Showing posts with label Carver Federal Savings Bank. Show all posts
Showing posts with label Carver Federal Savings Bank. Show all posts

Friday, May 10, 2013

On Black Banks

I saw an article recently on Black banks in the US that was filled with inaccuracies. It was a public relations piece for the banking industry, so I thought I would post something based on my 20 years of research experience in the sector.

1. What is the historical significance of Black banks?

They were created at a time when discrimination against Black people was legal in the US. They served as the only financial service providers to the community.

2. Do Black banks have the same level of significance to the Black community today? Why or why not?

No. They are too small to serve the community in any meaningful way. For example, they cannot serve as a line of defense against predatory lending. The result: banks like Wells Fargo are free to target black communities for shoddy loanshttp://www.washingtonpost.com/business/economy/former-wells-fargo-loan-officer-testifies-in-baltimore-mortgage-lawsuit/2012/06/12/gJQA6EGtXV_story.html

Some Black banks were trying to help: See:
http://twisri.blogspot.com/2008/03/racial-divide-in-mortgage-mess-carver.html

But most were not. See:
http://twisri.blogspot.com/2009/04/black-owned-bank-has-few-urban-loans.html

This is contrary to their original mission. See:
http://www.creativeinvest.com/research/mlkoninvesting.html

3. What factors contributed to the dwindling in the number of Black-owned banks?

Several factors, but the main one is a lack of vision. Let's face it, though. Greed is a factor, too: "Regulators in October (2008) concluded in a cease-and-desist order that one Black bank had poor standards for qualifying and documenting loans, and gave top executives excessive pay and perks. Two of the perks regulators targeted were a $6.4 million beachfront Santa Monica mansion Cohee used while in California and a Porsche SUV..." 

Really?

4. How would you characterize the experience of Black banks in America throughout their history?

They once served a critical role in Black economic development, but they were sidetracked by the factors listed above. 

5. How did the recent Great Recession impact Black banks?

Decimated most of them.

6. Do you believe Black banking institutions were given a fair shake with regards to the TARP program?

Perhaps, but one Black bank got the most: http://www.washingtonpost.com/wp-dyn/content/article/2010/08/11/AR2010081105561.html

7. What is the forecast for Black banks moving forward?

We will see the number fall to low single digits within 10 years.
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Wednesday, April 13, 2011

Legendary Carver Savings Bank Fights To Stay in Business

"Carver Federal Savings Bank, the financial institution currently holding the top spot on the BE BANKS list, is fighting for its future. The nation's largest black-owned bank must significantly boost capital reserves by month's end or risk a potential shutdown, takeover or sale of the bank.

William Michael Cunningham, social investing adviser at Creative Investment Research Inc., a Washington D.C. firm specializing in minority banking, estimates that Carver Bancorp Inc.,parent of the Harlem-based bank, must raise nearly $20 million in new capital by April 30, 2011, to meet orders by the Office of Thrift Supervision, the primary regulator of all federal and a number of state-chartered savings banks."

Full article at: http://www.blackenterprise.com/2011/04/12/legendary-carver-savings-bank-fights-to-stay-in-business/

Tuesday, April 5, 2011

"A few last items about Carver Federal"

According to a new article in Crain's NY Business: "1. Before the financial crisis, there were 36 banks that had been founded and run by African-Americans, according to Creative Investment Research in Washington. There are now 25."

The article goes on to state that:

"The reason: Most of these banks are small and lack the base of capital needed to absorb real estate-related losses clobbering small banks everywhere. Because there are so many small, ailing banks, it's all the harder for minority-owned banks to raise new capital. The competition for new capital is incredibly fierce."

While we think the articles published by Crain's on Carver have been very good, we actually disagree with this reasoning. The answer is far simpler: racial discrimination and greed. (See: http://twisri.blogspot.com/2008/11/what-we-said.html)

Sunday, April 3, 2011

On Carver Federal Savings Bank (Harlem, NY)

From Crain's NY Business:


"The parent of Carver Federal Savings Bank holds its annual stockholders meeting April 4 at The Studio Museum in Harlem, near the bank's 125th Street headquarters. It could be the last.

Time may be running out for Carver, the nation's largest bank founded and run by African-Americans and an integral part of the city for 63 years. Staggering under a load of delinquent real estate loans, the bank is under orders from the U.S. Office of Thrift Supervision to raise $20 million in fresh capital by the end of this month. That's a steep climb for a bank that at best posts annual profits of $5 million. Yet if Carver can't raise the cash, regulators can either seize the institution and sell it to another bank, or dissolve it.

