Founded: 1948 as Carver Federal Savings and Loan Association
NAIC: 522120 Savings Institutions; 522210 Credit Card Issuing; 522310 Mortgage and Other Loan Brokers; 522291 Consumer Lending; 551111 Offices of Bank Holding Companies
SIC: 6035 Federal Savings Institutions; 6036 Savings Institutions Except Federal; 6163 Loan Brokers; 6141 Personal Credit Institutions; 6712 Bank Holding Companies
Carver Bancorp, Inc., the holding company for Carver Federal Savings Bank, a federally chartered savings bank, is the largest publicly traded financial institution in the United States operated by African and Caribbean Americans. It engages in a wide range of consumer- and commercial-banking services, including demand, savings, and time deposits for consumers, businesses, and governmental and quasi-governmental agencies in the New York City metropolitan area. Carver also offers a number of other products and services, including debit cards, online banking, and telephone banking. Its loan products include commercial and residential mortgages, construction loans, and business loans. The principal lending activity is the origination of mortgage loans for the purpose of purchasing or refinancing one- to four-family residential, multifamily residential, and commercial properties. Through a subsidiary, Carver participates in local economic development and other community-based activities. Located in the heart of Harlem, the bank has ten branches, all in New York City.
A Pioneer Savings and Loan Institution
Carver Federal Savings and Loan Association was established in1948 as the result of a five-year effort by Harlem community leaders who were convinced that racial bias was keeping qualified black applicants from securing residential mortgage loans. After two years of waiting unsuccessfully for a response to its application to the state of New York, the group applied for, and received, federal approval. The charter, received on the basis of funds pledged to the undertaking, enabled Carver to obtain federal deposit insurance and become a member of the Federal Home Loan Bank of New York.
The first savings and loan association in the state of New York to be established by black people, it opened its doors on January 5 (the birth date of noted African American scientist George Washington Carver, for whom it was named) of the following year. Although Harlem residents pledged $250,000 to found the financial institution, only $14,000 was extended in the form of cash. Carver opened in a small storefront on 125th Street--Harlem's main thoroughfare--with one desk, one cash register, and two employees.
Several men held leadership posts in Carver Federal Savings during its first two decades. Walter A. Miller was the first president, but its day-to-day manager was the executive vice-president, Joseph E. Davis. Miller, who died in 1950, was succeeded by William R. Hudgins. Hudgins, who later became first president of the rival Freedom National Bank, relinquished the post in 1958. Davis then held it until his death in 1968. The Rev. Dr. M. Moran Weston, an Episcopalian priest and one of Carver's founders, was appointed to fill out Davis' unexpired term, then continued as chairman into the 1990s.
In his obituary of Weston, Douglas Martin of the New York Times wrote, "Before Carver opened ... there was only one black above the rank of janitor working in a New York bank." That all changed, Weston told Robert Fleming for a Black Enterprise article in 1987, when banks realized they were losing African American depositors to Carver. "Without a doubt, our most significant contribution is that we broke the back of discrimination in the financial industry," he said. "Our success forced the white banks to hire blacks. They changed their policies to offset the drain of black dollars from their banks. We could save at their banks, but we couldn't get loans."
Early Growth and Expansion
By 1952 Carver was affluent enough to move into a two story building at its present location. In 1961 it opened its first branch office, in the Bedford-Stuyvesant neighborhood of Brooklyn, which, like Harlem, was a predominantly black residential area. In late 1962 Carver had $31 million in assets and 32,000 depositors. It had lent more than $80 million to some 3,000 home buyers and, according to Lewis, had foreclosed on only one home loan--which had been made to a white family.
Carver opened another branch in 1963, in the racially integrated Penn Station South housing project, located in Chelsea, a predominantly white downtown Manhattan neighborhood. Davis told Layhmond Robinson of the New York Times, "We will not be operating down there as a Negro institution. We will be competing on the same basis as any other business." Davis was said to be proud of the varied ethnic background of the institution's tellers, who could serve customers in six languages besides English.
At Davis' death in 1968, Carver had some $40 million in assets and 40,000 depositors. It grew slowly in the 1970s, a decade marked by rising crime and economic decline in New York City, and continuing flight to the suburbs by blacks as well as whites, a migration that took its toll on Carver's middle-class base of depositors. Even so, the savings institution established more branches, in Brooklyn and the adjacent borough of Queens.
Richard T. Greene was president of Carver Federal Savings from 1969 to 1995. By 1982 the institution had assets of $88.5 million and five offices in Manhattan, Brooklyn, and Queens. In that year it absorbed Allied Federal Savings and Loan Association, a financial institution based in Jamaica, Queens. Allied had assets of $19.1 million, but its net worth had diminished to practically nothing in the economic recession of the early 1980s. Carver kept one Allied branch but closed the other. The merger made Carver the nation's second largest black-owned savings institution, trailing Family Savings and Loan Association of Los Angeles. In 1986 Carver converted to a savings bank and changed its name to Carver Federal Savings Bank. According to Greene, however, the change in status did not change the nature of the operation. Carver preferred to call itself a community development bank rather than a savings or commercial bank.
