The annual statistics, compiled last month by William Michael Cunningham, senior investment adviser at Creative Investment Research Inc., a Washington D.C. firm specializing in minority banking, illustrated a major decline as some black owned banks suffered big losses tied to securities-related investments.
Buddy Howard, president and banking analyst at Equity Research Services Inc. in Raleigh, North Carolina, said black owned banks, much like the majority of banks, were under intense profit pressures in 2008, and these pressures have extended into 2009. “It was one of the most challenging years the entire industry has had in many years, with earnings pressured by tighter margins, severe asset quality problems and anemic loan demand, which has negatively impacted earning asset growth,” Howard said.
Profits at 44 black-owned banks fell to a collective net loss of $27 million last year, down from a profit of nearly $24 million in 2007 and the lowest level since 2000, according to Cunningham’s analysis. He said the data was based on call reports the banks’ flagship banks – not their parent companies – filed with the Federal Deposit Insurance Corp. for the year ending Dec. 31. He said 22 of the banks had a net loss.
Kevin Cohee, CEO of OneUnited Bank (No. 2 on the BE Banks list with $636 million in assets) acknowledged that the investment losses in the two mortgage giants hurt the bank’s earnings last year. But he said the bank continues to be well capitalized and has returned to profitability in 2009. “It’s a testimony to the strength of OneUnited that it was able to lose over $50 million tied to investments in Freddie Mac and Fannie Mae and narrow that lost to $29 million by year end shows the company’s earnings capacity,” Cohee said. “The fact that the bank is now well capitalized shows the financial wherewithal of the bank’s shareholders.”
However, the news was not all bad. The number of black owned institutions that survived last year was at a substantially higher rate than U.S. banks overall and their growth in assets rose at nearly the same level as their mainstream peers. According to Cunningham, there were 44 black owned banks or banks controlled by a black board in 2008, three fewer than in 2007. Those institutions had assets of $7.6 billion in last year, up 5.5% from in 2007. In contrast, the number of FDIC-insured banks and thrifts totaled 8,305 of last year, down from 8,534 two years ago, according to the FDIC. Their net income totaled $10.2 billion in 2008, down from $100 billion in 2007. Those institutions’ assets reached $13.8 trillion, up 6.1 percent from 2007.