Executive Summary

Commitment To Core Cities Is Good Business

James R. Campbell
President & CEO of Norwest Bank Minnesota

January 1994

It's easy for banks to say committing to the success of our core cities is good business. Under the federal Community Reinvestment Act, we're required to do it and publicly rated for our performance. An "outstanding" CRA rating, which Norwest Bank Minnesota has earned, is increasingly weighed by socially conscious customers, shareholders and organizations and is a source of pride for employees. Regulators factor CRA performance heavily in reviewing mergers and acquisitions we seek to make our company more profitable.

Beyond these reasons, beyond human caring and concern and the obligation responsible people and businesses should feel, there are good, sound business reasons for community reinvestment. Learning from the trials and errors of companies like ours, you may consider whether your business may be overlooking the potential of the inner city and the perils of ignoring it. One urban Norwest banker, for example, not long ago tuned out city leaders' pleas for increased mortgage lending in a neighborhood where declining home ownership seemed to track decreasing property values. The banker's epiphany came when one of his employees moved from the area, fearing that she and her husband would lose the lion's share of their home equity. Suddenly he recognized that Norwest already had a sizable investment in the neighborhood in mortgage and business loans. Without intervention, Norwest could face a flood of foreclosures in the years to come. The lesson? If our neighborhoods deteriorate, Norwest deteriorates right along with them. Protecting our investment involves aggressively reaching out to make home mortgages and working closely with small businesses and developers -- both for-profit and non-profit -- who are similarly committed to the core city.

We also consider the very real opportunity to make money through community reinvestment. We can't afford to discount the needs of low to moderate income people, who make up more than two-thirds of the Twin Cities population, and people of color, who comprise 11 percent of the same group. Our research, which includes conducting neighborhood focus groups, has helped us to attract a diverse customer base we would otherwise lose. In response to comments from participants, we've done such things as translate brochures from English into other languages, record radio commercials in Spanish and actively recruit minority employees. We've also developed new relationships by providing education. Particularly successful is our Community Home Ownership program, which includes money management and mortgage application counseling and has provided $42 million in mortgage loans in designated areas of the core cities of Minneapolis and St. Paul to more than 800 homebuyers over the past three years.

Making money in the core cities requires a different strategy than we'd use in other locations. We must aggressively research our customer base; we must tailor products and services, including education, to meet identified needs. The number of customers must be higher because there may be fewer transactions per customer. Finally, we must creatively reduce costs while maintaining a high level of customer service, which is as vital to a core-city customer base as it is anywhere else. Although we're pleased with our progress, we're not yet where we want to be and we have much more to learn. But we're seeing benefits from community reinvestment we never could have imagined.

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