Roller-Coaster Ride
Under Greene, Carver pursued a conservative policy, lending far less money than it had on deposit. Most of its loans were made on one- to four-family homes and to churches--more than 100 of them. Other assets went into safe but low-yielding investments such as money market funds and mortgage-based securities. This policy allowed the bank to avoid falling victim to the savings and loan crisis of the late 1980s and the problems created by the recession in the early 1990s. By contrast, Freedom National Bank, located only two blocks from Carver, was closed by federal regulators in 1990. By 1992, other than Carver, there were only four bank branches on 125th Street, compared to 14, representing 12 institutions, in 1960.
If Carver seemed stingy in extending loans--and it did rank second-lowest for compliance with the Community Reinvestment Act--it nevertheless engaged in other means of serving African Americans in New York City. The bank was a popular field trip destination for groups of schoolchildren; it gave out dozens of college scholarships each year; employees were hired locally; and the bank published an annual black-history calendar.
By 1994 the number of Carver branches had grown to seven, including one in Roosevelt, Long Island, on the site of a former Anchor Savings Bank branch. All but the location in Chelsea were in minority neighborhoods, and most were in the former quarters of white-owned commercial banks that had left the area. Assets had passed $300 million, but Carver's management felt the bank had to grow faster in the more competitive, deregulated economic climate of the times. As a mutual savings bank, it was owned by its 44,000 depositors, but like many other such banks, it decided to change to stock ownership. After a considerable struggle, it won the necessary assent of more than half the depositors and went public, selling 2.4 million shares, about 90 percent to depositors, at $10 a share.
In 1993 the shares of banks converting from mutual to stock ownership had risen as much as 28 percent on the first day of trading. By 1994, when Carver followed this course of action, legislation had raised the capital requirement for such conversion, and the market had soured. Consequently Carver's stock, listed on the NASDAQ, sank by 22 percent on the first day of trading and seldom reached its original $10 mark until 2002. Another setback was the destruction by fire of Carver's headquarters in 1992, which forced depositors to visit a hastily assembled nearby office or take shuttle buses in order to conduct their business in the branches until the bank reopened in 1996 in a four story building on the same site.
New Leadership, Mixed Success
Greene was succeeded as president of Carver in 1995 by Thomas L. Clark, Jr., a former state banking regulator. Under Clark's leadership, Carver invested about 70 percent of its assets in mortgage loans and instituted a mortgage origination center making direct loans rather than buying lower-yielding but safer pools of mortgages. It also made good its claim to be a community development bank by lending $3.15 million to the Bedford Stuyvesant Restoration Corp. to help it renovate its commercial plaza, which was a neighborhood hub of business and cultural activity. In 1996 the magazine Black Enterprise chose Carver as financial company of the year. Also in that year, the bank completed a reorganization that made it the subsidiary of Carver Bancorp, Inc., a newly created Delaware-incorporated holding company. Federal Savings Bank shares were exchanged for Bancorp shares on a one-to-one basis.
One difficulty faced by Carver in the 1990s was a federal effort to prod banks into investing in inner-city neighborhoods. By 1999, Chase Manhattan Bank alone had three branches on 125th Street. Faced with increasing competition from outside, Carver began offering services such as unsecured credit cards and auto loans, interest-bearing checking accounts, and automated teller machines (ATMs). It also opened its first branch in suburban Westchester County, in predominantly African American Mount Vernon. However, the bank soon foundered on losses related to its consumer loan portfolio, many of the loans having proved of poor quality--including credit card and personal loans--and a badly implemented conversion of its data processing from an outside provider to an in-house system. Amid a $4.5-million loss in fiscal 1999, Clark was ousted and replaced by Deborah C. Wright, formerly a New York City housing commissioner.
Recovery in the 21st Century
Wright's first challenge was to keep her job, which had been threatened by a takeover bid from the Boston Bank of Commerce's Kevin Cohee, who, with his wife, had become one of Carver's largest shareholders. Cohee--a former classmate of Wright's at Harvard University--proposed that Carver acquire his bank and hire him and his wife to administer the joint operation. Wright parried the offer by persuading two downtown firms to purchase an equity stake larger than that held by the Cohees, who had sold their shares in Carver by 2002. By 2006 Wright was chairman and chief executive officer, as well as president, of the bank and holding company.
