How MLS' $25 million loan deal with Black banks leveraged more than proof — it led to impact

Major League Soccer's objective in leveraging a breakthrough $25 million loan with seven Black-owned banking institutions in March was to change the perception of the banks' capacity to do business with large companies and better impact the communities they serve.

Mission accomplished so far.

In the time since the deal was struck, those companies have come calling, The Tennessean has learned, producing new deals worth millions in capital for the banks to reinvest in the Black community, particularly in underserved neighborhoods in their proximity. Not all seven bank organizations — and the dozens of branches they oversee — have experienced identical impact, but one in particular has significantly increased its footprint in funding the Black community.

Atlanta-based Citizens Trust Bank is one of the banks assembled by the National Black Bank Foundation, which served as mediator for the trailblazing MLS deal. Jason Eppenger, Alabama Market President for Citizens Trust Bank, said his branch in Birmingham, Alabama, can already attribute "two to three" sizable deals valued around $10 million in capital solely to the exposure from the MLS deal.

Since June, the bank has turned that around to lend more than $5 million to affordable housing developers to rehab more than 60 dilapidated units in predominantly-Black neighborhoods across Birmingham.

"Our bank specifically, CTB, has historically been real estate-heavy in the transactions that we do and so this (MLS deal) was a different avenue for us to earn," Eppenger told The Tennessean. "And the more diversification that we can get in earnings, in my opinion, it just allows the banks to be more dynamic in the communities that they serve."

Black banks historically have been overlooked by major companies due to the perception of being limited in human and capital resources, according to National Black Bank Foundation co-founder Brandon Comer. But the deal with MLS has started to change the narrative, allowing them to stretch their financial capacities to provide small business, mortgage and church loans to Black organizations — which are disproportionately impacted by financial crisis and discriminatory homeownership criteria and often have been neglected by traditionally white-owned banks.

All told, as the first American professional sports league to partner with Black banks, MLS — and the independent Black Players for Change coalition — has unearthed one blueprint for systemically attacking the racial wealth gap in America.

"These (developers) are bringing essentially brand new units back to the market. And rental rates are $750-$800 a month," Eppenger said. "That is one of our five components that we're gonna focus on specifically — the other being creating opportunities for homeownership — but also helping advertisers and developers either redevelop existing properties or develop new properties that are specifically targeted to be affordable housing."

'It will build over time'

Black banks' access to an extensive credit capacity is as vital now, with the Black-white homeownership gap sitting around 30%, as it was during the 1960s, when racially discriminatory tactics such as "redlining" were legal. Redlining allowed the federal Home Owners’ Loan Corp. to unapologetically identify Black neighborhoods as "hazardous," refusing to lend to families who lived there. Black banks today, just as they did during the Civil Rights Era, can only lend capital up to their capacities, making it harder to impact communities that have been systemically set back decades.

In August, the U.S. Census Bureau released its quarterly report on residential vacancies and homeownership. In the second quarter, the non-Hispanic white homeownership rate was 74.6%, compared to 45.3% for Black householders. A key culprit is a discriminatory credit score system.

It's a system that stems from Black households owning just 2.9% of America's wealth, compared to white households owning 86.8%, according to the 2019 Survey of Consumer Finances. This means payments like student loans and home payments — which until 2010 did not include renting — often render higher mortgage, student loan and credit card interest rates for Black Americans, which in turn often negatively affect credit scores.

A Credit Sesame survey in January 2021, which surveyed 5,000 adults, said 54% of Black Americans reported a credit score of 640 or lower, compared to just 37% of white Americans. So when Black small businesses or families fail to qualify at traditionally white banks, Black banks become inundated beyond their credit capacity.

That's where NBBF co-founders Ashley Bell and Comer come in.

Comer, who is also the managing partner of Comer Capital Group, LLC — the financial and syndication adviser for the deal with MLS — said the issue that "plagues" those Black banks is the notion of concentration, particularly small-business loans, church loans and mortgages in Black neighborhoods. Though the transactions are mission-driven, they lack diversity in their portfolio and, in turn, financial sustainability. The Urban Institute reported in March 2020 that Black-owned banks have declined by more than 50% since 2001. The MLS deal, through interest income fees, provide Black banks a portfolio with balance and power.

"That then translates in their ability to utilize that revenue to turn around and do more — what other entities aren't doing as well as them, which is lending into the Black community, whether that's mortgages, small consumer loans, or small business loans," Comer said. "And that will continue to build over time."

Inside the MLS-Black banks deal

In addition to Citizens Trust, the other six banks are Carver Federal Savings Bank (New York), Alamerica Bank (Birmingham, Ala.), Carver State Bank (Savannah, Ga.), Columbia Savings & Loans (Milwaukee), Mechanics & Farmers Bank (Durham, N.C.) and Unity National Bank (Houston).

The loan deal is a five-year-agreement with the Black banks funding MLS $5 million per year. Sola Winley, MLS executive vice president and chief diversity, equity and inclusion officer, and the league's catalyst for the deal, said the funds MLS is receiving are not be labeled for a specific project, but will go toward general operation of the league.

In order for MLS to be able to do the deal financially, it negotiated additional credit into an existing agreement with a separate set of banks that had previously loaned to the league.

MLS Chief Financial Officer Sean Prendergast, who secured approvals for the deal from the MLS finance committee, diversity committee and board of governors, emphasized the importance of the agreement being a market-based deal.

"We weren't given anything here," Prendergast said of the terms of the loan deal. "We got a deal that I think we would've gotten at a marketplace for a subordinated debt facility. It was a good deal for us and I think it was at a price that made sense for the banks, so I think both parties benefitted."

The future of MLS' deal with Black banks

Black Players for Change founder and executive director Quincy Amarikwa said the discussion about MLS better serving underserved markets stemmed from the MLS Barbershop Forum held at the 1923 Club at the LA Coliseum during the 2021 MLS All-Star Week.

"You see that the league can now see that there is a great deal of potential in markets that have been underserved and in demand that has not been met, but has the capacity to be met," said Amarikwa.

So Prendergast decided to invite Comer and Bell to its annual finance meetings.

On Sept. 22 in Cincinnati, the NBBF duo met with nearly every club CFO in the league and gave a presentation to the CFOs regarding the league's deal with the Black banks and the subsequent impact that can be traced from the deal's national exposure.

Comer said "several teams" reached out to NBBF following the meetings to talk through their club's upcoming projects, transactions and how the NBBF and the Black banks can get involved.

"My hope is that Brandon and Ashley and folks at at the foundation continue to carve out space, continue to demonstrate not just their capabilities and credibility, but their innovation and partnership and thoughtfulness," Winley said. "And I have full expectation that our relationship will only deepen and grow over time."

For stories about Nashville SC or Soccer in Tennessee, contact Drake Hills at DHills@gannett.com. Follow Drake on Twitter at @LiveLifeDrake. Connect with Drake on Instagram at @drakehillssoccer and on Facebook.

This article originally appeared on Nashville Tennessean: MLS' $25 million loan with Black banks was novel — but it's working