NEW YORK -- As dozens of banks caught up in the collapse of the housing market are struggling to stay alive, one team of finance professionals is moving boldly in the other direction.
They're opening a new bank. A new "green" bank.
Frank Baldassarre Jr., Sandy Wiggins and their colleagues say their e3bank will thrive because of their "triple bottom line" approach to finance: enterprise, environment and social equity.
"All the decisions we make are passed through three lenses," said Baldassarre, the bank's president and CEO. "What's the impact of our decisions on profitability for the bank? What's the impact of our decisions on the environment? And what's the impact of our decisions on the people involved?"
The group announced today that the Pennsylvania Department of Banking has awarded e3bank conditional approval for a state charter for its flagship bank in the Philadelphia area. Once given full approval by the state and the Federal Deposit Insurance Corp., the new bank will open as a "green" triple bottom line bank, organizers said. It is already seeking investors and is raising money online.
E3bank joins a small but growing number of green banking centers sprouting as credit markets normalize. Just as the government is stepping in with the fiscal stimulus package with provisions designed to encourage consumers and businesses to go green, the banking industry is launching green incentives of its own.
The model that e3bank is pursuing envisions having loan officers accredited by the U.S. Green Building Council, or USGBC, as experts in its Leadership in Energy and Environmental Design (LEED) ratings program. Loan officers would be empowered to customize loans and lines of credit to commercial and residential borrowers planning green building projects and retrofits.
Wiggins, the e3bank chairman and a former chairman of the USGBC, said the bank model complements federal efforts.
"E3bank is supporting mobilization around a green economy and a sustainable environment," Wiggins said. "The bank was created for everyone who cares about a sustainable world."
Instead of following the industry standard -- basing loans on a borrower's ability to pay and the up-front costs of the building -- e3bank officers will be authorized to modify debt-to-income and loan-to-value proposals. Financial products would be tailored to account for the up-front costs of more expensive green projects but also factor in cost savings from lower energy consumption that would be netted over the course of the loan.
Baldassarre said the bank would also be more flexible in extending loans for solar installations, geothermal heating and other technologies on existing buildings, knowing that the cost savings the extra energy would bring in affects the borrowers' ability to repay the loan. Loan officers at e3bank could also advise customers on the latest green building innovations and the various options that people with projects in mind could consider.
"The core of our business will be both consumer and commercial loans geared toward helping people put these systems into their homes or businesses," Baldassare said. "We're going to help consumers mitigate some of those increases by helping them finance systems that consume less energy."
Green banking movement?
E3bank will have company in green banking.
ShoreBank, a community redevelopment banking center founded in 1973 to combat gentrification and urban blight on the South Side of Chicago, is considered by most in the industry as the first "triple bottom line" bank, a provider of lending and finance that is devoted as much to serving the socials needs of a community as it is to maintaining profitability.
ShoreBank's green bank spin-off, ShoreBank Pacific, was established with the goal of "creating a conservation economy in the rainforest of the Pacific Northwest." It lends to local companies in Washington and Oregon in ways designed to encourage them to use less energy and lumber and reduce waste production and pollution.
ShoreBank's depositors are invited to support their green initiatives directly by putting their money into "EcoDeposits." The company also offers "environmental advisory services" to customers in the coastal Pacific Northwest, Michigan's Upper Peninsula, and urban centers where it conducts business.
In 2005, a team of entrepreneurs set up New Resource Bank in San Francisco. One of its signature products is a "solar home equity financing" loan. It also sells one- to two-year fixed-term solar certificates of deposit, with the funds gathered ostensibly used to help fund solar power projects in California.
First Green Bank of Florida is a new member of the green banking movement that set up shop last February. Its suite of financial products includes green checking and savings, a green money market account and what it calls "hybrid" CDs and IRAs.
The people behind the bank took early advantage of the growing popularity of environmentalism being awakened by the financial crisis. Early last year, First Green overshot its fundraising and capitalization goals in just five weeks, attracting a great deal of investor interest even as a nationwide recession began to take hold.
"We have a distinct advantage with our unique business model that has been confirmed with the level of investor interest," said First Green Bank CEO Ken LaRoe.
Green car loans, home equity lines
Established, more traditional banking brands are following the trend.
Kevin McCloskey, vice president of lending Affinity Federal Credit Union of Morristown, N.J., said his bank is now offering "green car loans" to members looking to buy more environmentally friendly autos.
The loans, which qualify for a 0.25 percent interest rate reduction, are not only reserved for purchases of hybrid cars. Customers can use the loan to buy any vehicle meeting U.S. EPA's Green Vehicle Guide -- a car less than five years old and fewer than 75,000 miles driven that gets at least 30 miles per gallon on the highway.
McCloskey says the green car loans are proving popular among customers. Forthcoming incentives by the federal government to help struggling domestic automakers and to encourage purchases of more environmentally friendly vehicles could boost the appeal of such loans and encourage more banks to enter into the competition for green lending.
"So far, we have received a very positive reaction from our members," McCloskey said. "When we first launched our green auto loan, we thought that the reduced rate would motivate members to purchase green vehicles, but in fact we are finding that members are coming to us after they settle on a vehicle to finance."
Alongside the green banks, Affinity Federal Credit Union has also launched the "green home equity loan." Affinity is offering its representatives as advisers to help commercial and residential customers on the logistics of their green building plans. Classifying a building or home improvement project as "green" also qualifies the borrower for a 0.25 percent APR rate reduction.
Experts believe that many more established banks and financial institutions will increasingly offer green car loans, business loans, savings and investment vehicles, and even possibly green home mortgages once balance sheets are shored up and credit starts flowing again.
The number of narrowly focused "green banks" could also increase in the coming months and years. But that world is expected to stay incredibly small compared to the industry as a whole for some time.
Nationwide only a handful of green banks exist, out of a universe of some 8,000 banks in total. But green bankers believe their startups have an advantage in this business climate.
"We think now is the perfect time to launch a bank," e3bank's Baldassarre said. "I have no legacy issues. I have no problem loans. I have no problem investments. And I don't need a TARP bailout."