Wright next set out to improve Carver's bottom line by closing three unprofitable branches: Penn Station South and the two in the suburbs--Roosevelt and Mount Vernon. After writing off $8.3 million in nonperforming consumer loans, she reached out to powerful figures such as Henry Kravis of private equity Kohlberg Kravis Roberts & Co. for help in raising an additional $45 million in deposits. Carver invested in more ATMs; began selling life insurance, annuities, and other investments in its branches through other firms; and greatly increased its participation in nonresidential real estate loans, including $9 million for a housing project by Harlem's Abyssinian Baptist Church.
Under a 1998 state law, banks and thrift institutions in communities designated as underserved were eligible to receive state- and municipal-government deposits. In 2001 Carver opened a Harlem branch mainly to take advantage of the provision and received $55 million in state and city deposits. These funds, which remained on deposit for five years, helped tide the bank over the period it took for the branch to become profitable. Carver also opened a branch in a Queens area that was designated a banking development district in 2004. Two years later, the state designated part of northern Harlem as another banking development district. The immediate beneficiary was Carver, which was operating the only branch in this district.
One initiative that did not go well was Carver's attempt in 2004 to acquire Independence Federal Savings Bank of Washington, D.C., another big city financial institution founded and administered by African Americans. Carver was prepared to pay $30 million for Independence, which had assets of $195 million, but the federal Office of Thrift Supervision rejected the deal. Independence was losing money and was fighting three lawsuits relating to embezzlement of funds. Wright later conceded that the proposed acquisition had been a mistake. "I still feel bad about it," she told Philana Patterson and Tanisha A. Sykes in 2006 for a Black Enterprise article. "We spent a lot of money there."
Positioned for Growth
Black Enterprise again selected Carver as financial services company of the year in 2006. In that year the holding company entered a merger to acquire Community Capital Bank (CCB), a Brooklyn-based community bank, for $11.1 million cash. CCB had two branches, about $165 million in assets, and an award-winning small-business lending platform. In 2007 Carver forged an alliance with Merrill Lynch & Co. whereby two of Carver's branches allotted space to Merrill Lynch financial advisers, allowing the Wall Street firm to recruit bank customers for brokerage accounts, mutual funds, annuities, and other investment products. The two institutions also agreed to offer evening educational seminars at the Carver branches.
At the end of fiscal 2007 (the year ended March 31, 2007), Carver had ten offices, 46,034 deposit accounts, and assets of $740 million. Total loans of $609.19 million almost equaled deposits of $615.12 million. Return on average equity was 5.23 percent during the year. Revenues came to $44.61 million and net income to $2.58 million. The four leading holders of Carver's common stock were private equity firms; Wright came next, with 7.7 percent of the shares in March 2007.
Principal Subsidiaries
Carver Federal Savings Bank; Carver Statutory Trust I.
Principal Competitors
OneUnited Bank.
Further Reading
Eaton, Leslie, "A Shaky Pillar in Harlem," New York Times, July 11, 1999, pp. 21, 25.
Fairley, Juliette, "A New Lease on Banking," Black Enterprise, June 1996, pp. 174-75, 178, 180-81.
Fleming, Robert, "Carver Federal Carves Out Its Market Niche," Black Enterprise, June 1987, pp. 215-16, 218.
"Joseph E. Davis Is Dead at 58; Led Carver Savings and Loan," New York Times, May 8, 1968, p. 47.
Kennedy, Shawn G., "Defending the Territory," New York Times, October 16, 1994, City sec., p. 4.
Leuchter, Miriam, "Black S&L Endures, but Not by Lending," Crain's New York Business, April 19, 1993, pp. 3-4.
Mack, Gracian, "Carver Stock: Boon or Boondoggle?" Black Enterprise, January 1995, pp. 47, 50.
Martin, Douglas, "M. Moran Weston, 91, Priest and Banker of Harlem, Dies," New York Times, May 22, 2002, p. B7.
Mullins, Luke, "Varying Goals in Low-Income Neighborhoods," American Banker, January 13, 2006, pp. 1, 4.
Osuri, Laura Thompson, "Independence, Carver Face Futures Apart," American Banker, October 22, 2004, pp. 1, 4.
Patterson, Philana, and Tanisha A. Sykes, "Through the Fire," Black Enterprise, June 2006, pp. 180-86.
Robinson, Layhmond, "Negro Savings and Loan to Open First Unit Outside Negro Area," New York Times, May 11, 1963, p. 51.
------, "Savings Agency Gains in Harlem," New York Times, November 25, 1962, Sec. 3 (Business), p. 9.
Seals, Kimberly L., and Eric L. Smith, "The Wright Move," Black Enterprise, July 1999, p. 24.
Smith, Franklin L., "For Harlem Thrift, Housing Spells Success," American Banker, May 6, 1992, pp. 1, 8-9.
Spruell, Sakina P., "Carver vs. OneUnited," Black Enterprise, December 2004, pp. 96-105.
Stewart, Robert, "How Carver Federal Savings Began," Amsterdam News, July 2, 1975, p. D3.
— Robert Halasz
