As a result, 2008 was the last year the bank posted a profit, of $1 million. Non-performing assets contributed to losses for three straight years: -$7.8 million in 2009, -$7.5 million in 2010, and -$3.5 million in 2011. With those losses came compliance and capitalization issues with the Office of the Comptroller of the Currency, a federal regulatory agency and the bank’s primary regulator. “The things that we need to do now are different,” says Pinkett, who graduated from Cornell University and earned an M.B.A. from the University of Pennsylvania’s Wharton Business School.
Something clearly had to change. “The regulators encouraged major and sustained improvement in policies, procedures, and practices within the bank,” says Pinkett, who was a board member before he assumed the presidency when predecessor Louis E. Prezeau retired in March 2011. Now, Pinkett, a former PNC Bank senior vice president, looks to return City National to profitability in the next two years or so by rebranding, refocusing, and redefining the 39-year-old institution.
Sign of the Times
City National Bank was established in 1973 when a group of African American community leaders sought to create an institution that would be sensitive to the financial needs of minority residents who had limited access to credit and banking services. Charles L. Whigham, a prominent local businessman (who later became the bank’s first president), organized the efforts to raise $1.2 million mainly through church groups and individuals selling stock door-to-door. Some 1,800 shareholders purchased 60,000 shares. Over the years, City National Bank grew to comprise branches in Newark and Paterson in New Jersey, as well as in Harlem, Brooklyn, and Long Island in New York.
But recent years have seen more changes in the banking industry than the previous three decades combined. With interest rates at historic lows, institutions of all sizes needed to develop revenue streams beyond accepting deposits and lending capital. “A bank has to pay depositors for the money it takes in from them, and we have to turn around and either invest or lend that money out at spreads sufficient enough to cover the cost in addition to the overhead,” says Edward R. Wright, the bank’s senior vice president and CFO. “So, as long as rates are held down we don’t have the same opportunities that we had in the past. The overhead doesn’t go down. It goes up. Yet the difference between what we earn and what we pay on our interest on the assets goes down. So, we’re squeezed there as well.”
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