The chief executive of New York’s Carver Bancorp Inc. says its deal for a small Brooklyn bank would instantly establish Carver as a commercial lender and help it stand its ground against larger banks continuing to enter inner-city neighborhoods.
The nation’s largest African-American-owned thrift was expected to announce the $11.1 million cash deal for the $163 million-asset Community Capital Bank today. It would be the first whole-bank acquisition in Carver’s 58-year history.
Both the $646 million-asset Carver and Community Capital are certified by the Treasury Department as community development banks, which typically focus on low- and moderate-income communities.
Deborah C. Wright, Carver’s president and chief executive, said the Carvers and Community Capitals of banking once had these neighborhoods largely to themselves. But in recent years larger banks have moved in both to meet Community Reinvestment Act obligations and because they see good lending opportunities.
“It is a lot more competitive for banks like mine and Charlie’s” in commercial real estate and small-business lending, Ms. Wright said, referring to Community Capital president and CEO Charles F. Koehler. “More of us are going to have to come together in mergers and acquisitions to have the resources to be competitive,” she added.
In March 2004, Carver announced a deal to buy Independence Federal Savings Bank in Washington for about $33 million, but it was called off after the Office of Thrift Supervision rejected the merger application. Independence was troubled at the time — it lost $1.3 million in 2003 — and the OTS cited said it was concerned the acquisition could hurt Carver’s profitability.
Community Capital is profitable but has had its own struggles of late. Its net income fell 22% in 2005, to $571,000, and its loan chargeoffs rose 141%, to $677,000.
Mr. Koehler said the increase in chargeoffs was a result of heavy lending to start-ups and nonprofits. He said his company has tightened its collateral requirements and is working on chargeoff recoveries.
“We got very aggressive in our marketplace,” Mr. Koehler said. “We also had some hits. The underwriting standards have gotten far more secure.”
The amount Carver has agreed to pay is about 1.41 times the seller’s book value.
As a thrift, Carver focuses on commercial real estate and residential mortgage lending. The parent of Carver Federal Savings Bank had just $424,000 of commercial and industrial loans on its books at Dec. 31; Community Capital had $57 million, according to Federal Deposit Insurance Corp. data.
Ms. Wright said it is easier to bulk up in commercial lending by acquiring a bank with its own portfolio and lenders than to build the business from scratch.
“Hiring a team has a pretty big impact on cost because it takes time for people to get there, get established, and generate enough business to justify the expense,” she said. She added that Carver would probably hire additional commercial lenders.
“Our customers have always wanted us to be in the small-business field,” she said.
Community Capital has two branches and Carver eight, in Manhattan (where it is headquartered), Queens, and Brooklyn.
Ms. Wright said Community Capital would be a separate subsidiary run by Mr. Koehler. The deal is expected to close by Sept. 30.
