ScottEnsley adds that for minority banks to compete in the next millennium, they must also continue to operate efficiently and be financially sound. Granted, but there will always be a place for small community banks, even in the face of mergers, says Joe Gladue, an equity analyst with the Chapman Co., a Baltimore investment bank (No. 13 on the BE INVESTMENT BANK list). “Small banks have intimate knowledge of their markets and customers and should be able to thrive on that.”
In fact, he says the banking industry could end up as a two-tier market, “where we have large national banks with $100 billion or more in assets, like Bank of America, Citibank and NationsBank, at one end and small banks that can continue to provide personalized services on the other end.”
TWO STEPS FORWARD
The fact that black-owned financial institutions will survive the current wave of mergers does not mean there won’t be casualties along the way. First Texas Bank of Dallas, the city’s only black-owned bank (ranked No. 7 on the 1996 BE FINANCIAL 25), was recently sold to BOK Financial Corp. in Tulsa, Oklahoma. At the time, First Texas had $ 142 million in assets, a hefty chunk now missing from this year s BE FINANCIAL 25.
The loss of First Texas and the tumultuous climate black-owned banks find themselves in, helped contribute to total assets for black-owned banks in 1996 reaching $3.30 billion, up slightly from $3.28 billion in 1995. Total deposits for 1996 were $2.79 billion, down from $2.81 billion in 1995; and total loans for 1996 equaled $2.10 billion, up from $1.58 billion in 1995. Total capital remained constant at $271 million over the two-year span.
The overall picture for banking was not so mixed. Super regional banks experienced healthy growth across the board. Total assets of all 10,120 banks throughout the country amounted to $4.84 trillion in 1996, up from $4.57 trillion for 10,537 banks in 1995. Total loans were $2.98 trillion, up from $2.76 trillion; deposits were $3.40 trillion, up from $3.23 trillion, equity capital grew to $400.5 billion from $374.1 billion, and earnings for the entire industry were $54.8 billion compared with $51.2 billion the previous year. The industry’s record profits are continuing, but this year, black-owned banks have a better handle on tapping into the lucrative opportunities.
COLLECTIVE LENDING AND STRATEGIC PARTNERING
Several years ago, small national banks talked in terms of their legal lending limitation–no more than 15% of their capital. Since lending is a chief money-making source, these limitations severely diminished the profitability of the black-owned banks. They were virtually shut out of lucrative opportunities with large corporations. The solution was banking consortiums. “If your capital base is $1 million, the most you could loan out to any one customer is $150,000,” says Seaway National Bank President and CEO Walter Grady. “Being that we had a small capital base, we felt that if we pooled our resources, we could attract larger lines of credit and spread our risk the same as a majority bank does.”