The Fight Of Their Lives

B.E. financial services firms were locked in mortal combat with tough competitors and a bruising

like OneUnited Bank, formerly the Boston Bank of Commerce (No. 1 on the BE BANKS list with assets of $499.7 million) and Atlanta-based Citizens Trust Bank (No. 5, with assets of $277.25 million).

Second, a number of institutions don’t have the capital to adequately modernize operations — a major disadvantage in a world in which customers prize quick, qualitative, and convenient service. And finally, the biggest challenge: economic uncertainty. Even with the resolution of “Persian Gulf War II,” the economy in 2003, at best, is expected to mirror the tepid performance of 2002. With home mortgage lending being the bread-and-butter of many black-owned banks, Gladue ponders the fate of these institutions if they no longer reap the benefits of a low-interest-rate environment that has fueled a record number of home purchases and mortgage refinancings. His point: What happens if the housing boom proves to be a bursting bubble?

Citizens Trust Bank is one institution that’s recovering from a battering by a tough opponent: the economy. CEO James Young says the bank’s profits last year came in at $2.5 million, about $300,000 below target. The reason: Citizens Trust has to set aside more money to cover potentially bad loans. Loan loss reserves as a percentage of total loans were 1.47%, up from 1.27% the previous year and much higher than the average ratio of 1.25% for peer institutions.

But Citizens Trust is still positioning itself for future growth, competing with OneUnited for the leadership of minority banking. Last year, it completed the $10 million cash purchase of Birmingham, Alabama-based Citizens Federal Savings Bank — a move that allows Citizens Trust to expand across state lines into Alabama, pick up about 6,000 individual customers, and increase fee income by providing commercial loans to large and small companies in the area. The acquisition is one in a series of transactions Young expects will grow assets to $3 billion over the next five years. “We would have to make more acquisitions or combine with other companies to achieve that goal,” he says.

One top performer was City National Bank of New Jersey (No. 8 on the BE BANKS list with $215 million in assets). The Newark-based institution realized a 2002 profit growth of 31.7% over 2001. City National’s CEO, Louis E. Prezeau, maintains that the bank enjoyed a renaissance along with the city’s new economic development and was able to offset the slowing economy by boosting construction lending, as well as making more loans to area churches.

City National also found growth through partnerships. For instance, it benefited from its 20% stake in Minority Alliance Capital, a joint venture with New Orleans-based Liberty Bank & Trust Co. (No. 7 on the BE BANKS list with $226.13 million in assets), First Independence National Bank of Detroit (No. 12 on the BE BANKS list with $165 million in assets), and GE Capital. Minority Alliance Capital offers equipment lease financing and advisory services to major companies. Prezeau says City National will keep expanding, opening a new branch this summer in West Harlem, New

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