhouse gas emissions.

Human Resources Tools

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Human Resources Tools

The bank’s values-based mission is the starting point for its incentive, compensation, and performance structure.

The bank’s sustainability mission is the starting point for its incentive, compensation, and performance structure.

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The bank’s values-based mission is the starting point for its incentive, compensation, and performance structure.

Beneficial State Bank seeks to hire people that are passionate about our mission. We seek to hire so that the diversity of our staff represents the communities we serve, including race, ethnicity and gender. Additionally, we are committed to compensating staff well and fairly and to providing generous benefits. Finally, we believe that staff should be supported in their own personal and professional development aspirations, and to be able to invest in, volunteer for, and support their community and environment.

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The bank’s values-based mission is the starting point for its incentive, compensation, and performance structure.

The bank includes its mission prominently in job postings and interviews, and provides an immersive training for each staff person that covers our mission, vision, values and culture. Monthly all-staff meetings include a discussion of social and environmental impact.

Our executive team proactively recruits a diverse and representative staff by having in-depth conversations with our recruiters to share our diversity goals and by working with partner organizations that support various racial and ethnic groups in order to outreach and recruit through their communities. We voluntarily measure our performance through the JUST label, a social justice measurement and management tool from the International Living Futures Institute.

The bank has a formal performance management process and employee performance is tied to a bonus program, in which bonus amounts are determined by individual, division, and bank performance collectively. Our Human Capital team works hard to support managers in supporting their respective teams, providing trainings, coaching and mentoring to ensure that managers are engaged, connected and helpful. The commercial loan sales team has a commission incentive based on the bank’s overall mission performance for the year, ensuring a minimum of 75% of all loans are to mission-aligned changemakers. The bank offers $500 for each staff person to take courses in support of their professional development and requires a plan for their utilization of this benefit in their professional goal setting. One criterion for any merger or acquisition is that it increases professional opportunities for our staff.

The bank makes explicit commitments to exceed the area’s living wage according to the MIT Living Wage Calculator, maintain pay scale equity, and seeks best practices in setting and improving employee compensation. All employees are paid at a minimum 150% over the local living (not minimum) wage, and the bank’s ratio of lowest paid to highest paid employee is 1:10 (includes base and incentives), compared to 1:100+ for many large bank and Fortune 500 companies in the U.S.

In addition, every bank colleague participates in an annual bonus plan that augments income as well as a long-term incentive program to build assets.

Throughout the year, the bank offers internal trainings called Beneficial Briefings, which cover topics related to our mission sectors and community issues. The bank has two key staff-led culture committees: Agents of Wellness, which focuses on Physical, Social and Community Wellbeing, and the Green Team, which focuses on sustainability practices in the organization.

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The bank’s values-based mission is the starting point for its incentive, compensation, and performance structure.

In addition to focusing on mission within the bank, our employees participate in volunteer activities throughout the year. In 2016, Beneficial State Bank and Foundation employees gave a total of 308 hours in volunteer community development service. Led by the Green Team, Beneficial State staff participated in the Northwest Earth Institute’s Eco-Challenge for the 3rd year in a row, to challenge themselves to engage in more sustainable behaviors. The team did quite well, ranking in the top 10% of all of the 2016 Eco-Challenge participating organizations in terms of impact.

 

In 2016, within our staff of 142, we had 10 promotions across various divisions and roles and responsibilities. The bank’s attrition rate was 22%.  Beneficial State’s merger with Pan American Bank enabled staff to gain increased responsibility, have a broadened scope and increased pay and benefits.

Performance Reporting

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Qualitative Elements provide substantial and important information on a bank’s value-based banking approach and results. This information is used to provide a comprehensive evaluation of a bank’s efforts, capabilities and performance. The information for each element is organised to provide insight from strategy to results as follows:

Performance Reporting

The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

 

 

The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

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The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

 

Beneficial State Bank is committed to continually improving its internal social and environmental mission reporting and using the information to increase its impact.

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The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

 

The bank completes all required financial reports by regulators, and community development reports as part of CDFI certification and funding. It also voluntarily completes the B Corp Assessment, the JUST label disclosure program, and the National Community Investment Fund (NCIF) BankImpact Dashboard.

In 2015, Beneficial State launched new mission definitions, systems and data to improve measurement and management of our impact. For example, we led a Salesforce development project to connect the bank’s core data to Salesforce and allow for easy reporting, developed a new Impact website, provided an analysis of all affordable and multifamily loans to determine number of units, affordability levels and percent of affordable units at risk, and articulated the four major elements of positive changemakers that Beneficial State Bank seeks to support with its lending: 1) Structure, 2) Ownership, 3) Practices, and 4) Products & Services. In 2016, we piloted an Impact interview process to enable staff to gather deeper impact data from a client after a loan is closed.