Longtime Chief Executive Deborah Wright has pulled Carver back from the brink before and has many high-level business and political connections who could help the bank get the needed funds.

But backers would be buying into an institution where 12.3% of the loan portfolio is more than 90 days delinquent. The industry average is 4.9%, according to Federal Deposit Insurance Corp. data. In addition, although $74 million of its loans are well overdue, Carver has just $21 million in reserves to cover loan losses.

'It's worrisome,' said William Michael Cunningham, founder of Creative Investment Research, a Washington firm that tracks minority-operated banks. 'Carver faces real challenges, because the impact of the financial crisis has hit the communities that it serves especially hard.'"

For the full article, see: http://www.crainsnewyork.com/article/20110403/FREE/304039975#

Friday, December 26, 2008

Lending facility for mortgage servicers

We note that, according to a recent article in Black Enterprise Magazine, "Through Urban Trust Bank (a black-owned bank), (Robert) Johnson created a new entity, Homeowners First Bank. Homeowners First is an advanced lending facility or a bank designed specifically to provide temporary, advance funding to mortgage servicers. Mortgage servicers are the middlemen, who may or may not be the same company as the lender, but who retrieve money from borrowers on behalf of lenders."

We feel this effort may be an attempt to profit, as the Washington Post noted, from the "unprecedented wave of foreclosures, charging distressed homeowners for help negotiating better loan terms -- a service provided for free or for a nominal fee by many nonprofits."

We should remember that Mr. Johnson has a history of not living up to promises made to the black community. Since it is irrelevant to the current discussion, we will ignore historical charges against the man, and focus on the bank.

Urban Trust recently abandoned efforts to maintain a banking presence in black neighborhoods of Washington, DC, preferring to concentrate on more profitable suburban Maryland banking markets.

But as we suggested earlier, we believe black and minority neighborhoods would not have been so heavily and negatively impacted by the subprime lending crisis if Urban Trust had moved to head the crisis off at the start, by offering responsible, non-subprime loans in minority communities. At least one black owned bank, Carver Federal, launched a special effort to do so in 2006, 2007 and 2008.

Bottom line: we see this as a likely-to-be-ineffective attempt to profit from troubles in the Black community. We base this statement on our experience in
helping create a refinancing plan for victims of predatory lending in Minneapolis.

Friday, August 15, 2008

Positive second qtr 2008 results for Carver

Carver Bancorp, Inc. reported earning $700,000, or 27 cents per share, in the second quarter of 2008. The bank declared a cash dividend of 10 cents per share. This compares favorably to the mammoth writedowns, and the resulting hits to income, large banks are reporting this quarter. For example, according to Marketwatch.com,

"Salt Lake City-based Zions' Bancorporation..closed down 14.3%, becoming the top loser among financials after a rapid tumble.. The fall in the bank's share price comes after Moody's Investors Service said it was reviewing the company for a downgrade.

Wachovia reported a second-quarter loss of $9.11 billion, or $4.31 a share, last month. Wachovia ended 12% lower as traders beat down the stock on news that the bank is revising lower its second-quarter loss by $500 million pretax. This was to reflect a hit it is likely to take from settlement discussions with regulators of investigations relating to auction-rate securities."

Thus, small, minority banks will, we believe, outperform their larger, non-minority counterparts for the balance of the year.

At Carver, net interest income declined by $400,000, and non-interest expense climbed by $800,000. Non interest income increased by $600,000, and the bank generated an income tax benefit totaling $500,000.

One worrying sign: Carver increased provision for loan losses - non-performing loans at the bank increased. And bank assets fell to $788.7 million, driven lower by declines in cash and cash equivalents.

Carver Bancorp is the holding company for Carver Federal Savings Bank, the largest African American run bank in the United States.

Tuesday, March 11, 2008

Racial Divide In Mortgage Mess: Carver Federal on CBS Evening News

Carver Federal Savings Bank was featured on CBS Evening News on Sunday, March 9th at 6:00 PM. They discussed their approach to helping subprime lending victims. To see the video, click below:

Racial Divide In Mortgage Mess

http://www.cbsnews.com/sections/i_video/main500251.shtml?id=3920203n

CBS News Online