Digging In

Black financial services firms entrench themselves amid a rocky market

banker at Broadway can now make a commission based on products sold, such as certificates of deposit.

No bank has had more adjusting to do than Liberty Bank & Trust (No. 8 on the BE BANKS list with $328.2 million in assets). In the aftermath of Hurricane Katrina, Alden J. McDonald Jr., president and CEO of the New Orleans-based bank, has been busy rebuilding his business. Liberty Bank recently won a bid to take over the assets of Kansas City-based Douglass National Bank, formerly on the BE BANKS list. Liberty acquired an estimated $55 million of Douglass’ assets at book value, less a discount of $6.1 million. Liberty also picked up approximately 6,500 accounts, three branches, and the ATM network from Douglass, previously the Kansas City area’s only black-owned bank. Federal regulators closed Douglass because of escalating bad loans and insufficient capital. In 2007, assets at Liberty rose 9.6%.

Despite the concerns in the housing market, Milwaukee-based Legacy Bank (No. 13 on the BE BANKS list with $184.4 million in assets) realized asset growth of about 15% mainly from a jump in loans to small businesses and commercial real estate developers. Net loans grew by 11% to $144.7 million while bank deposits grew 12.7%, from $134 million to $151 million in 2007. The gains helped the bank, founded in 1999 by three African American women, post a 39.4% increase in profits, from $961,000 to $1.34 million. To motivate employees to improve efficiency, sell more products, and boost profitability, CEO and President Deloris Sims says Legacy launched cash incentive and employee stock option programs. The bank also plans to use $120 million in tax credits from the U.S. Treasury Department to make loans to small businesses. “Those tax credits will help us get through these tough times,” Sims says.

ASSET MANAGERS: DODGING SUBPRIME
A trend that black asset managers benefited from last year was that many of the nation’s largest pension funds — including those managed by states, major cities, and big corporations — realized they could get better investment results and great services by broadening their focus to hire “emerging” asset managers who typically have less than $5 billion in assets under management. According to Isaac H. Green, president and CEO of Durham, North Carolina-based Piedmont Investment Advisors L.L.C. (No. 10 on the BE ASSET MANAGERS list with $2 billion in assets under management), the trend has grown steadily since the bear market of 2000-2002. However, it’s also led to a rapid increase in the number of firms competing in this business segment, making it more difficult for any of the emerging asset managers, including the black-owned firms, to distinguish themselves.

Ranked No. 8 on the BE ASSET MANAGERS list, Houston-based Smith Graham & Co. Investment Advisors L.P. grew 21.1% last year in assets under management, from $2.27 billion to $2.75 billion. Gerald B. Smith, chairman and CEO, attributes the gain to the firm’s solid performance in the bond market during the past three years. “Avoiding [subprime] issues has created new opportunities for us with corporate

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