 

As part of our commitment to continually improve and make true positive impact in our communities, we made two major changes in our mission definitions in 2016. The first was to stop counting all loans to low-to-moderate-income neighborhoods as mission. In order to count as mission, the borrower must be making a positive change in the community. While more strict than our federal standards, we feel it is important to be accurate about how a loan is impacting the community, not assume that a loan or borrower is helping low income people just because it is located there.  As we know, businesses can low income communities can also harm those communities.

 

The second change was to stop counting all multifamily loans as mission. These loans, primarily to purchase or refinance existing multifamily apartment buildings, are now counted as mission only if the property owner shows history of and intention to keep rents affordable, and/or implements intentional sustainability elements while not contributing to increasing rents.

 

These changes resulted in a decrease in our internal mission percentages, as described in the next section.

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The bank reports on the impact of what it does, not just its financial performance in an honest, transparent and accessible way.

Beneficial State Bank has been a certified CDFI (Community Development Financial Institution) Bank since 2009 when it was OneCalifornia Bank.  Using its Social Performance Metrics, NCIF gave the bank a 96.1% missing ranking in its latest analysis.

The bank is B Corp certified, is designated as one of the Best for the World and Best for the Environment B Corps, and it’s the 3rd highest ranking B Corp in the world.

Our staff-led Green Team works with a 3rd party sustainability assessment organization to produce our annual Sustainability report, and then leads efforts to improve our carbon footprint numbers. The addition of 7 new branches from our merger with PanAmerican Bank increased FTE from 65 to 165, or over 250%, and in conjunction, our total GHG emissions increased 98% to 445 metric tons of CO2 equivalent.  Because these new branches are located in non-metropolitan areas requiring much more car commuting, our per-employee emissions increased from 3.5 mtCO2e/FTE in 2015 to 4.7 mtCO2e/FTE, a 33% increase. For legacy Beneficial State branches, per FTE emissions decreased 11% to 3.1 mtCO2e/FTE. Overall, BSB legacy branches have decreased per FTE emissions by more than 40% since 2013.

 

Beneficial State Bank and Albina Bank 2016 consolidated Triple Bottom Line asset ratio is 73% and Real Economy is 82%.

 

As described above, the implementation of our new, stricter mission definitions resulted in a reduction in the number and dollar amount of our commercial lending that we count as mission internally at Beneficial State.  According to our old definition, 87% of our commercial loans as of 12/31/16 were mission loans; under our new definition, the percentage was 65%.   These are defined as loans to Mission Changemakers, comprised of businesses and nonprofits making a positive change through their products, services, structures and practices, and of businesses and nonprofits owned or led by people from underserved communities, such as women, people of color, disabled, formerly incarcerated, etc.

 

In both the older and newer definitions, the remaining loans have been mission-screened and deemed conventional.  None of them have been deemed contra mission.

 

The detailed breakdown of our mission lending is as follows:

 

  • $58MM to Mission Affordable Housing
  • $32MM to Arts, Culture, and Community Building
  • $32MM to Beneficial Financial Services
  • $33MM to Economic, Business and Job Development
  • $17MM to Education and Youth Development
  • $82MM to Environmental Sustainability
  • $22MM to Health and Wellbeing (Non-Food)
  • $26MM to Healthy Food
  • $24MM to Making, Manufacturing and Production
  • $4.4MM to Social Justice
  • $5.6MM to Other Mission borrowers

 

  • 13% of our lending, $63MM, supported our goal of Diverse and Distributed Ownership, which includes businesses and nonprofits owned by People of Color, Women, Disabled, Formerly Incarcerated, and Veterans, as well as small independent businesses not counted in the Mission Changemaker category above.

 

  • 19% or $86MM in loans to nonprofit organizations.

 

  • Our lending supported 4840 units of affordable housing;
  • 59% of the units are dedicated affordable through deed restrictions and other protections.

 

  • 300 Million kWh of renewable energy produced through $36MM of lending to Solar, Wind, Biodigester and Small Scale Hydro loan clients.

 

To help monitor and manage mission impact, the management team and board are provided with the monthly mission numbers for loans booked that month, loans in the pipeline, and total outstanding loans at month end.

 

Monitoring of our multifamily and affordable housing lending has resulted in new partnerships and loans to support deed-restricted affordable housing; the need for these units is critical in our bank’s footprint due to skyrocketing housing costs and a lack of government policy to control these costs.

 

We also think constantly of ways a new economy can benefit low resources households and communities, like for instance, viewing our multi-family portfolio as a potential base for energy retrofit, solar generation, and charging station lending that redounds to the tenant and investors' increased income, sustainability, and resiliency.

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