Financial FREE-For-All

Black-owned banks are poised to profit from repeal of the Glass-Steagall Act

seats on its board of directors that BBOC had tried to win in a shareholders’ vote at Carver’s annual meeting. BBOC had unsuccessfully nominated Cohee and his wife, Senior Vice President Teri Williams, for the board seats. Instead, Carver Directors David Dinkins, the former mayor of New York City, and David R. Jones, Carver’s nonexecutive chairman, retained their seats by a margin of just 30,000 votes (See “Battle Royal,” this issue).

The tangle between BBOC and Carver doesn’t necessarily mean that future mergers between black-owned banks will be just as contentious.

Chapman’s Gladue says that’s mainly because most black-owned banks are privately held, making hostile takeovers highly unlikely. And a big percentage of the stock of most publicly traded black-owned banks-like Carver and Broadway Financial Corp.-are owned by directors or top officers, making it tougher for suitors to make bids.

“The Carver-BBOC case is somewhat unique, particularly for black-owned institutions,” Gladue says. “This is rare, and I really doubt that we’ll see more deals like it.”

OFFERING MORE THAN JUST PASSBOOKS
Some black-owned banks have already been successful at offering nontraditional bank products and at entering into alliances with regional institutions. For example, in
1998 Liberty Bank and Trust in New Orleans (No. 11 on the B.E. Banks list) began offering mutual funds through Jackson, Shankin & Sonia Investments, a New Orleans brokerage firm. And last fall, Liberty Bank aligned itself with Maryland-based Harbor Bankshares and Alabama-based Tuskegee Bank in a joint venture with Jackson, Shankin & Sonia to sell stocks, mutual funds and annuities through the three banks’ branches.

And Gladue predicts that black-owned banks might partner with larger banks looking to gain Community Reinvestment Act credits and deter opposition from fair-lending and community activists who might challenge future acquisitions as they expand geographically.

Donald Davis, chairman at First Independence National Bank of Detroit (No. 12 on the B.E. Banks list), with assets of $158.2 million and four branches, says the new law could create many opportunities for black-owned banks to generate additional fees, increase loan production and offer both individual and business customers in black communities new products and services.

“We won’t have to close the books on them with one product like a checking or savings account,” Davis says. “The entire financial services world is moving that way and I don’t see why we won’t now.”

Davis figures that one of the biggest areas where First Independence can generate fee-based income will be to offer more services to small- and medium-size businesses with annual sales ranging from $500,000 to $20 million, its primary market.

Some industry observers are unsure whether the law will foster more acquisitions among black financial companies, though.

A HANDFUL OF DEALS
Gladue believes that some black-owned financial service companies will merge, but that there will not be a massive number of deals. He says that’s because there are a limited number of major cities with two or more black-owned banks, or a bank and insurance company. But Gladue says there are two wild cards that could fuel a few deals. Most of the banks that

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