Native American bankers targeting N.Y. tribes

By Thomas Hartley
Business First of Buffalo

J.D. Colbert has a dream.

In his words, it is "to be the Johnny Appleseed of Indian banking. We hope to create new tribally owned banks and financial institutions," says the president of the North American Native Bankers Association, which he founded six years ago.

Like the legendary John Chapman, who became known as Johnny Appleseed in the early 19th century for creating apple orchards as he roamed New York and several Midwestern states, Colbert wants to plant seeds for Native American-owned banks.

Within five years, he hopes to see the number of banks owned by tribes or individual Native Americans increase from the approximately 20 that exist today, to as many as 35 in every region of the country. All the existing Native American banks are west of the Mississippi River.

Colbert, who is based in Oklahoma City and is an enrolled member of the Chickasaw Nation, says his group and its consultant have identified 40 tribes from the approximately 560 federally-recognized Native American tribes which are "ideal candidates to own a bank."

None is identified, but "two or three" are in upstate New York and "at least five to eight" are east of the Mississippi, Colbert said.

U.S. census figures for 2000 show that there were more than 11,500 Native Americans living both on and off the five existing reservations in the eight-county Western New York region. The largest numbers are members of the Seneca and Tuscarora tribes. Elsewhere upstate, there are significant numbers of Onondaga, Oneida and Mohawk tribal members.

In an effort to spread his message that opportunities for investment in the financial-services sector are expanding, Colbert and a marketing consultant, NuBank of Dallas, Texas, have scheduled daylong banking start-up seminars in 10 cities. None of those planned appearances is in New York, but that could change, he said.

The sessions will focus on tribes with thriving commercial enterprises that include gaming casinos but also manufacturing operations.

"Our goal in these seminars is a bumper crop of new tribal banks," Colbert said.

A veteran of 27 years in banking, Colbert presently serves as executive vice president of Native American Services for Bank 2.

The Bank 2 is owned by the Chickasaw Nation, which several years ago bought a small bank based in Davidson, Okla., that was formed in 1903 and moved it to Oklahoma City. Under the new owners, the bank expanded its asset base in 31 months from $7.5 million to $63 million. Deposits total about $54 million and there are more than 2,200 customers.

Colbert says the time is ripe for Native Americans to enter the financial services field.

"Several tribes have discovered that there are significant profit opportunities in bank ownership," he said.

"Tribal ownership is increasingly on the radar screen for a number of reasons," he said. "One is because of tribes' economic development successes and in a wide variety of business endeavors. They have accumulated sufficient capital to invest in a bank and also accumulated a fair amount of acumen along the way.

"Another reason is, it is my perception that tribes are increasingly looking at controlling financial institutions. And there has been the creation of some semblance of middle class in Indian country over the last 30 years, particularly in the last 15 years."

Investing in diversified business ventures, such as banking, also helps to provide tribal members with good jobs, he said.

"Before, a tribal member left the reservation, got a college education and there was no place to go to work if they came back to the reservation," he said. "Now there are increasing opportunities for tribal members to return to the reservation.

"Job opportunities are increasing for individual entrepreneurs and all of this requires financial services."

A major benefit for tribe members in having the tribe own or control a bank is as a source of low-interest loans to tribal members for auto or education loans and residential mortgages.

"Home ownership is, I think, the major issue among tribal members. HUD or Fannie Mae numbers show the great disparity in home ownership for Native Americans and non-Native Americans," Colbert said. He cited figures showing that only about 33 percent of Native Americans own their homes, compared with more than 70 percent of the overall U.S. population.

Ross Hill, president and CEO of Bank 2, said that to be successful, a tribal bank or one that is owned by tribal members must be indistinguishable from other community banks.

"In the beginning, 10 to 15 percent of our customers were Native Americans. Now it is actually 35 percent and growing. Next year it may be 50 percent. But we reach out to the entire community as any community bank does and must do.

"The premise behind the bank being formed was to make money. That is the basis of why the Chickasaw Nation wanted to be in the banking business. It was to diversify their investments," Hill said. "They were already in 30 different businesses -- they own a newspaper, hotels, convenient stores, a manufacturing concern and an energy company -- and they wanted to get into the financial services industry."

Dan Hudson, whose NuBank specializes in marketing banks and is a consultant to Colbert's association, says there is no correlation between Native American banking and a tribe operating a casino, as the Seneca Nation does in Niagara Falls and Salamanca, and the Oneidas do in Verona, N.Y.

"Basically, Native Americans need financial institutions as does anyone else to facilitate their own businesses. Tribes own a lot of businesses, whether they are casinos or not. There are 560-something federally recognized tribes and not every one has a casino," he said.

"The success of Ross (at Bank 2) has been as a community bank first, not that it is a Native American bank. It looks like an everyday community bank. He just happens to have a set of services that fit tribal needs and uses and that helps drive the success of the bank."

"Those that go out to draw totally on Native Americans are drawing on such a thin market that they are not that successful," he said.

Colbert noted that in all cases, the existing Native American banks were the result of takeovers of other banks.

"None were de novo banks," he said. "One of the biggest challenges to opening a bank is raising sufficient capital. "But for many tribes that isn't a big issue. They have the money now. What they really need is expertise on how to do it."

© 2004 Buffalo Business First