Carver Bancorp took another step toward rebuilding itself Wednesday, announcing a $2.5 million capital infusion intended to accelerate its expansion in New York's African-American and Caribbean communities.
Morgan Stanley Dean Witter & Co. invested $1 million, and Provender Capital Group, a New York minority- and women-owned private investment firm, invested $1.5 million. Combined, the infusion gives the investors an 8.25% stake in Carver. As part of the agreement, Frederick T. Terrell, managing partner of Provender, was named to Carver's board of directors.
Deborah C. Wright, president and chief executive officer of the $421 million-asset thrift, said the investment should send a "tremendous signal" to Wall Street that Carver is working hard to boost profits.
"We worked day and night for the past three weeks to get this deal done," she said. "It is such a vote of confidence for our institutional shareholders who have been through such a rough time with the stock not performing the way the company would have liked."
Ms. Wright said the fresh funding would be used to open an undisclosed number of branches and freestanding automated teller machines in the Harlem and Brooklyn sections of New York City. Carver also hopes to begin telephone and on-line banking this year, she said.
Carver, the parent of 51-year-old Carver Federal Savings Bank, the nation's largest minority-owned bank, appears to be on the rebound after credit-quality trouble and a botched data processing system conversion in late 1998. That sparked a pretax, $5.7 million loss for the quarter that ended Dec. 31, 1998, and the firing of Carver's longtime chief executive Thomas L. Clark.
Shortly afterward, the thrift received, but fended off, two unsolicited bids from one of its larger shareholders - Boston Bank of Commerce, a $103 million-asset, minority-owned company that owns a 7% stake in Carver.
But with new senior managers, Carver's profits rose 51%, to $775,000, or 35 cents per share for the six months through Sept. 30. (Carver's fiscal year ends March 31.)
Boston Bank of Commerce, however, is still planning to seek two board seats at the Carver annual meeting, scheduled Feb. 24. Carver's candidates are its chairman, David Jones, and former New York Mayor David Dinkins.
Robert Patrick Cooper, senior counsel for Boston Bank of Commerce, said the company is encouraged by the capital infusion but plans to closely monitor Carver's progress.
"Carver is undertaking substantive changes that we've been pushing for," Mr. Cooper said. "But the verdict is still out if Carver can produce value for shareholders."
Shares of Carver closed Wednesday at $10.375, $1 off their 52-week high.
