FDIC selling controlling stake in Black-owned bank. The American Banker Newspaper. By John Reosti. December 01, 2021
While a preliminary bidder’s list included several large Black-owned banks, it also included some non-minority bidders. Founded in January 2000, the $15.4 million-asset Alamerica is the smallest of the 17 remaining Black-owned banks in the United States.
According to William Michael Cunningham, CEO at Creative Investment Research and an authority on Black-owned banks, the FDIC-owned shares were used as security for a $4 million loan from Silverton Bank. They passed into the FDIC’s possession following Atlanta-based Silverton’s failure in May 2009.
The FDIC “certainly has the right to do this,” Cunningham said Tuesday, but he called it troubling that Alamerica might wind up outside the minority banking sector as a result of the auction.
“If Alamerica is no longer Black-owned, that could damage perceptions of Black banks from a social and cultural perspective, especially given the bank's location in Birmingham, called Bombingham during the Civil Rights era due to the 50 dynamite explosions that occurred in the city during this time span. Another factor damaging perceptions is the supposed support for Black banks following the death of George Floyd. This situation leads some to question the validity of that support,” Cunningham said.
Alamerica has struggled with controversy and poor performance in recent years. In March 2019, Donald Watkins, the bank's founder and largest shareholder, was convicted of wire and bank fraud in connection with a scheme that involved the theft of more than $10 million from a group of investors and Alamerica itself. According to the U.S. Attorney for the Northern District of Alabama, Watkins used a straw borrower to obtain $900,000 in loans from the bank.
At the same time, the bank has reported losses each year since 2017, including a total of $635,000 lost through the first nine months of 2021.
Matthew Morris, who has served as Alamerica’s interim CEO since December 2020, said the bank's staff was taking a “business-as-usual” approach ahead of the Wednesday auction.
“It’s hard to know what will happen, but we’ll still be serving our customers whoever ends up being the owner,” Morris said Tuesday. An FDIC spokesman declined to comment.
The number of Black-owned banks has been declining steadily for decades. As recently as 2001, there were 48, but the number dropped to 17 as of June 30 this year. In April, Broadway Financial Corp. in Los Angeles and CFBanc Corp. in Washington, D.C., closed a merger of equals creating the nation’s largest Black-owned banking company. The $1.1 billion-asset company kept the Los Angeles company's name.
In November 2019, the Black-owned City National Bank of New Jersey in Newark failed. Its assets and deposits were assumed by the Black-owned Industrial Bank in Washington, D.C.
To counter the downward trend, organizers in Columbus, Ohio, are planning to raise $20 million to open a Black-owned bank there.
(NOTE: Alamerica's stock was purchased by Black-owned Carver Financial, located in Georgia, for $1.1 million.)
Edited by William Michael Cunningham.