For one novel eight-year-old Washington bank, an important measure of success will be reached this year: It will pay taxes for the first time. By itself, that is not unusual; in a capitalist economy, businesses -- including banks -- are supposed to turn a profit and pay taxes on it. What is odd is that most of this bank's customers live some distance from its District of Columbia headquarters, about 2,000 to 3,000 miles west.
The bank is the American Indian National Bank, considered one of the most successful minority-oriented banks in the country, a reputation it has had to earn quickly, since in 1978 it was suffering heavy losses, primarily because of what its management refers to as a "soggy" loan portfolio.
The bank's location here doesn't make it any easier to explain its success. The headquarters -- and sole Washington office -- is on the third floor of an office building situated diagonally across from the Old Executive Office Building. Until recently, there wasn't even a sign in the lobby to advertise its location. Now that there is a sign, a lot of people drop in to ask what a bank with a name like thatm is doing here.m
What it is doing here is performing the function it was designed for when it was founded in 1973: acting as a funnel for the flow of money from various federal agencies and bureaus to Indian tribes around the United States. It also uses deposits from individual Indians and tribes to reinvest in Indian development projects.
Bank funds have helped finance projects like a wood products plant in Oregon, a chain of Navajo stores in New Mexico, a livestock auction in Washington State, and a dish antenna for receiving television signals by satellite.
And more recently, American Indian National has been going after business in the Washington, D.C. area, including the area's black and Hispanic residents, as well as accounts from small businesses, trade associations, and nonprofit organizations.
While many banks would not consider a client list like this a great source of profits, American Indian National has been able to turn a tidy profit with it. Through the first four months of this year, the last period with available figures, the bank earned $249,928, compared with $113,681 for the same period in 1980 (previous losses carried over, offsetting any tax liability that year). And while deposits at other banks in the Washington area have been increasing about 10 percent a year, American Indian National's deposits went up 106 percent , from $12.3 million to $25.5 million. Its return on stockholders' equity reached 35 percent.
And for the last two years, the bank has done all this while holding its prime interest rate at 12.5 percent (though few loans are made at prime), compared with the 19 and 20 percent rates charged by most other banks. At the same time, it has to pay as much as 18 percent for some of its money.
Currently, the bank has a loan portfolio totaling $3.5 million. A large proportion of its assets are invested in federal government securities. At present, the bank's asset picture enables it to make loans up to $240,000 per customer, says Conley Ricker, its chief executive officer. Eventually, he added , he would like to see this limit reach $1 million.
The turnaround of the last three years started, says Richard West, chairman of the board, when the bank started tightening up requirements for some of the "soggy" loans that weren't being paid back.
"In the beginning," Mr. West acknowledges, "we made a lot of loans without knowing which ones would be the easiest to suprevise from here. . . . So we have made it clear that except for individual ventures in the D.C. area and the four states around our Albuquerque office, we have backed off." The four states around that loan production office are New Mexico, Arizona, Utah, and Colorado.
Laws prohibiting interstate branching prevent the bank from using that office for anything but processing business and personal loan applications.If those laws are changed, West said, the bank would like to open more branches around the US to serve additional tribes.
The bank is also keeping closer tabs on its loans, West says, by "using collateral to compensate for the distance . . . as long as it's not on the hoof." Collateral is usually heavy equipment or buildings.
Most of the bank's Indian deposits do not come from individuals, he points out, but from tribes or groups of tribes.
"There is no question that the members of Indian tribes are on the bottom of any socio-economic ladder ever devised," he says. "But, by the same token, there are tribes with large assets looking for ways to invest them in such a way as to generate a return." The return they are aiming for, he added, is stronger businesses that provide jobs and income for tribe members.
When the bank was founded in 1973, West notes, the federal government was beginning "some of the most imaginative concepts in the Indian area in 20 years." A number of financing plans, involving both the government and the private sector, were set up to provide money for Indian development. Yet there was no Indian-controlled institution in Washington to keep track of what money was available and help it find its way to the tribes.
Thus, representatives of a number of tribes, including the Yakimas, Unitahs, Utes, and Koniags, founded the American Indian National Bank. Today, it is still owned by these and other tribes and some 365 additional shareholders, including Indian organizations and individual Indians.
Barbara Hughes, marketing officer for the bank's metropolitan division, adds, however, that "you don't have to be Indian to bank at American Indian National."
To prove this, she has been heading the bank's aggressive effort to find business in the Washington area. Much of this effort has been aimed at minority entrepreneurs. to help reach these people, as well as nonprofit and community organizations, the bank has been holding seminars and meetings to answer general business questions and help deal with specific financing issues.
While American Indian National was founded at a time of expanding federal assistance, Mr. West is concerned that the current wave of budget cuts will hit some tribes just as they are starting to see the greatest benefit from the assistance. Cuts in such agencies and offices as the Bureau of Indian Affairs, Economic development Administration, department of Housing and Urban development , and the Comprehensive Employment and Training Act (CETA) will be heavily felt in "Indian country," West said.