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National City to invest $2 million with local CDFI bank; council cites community benefits and small yield tradeoff
Summary
Council unanimously approved placing $2 million with Neighborhood National Bank (a CDFI) through CDARS to keep city funds local and support small business lending, after staff and the bank described expected yields (around 3.77–3.98% APY) and community reinvestment plans; council asked staff to verify investment policy conflict checks.
The National City Council unanimously approved a staff recommendation to invest $2 million with Neighborhood National Bank through the Certificate of Deposit Account Registry Service (CDARS) program on Jan. 14, citing the community‑development bank’s CDFI mission and plans to redeploy funds into local loans and grants.
Scott Andrews, the bank president, told the council the bank will re‑establish a downtown branch and direct lending into low‑ and moderate‑income communities. "Our intention with these deposits is to turn them around and deploy these funds back into the city in the form of loans, grants and charitable contributions," Andrews said.
Staff and finance officials discussed yields and portfolio diversification. Finance staff said the city’s portfolio currently yields nearly 4% overall and that CDARS terms from the bank were in the mid‑3.7% to high‑3.8% range depending on term. "The margin is small on a relatively small portion of our portfolio," the finance director said.
Council members asked about conflict‑of‑interest checks after a public speaker raised concerns that the building the bank plans to occupy is owned by a family with past ties to local council fundraisers. Staff said they would follow investment‑policy conflict checks and comply with ethics rules.
The motion to proceed with a $2 million CDARS investment passed unanimously; staff said it will monitor rates and evaluate additional investments if terms are favorable. The council viewed the combination of a modest yield differential and local lending benefits as acceptable.
