Investors Are ''Doing Well by Doing Good'' with Louisville Community Development Bank

"By restoring jobs, you restore neighborhoods." Civic, religious and business leaders in Louisville envisioned this concept back in 1992 when they formed a task force to devise a plan for providing long-term improvement of economic conditions in Louisville's inner city. They set out to create a vehicle that would be a self-sustaining economic engine; and, in January 1997, that vehicle was born when the Louisville Community Development Bank (LCDB) opened its doors.

Louisville Development Bancorp, Inc., designated as a CDFI, is the parent company of the LCDB. The LCDB states its mission as: "stimulating economic growth within nine neighborhoods of the West End and three neighborhoods to the east of downtown by providing an array of financial and development resources." These neighborhoods, referred to as the Investment Area served by the bank, cover 17 miles and have approximately 80,000 residents combined, 38 percent of whom are living below the poverty level. To achieve its mission, the bank's objectives are to:

• Support small business development and expansion;
• Make homeowners out of home renters;
• Improve the quality and value of real estate;
• Increase the number and quality of goods and services available to residents; and
• Link neighborhood residents to career-path employment.

With support from the banking community, local corporations, Fortune 500 companies and individuals throughout the entire community, the LCDB began operations with more than $20 million in deposits.

Gary Gambrell, marketing director for the LCDB, said the bank's motto of "partnerships work better" has helped it foster support and cooperative efforts with nearly every other major bank in town. Even though LCDB is a for-profit, FDIC-insured, commercial bank, it does not offer any type of checking or savings account. On the lending side, the LCDB often relies on partnering to facilitate deals.

Certificates of Deposit

The LCDB offers three types of certificates of deposit, all of which are "socially responsible" investments. In addition to its competitive Market-Rate CD, which has a minimum investment of $200, the bank also offers an Easy Access CD. The Easy Access CD, with a minimum investment of $1,000, can be redeemed without penalty after just seven days. While all three CDs are designed to provide community revitalization, the Community CD® most effectively carries out LCDB's mission. With a minimum investment of $200 and a lower interest rate (the customer is given the option of selecting an interest rate ranging from 0 to 3 percent), the foregone interest enables the bank to support and reinvest in community development programs.

The residents also have made a real commitment to the revitalization of their community. Nearly 25 percent of the depositors live within the Investment Area. For many of these depositors, it's their first investment.

Community Development Lending

The LCDB is dedicated to a resurgence of housing and businesses in Louisville's inner city. Both residential and business loans are available, but a home or business must be located within the Investment Area. Businesses outside the Investment Area must be committed to employing or servicing the Investment Area residents. Loans offered include:

• Commercial businesses--line of credit or term loans for startup, expansion or working capital
• Residential acquisition of homes for rehab or sale or new construction of single and multifamily structures
• Home improvement--additions, remodeling and repairs
• Commercial real estate--acquisition, rehab, or new construction of commercial, retail, wholesale, manufacturing, distribution and warehouse facilities

In just a little over two years, the bank has partnered with or been the sole financing institution for 89 small business loans. As a result of these loans, more than 600 new jobs have been created for area residents. The LCDB can offer individuals and businesses even more through its relationship with its partner company, LCDB Enterprise Group. This group, also affiliated with Louisville Development Bancorp, Inc., focuses on enterprise/business development by rendering management assistance to facilitate growth and expansion of Investment Area firms.

LCDB has made loans to several childcare providers located in the Investment Area. "Top quality day cares are a real community asset," said Kelly Downard, president and CEO of the bank. "They provide security to the family so that parents can work without worrying about their children, and they provide security to the community by nurturing and educating the next generation."

With a loan from LCDB, one such day care center, The Marchman Learning Centre, purchased a new van that provides transportation to and from the day care for families who need it. Vikki and Maurice Marchman Sr., owners of the day care, also were able to purchase additional property and convert it into a Toddler Tot Unit. With this expansion, enrollment has increased by almost 60 children, and the day care now has a 22-member staff.

Another mainstay of any community is a grocery. The Meat Store, a full line meat and grocery store, opened for business in early 1999 with the help of a loan from the LCDB. Les Estephane and Halim Halabel, owners of The Meat Store, employ more than 60 people. According to Estephane: "We could not have done it without the help of Louisville Community Development Bank. Its staff was very supportive and encouraging."

Creation of jobs, jobs being filled by inner city residents, increased spending in the neighborhoods--this is the new cycle in Louisville's inner city--and the LCDB has been a leader in providing the financial power. But partnerships are the key. Morton Boyd, retired chairman of National City Bank and chairman of LCDB, described the LCDB this way: "It's a different approach. When the banking community pools its resources and shares the risk, we are able to accomplish so much more than a single institution."