On a cold Chicago morning, Margie Reilly pulled her minivan into the parking lot at Community Savings Bank. She waited in the car as her husband went into the lobby to speak to a teller.
Reilly and her husband, like many Community Savings customers, have been with the bank for over 30 years.
“They’ve always served our needs,” Reilly, 60, said. “We’ve refinanced [our home] and bought many things with them over the years.”
Opened as a savings and loan bank in 1944, Community Savings prides itself on its conservative lending style which has allowed it to last through difficult economic times, including the one it faces now due to the lingering effects of the housing bust.
Community Savings is a mutual company, meaning that it has no owner or shareholders. Instead, the bank’s net revenue is held as reserves.
“Being a mutual company has been very helpful in this financial crisis because we’ve been very liquid, and we haven’t had to take undue risks in this uncertain economic time just to get returns to pay stockholders,” Community Savings’ President and Chairman Dane Cleven said.
According to the FDIC, Community Savings reported a third quarter net loss of $66,000 as legal fees and employee benefit expenses outstripped the income it earned from interest on loans and customer fees. Its ample reserves, however, mean the bank was easily able to cover the loss. Community Savings held $415 million in assets as of July 30, and it keeps 14.5 percent of that as capital. That’s three times what federal regulators require in order to consider a bank well-capitalized.
Cleven said diminished demand for home loans has negatively affected earnings. While housing indicators nationally have been flashing green, Cleven said he thinks Chicago’s housing market is lagging behind other parts of the country.
Frank Stromberg, Community Savings’ chief financial officer, said high student loan debt loads may be another factor. Young people saddled with debt are less likely to apply for mortgages than their parents were at the same age. Additionally, people who purchased homes prior to the 2008 recession don’t want to sell the homes they currently live in because they’re unwilling to take the financial loss caused by continued weakness in the housing market.
Stromberg is confident, though, that the cyclical nature of the economy means mortgage demand will bounce back. But when it does, Community Savings will still face competition.
“Chicago is considered one of the most banked markets in the country and as a result it’s one of the most competitive markets,” Robert Barba, who covers the Midwest for American Banker Magazine, said.
In the Cicero-Belmont neighborhood, Community Savings competes with Federal Housing Administration loans, which allow buyers to purchase homes with little money down. FHA loans do, however, have their drawbacks. Insurance premiums tend to be higher with FHA loans, and buyers with good credit may find that private loans are actually a better deal. Potential customers can also turn to the internet to find mortgage loans, which poses another challenge to Community Savings.
“We don’t really have one particular competitor,” Cleven said. “We’re just a little bank in a big pond.”
Cleven said in addition to competition, one of the main challenges the bank is facing is federal regulation. The 2010 Dodd-Frank Act placed strict restrictions on the banking industry in order to prevent a collapse similar to the 2008 financial crisis. Though regulations were mostly intended to affect larger banks, the act has had a major impact on community banks as well, he said, mainly in the form of additional paperwork, as well as legal and auditing costs.
“Regulatory issues are swamping community banks,” he said.
Community Savings’ net interest income as of Sept. 30 was down 6.7 percent to $15.5 million from last year’s $16.7 million. Still, the most recent quarter was the strongest for the bank so far this year.
Community Savings has been located on the corner of Belmont and Cicero avenues since 1953. When it opened it was one of the only businesses in the area, and in some ways, the bank reflects the community. Cicero-Belmont has a large immigrant population, and of the bank’s 80 employees, about 50 are bilingual, speaking English and either Spanish or Polish.
The bank has helped shape the community’s development as well. Community Savings owned the land across the street from its headquarters. Several years ago, it sold the land at cost to Walgreens in order to bring more jobs and shopping options to the community. The bank also runs educational programs at local schools.
The bank’s community outreach officer, Marisol Gaytan, said she began meeting with parents and students because many community members found banks intimidating.
“They didn’t know the process of opening an account so they were going to the currency exchanges or grocery stores where they had to pay to cash their checks,” Gaytan said.
Gaytan remembers one woman in particular who she met while conducting an in-school program for parents. Gaytan said this woman had a high-fee checking account with a larger bank, but not a savings account. According to Gaytan the woman didn’t know she could be making interest on her money. Gaytan helped her set up a savings account, and since then she’s opened a certificate of deposit and even received a mortgage from Community Savings.
“That was fulfilling,” Gaytan said.