June 1, 2004
Carver Acquires Independence Federal Savings
In a deal that promises more than 1 million new customers in the nation’s capital, Carver Bancorp Inc., the holding company of Carver Federal Savings Bank (No. 1 on the BE BANKS list with $529.6 million in assets), has agreed to buy the parent of Independence Federal Savings Bank (No. 11 on the BE BANKS list with $217.1 million in assets) for $32.6 million. The merger will create the nation’s largest African American-owned bank, with assets of approximately $750 million.
Deborah C. Wright, Carver’s president and CEO, says the merger will allow her bank to pick up $180 million in deposits from Washington, D.C.-based Independence. Wright, who will remain as president and CEO, says the purchase creates terrific growth opportunities for Carver, which has six branches and over 2 million customers in New York City. Independence has five branches and about 1.1 million customers in the greater Washington, D.C., area.
The combined financial institution will realize significant economies of scale resulting in better technological capabilities with which to deliver better products and services, says Independence President and CEO Thomas L. Batties. “Moreover, the increased size will enhance the bank’s ability to provide larger loans to its customers.”
Observers such as Robert Clark, a senior research analyst at SNL Financial, say Carver made the acquisition because it sees an opportunity to revive Independence, which had been losing money for a couple of years. He says the hope is that Carver will achieve the same success with Independence that it had in turning around its own bank.
“Since 1999, Carver has completed one of the most significant turnarounds in the banking industry,” Wright says. “After a loss of nearly $4.5 million in 1999, our team worked very hard to exit unprofitable business lines, restructure our branch network, and implement improved efficiency. For the nine months [ending] Dec. 31, we posted record net income of $3.7 million, up from $2.7 million, or 36%, from the prior year.”
But Clark says the first challenge to turn around the troubled financial institution will be to stop the red ink at Independence. “The goal for Carver … is to return [Independence] to profitability” by getting results back to industry standards on things such as return on equity and return on assets — two key profitability measures.
Among other things, management at Carver and Independence say the combination of their complementary franchises will allow them many strategic benefits, including the additional resources needed to serve one of the nation’s fastest-growing and most affluent African American consumer markets and increased funding for multifamily, commercial, and affordable housing loans.
And the deal also marks the end of much speculation about who might purchase Independence. BET founder Robert Johnson and Washington, D.C., investor Morton Bender, both individual holders of Independence stock, had expressed interest after Independence began taking bids from potential suitors.
Carver, which was reportedly the highest bidder, paid a premium of 1.51 times Independence’s book value and agreed to pay Independence’s shareholders $21 a share in cash for each share of their common stock. Under the merger,