of overhead over a larger base, and [Community Capital is] in a more profitable business, which is small business lending. For us, it makes a lot of sense,” she says. If the deal goes through, Carver’s assets will increase to more than $800 million. “It’s essential that we become a full-service bank in the communities we serve,” adds Bob Holland, an independent member of the board of directors and general partner of CSW Private Equity in New York. “We need to get more services to businesses in the community. It’s not easy for savings and loans to do commercial [banking] activities.”
That’s not to say that every transaction has been money in the bank. In 2004, Carver’s bid to buy Washington D.C.-based Independence Federal Savings Bank in a plan to form a bank with $750 million in assets was blocked by banking regulators because IFSB had been losing money. In addition, internal strife within that bank made the institution unstable as a shareholder attempted to take control of the bank, appointing two directors and buying shares on the open market while Carver was attempting the buyout. “We got caught in the middle of two factions for control of the institution. One of them purchased a blocking position; there was no way to get around that,” Wright says. “I still feel bad about it. We spent a lot of money there.”
This time around, Wright tried a different approach. She was introduced to Community Capital President and Chief Executive Charles Koehler and spent a few years getting to know him. She also enlisted a trusted colleague, Swan, to crunch the numbers. As chief of staff and corporate secretary, Swan handles corporate governance and shareholder and director relations.
“The main thing is going to be to get this one down and integrated well,” Wright says. The next step will be jumping through regulatory hoops and “getting people in the right chairs. I think we’re going to be in the M&A game for some time to come,” Wright adds.
That could be tough. With a small staff-Carver employs 126-it will take more time to put everything in place. Also, many of the typical targets, other African American-owned banks, aren’t actively interested in selling, Wright says.
“The hard part is that most of the black banks are privately held and they are usually family owned or linked to an individual’s identity,” Wright says. “That’s why so many of our institutions have gone under, because it’s been very difficult to get deals done.”
INTEREST RATE PINCH
Like other banks, Carver is feeling the effects of more than a year of interest rate increases by the Federal Reserve that are forcing banks to pay more to attract deposits while earning less on loans. Carver needs to find a way to cut expenses, Gladue says. At 82%, the bank’s efficiency ratio, a measure of its expenses, is well above its peers, he notes, adding that thrifts with $500 million to $800 million in assets located in mid-Atlantic states typically have an efficiency ratio