Navigating a ship into safer waters is not always enough. Sometimes a captain has to make sure the helm will be left in capable hands.

Deborah Wright, the longtime chief executive of Carver Bancorp, says she has reached that place with Michael Pugh, the New York company's president and chief operating officer. Pugh was recruited to Carver in 2012 from Capital One, where he was a regional executive and a market president in eastern Maryland, Delaware and Washington, D.C.

Wright is set to hand the CEO role to Pugh at the end of the year, though she is expected to remain Carver's non-executive chairman. She will also join the Ford Foundation as a senior fellow in the economic opportunity and assets program in early 2015.

Wright and Pugh last week sat down for an interview with American Banker at Carver's headquarters on 125th Street in Harlem, where they discussed the $644 million-asset bank's planned products, the changing dynamic of its neighborhoods and the future of community development banks. The following is an edited transcript.

Why step aside now?

DEBORAH WRIGHT: The company is stable and has enough capital to grow and succeed. The most critical factor is that I never had a Michael before. He is a tremendous talent. We've worked together for a couple of years and, over that time, I became comfortable that he could take the organization to the next level.

What do you want your legacy to be?

WRIGHT: In the depths of the financial crisis, we survived. That was a harrowing experience to go through. We are here to fight another day. And we are one of the few banks in the country that has reached out to the underbanked. We've spent money and time to create a product line that was relevant to that population. What happens next in terms of those folks learning to save and have financial aspirations, we'll see, but many are now under the tent of FDIC coverage. That's something I'm very proud of.

Sum up how you see the bank today.

MICHAEL PUGH: There's a tremendous opportunity for growth. When you think of the small business customer, we know there's a real need to come up with additional solutions to help them. On the consumer side, there is a need for more small-dollar credit solutions. Those are key things that will allow us to build primary bank relationships. The other thing is to remain committed to attracting talent.

WRIGHT: There are so many small businesses, you might even call them microbusinesses, that are prevalent in our community. They can't go borrow $5,000 or $10,000 any place that would be appropriately priced. There are a lot of banks focused on small businesses, but they don't talk a whole lot about the ones with smaller needs. People come to us all the time for that, but we haven't had somewhere to send them. Michael and his team are designing products for those customers now.

How's competition?

PUGH: A community bank like Carver in this community 20 years ago would have been one of a few choices. Now, just about all the globals are a stone's throw from our footprint.

WRIGHT: A good example is our branch at 116th Street and Lenox Avenue. We were the only one there for a number of years. Now, there are two direct competitors across the street. We've been teased a bit by the board for putting the spotlight on great neighborhoods that at one point were underappreciated. The tremendous price explosion in housing across the city has pushed mainstream individuals to our neighborhoods.

Look at places like Frederick Douglass Boulevard. It was a burned-out community where people were afraid to walk through. Here we are 25 years later, and there are beautiful glass apartment buildings where people are paying several thousand dollars a month to rent.

A frequent complaint about the type of gentrification Harlem has experienced is that long-term residents are made to feel like outsiders. How does Carver avoid that?

WRIGHT: You have to be relevant. It is a cruel world, and businesses that adapt are the ones that succeed. We have a very solid base of institutional customers that we were very important to their success. Churches, for example. If you're a small church looking to borrow a half-a-million, it is not that easy to get.

There are segments like that, or the unbanked, where, despite all the change, there are still some very tough statistics around the core of these communities. The real challenge is to hold on to the base, but make ourselves relevant to the evolving customer base. Our product line has evolved since Michael showed up because he knew what mainstream banking was. But once you get the products and the teams set with a focus on the newer, younger customer base, then you still have an uphill battle around getting the word out.

PUGH: You need people on board who understand the history of the company, are passionate and can go out and build and maintain relationships. Take digital banking, everyone loves it. But when there's a problem, most customers want to talk to a human being who is available, highly responsive and will know their name.

Carver is profitable again, but it is largely fueled by reserve releases. What's your plan for building long-term profit?

PUGH: Getting the word out that we are lending. We have the cash to provide loans to qualified borrowers. The second thing, within our retail footprint, there is continued opportunity to have feet on the street and grow primary banking relationships. That should help us generate more fee income. If you want to attract new customers, you have to have a full product suite available to them. The next step is a credit solution for middle-income customers who would be interested in banking with Carver if we could offer the same products as the big players.

WRIGHT: I want to make sure to note that credit for the middle-class and business customer is key, but we will be launching a credit offering for the unbanked. That is not prevalent today. People are getting that kind of credit from all the wrong places now. We want to make sure we can help them borrow responsibly. There will be counseling to make sure they understand what they are getting into.

What is the timeline for these new products?

PUGH: Over the next three to six months, we will begin to start the rollout. It is a highly regulated environment, so we have to make sure the regulators are comfortable with it.

Where are you finding success?

PUGH: The multifamily area continues to be a competitive market, but we're building relationships. We've always been a commercial real estate lender. We're starting to see an entry with new businesses. We just did a loan for a charter school called Brooklyn Free School. Another one is Greene Grape, a wine store in Brooklyn. In these cases, the borrowers started with a vision and wanted a bank that could invest the time with them.

WRIGHT: We also see a continued appetite from our existing customers. At our last loan committee, we approved a couple of church loans in the $500,000 range. Those are small, but growing, churches and the loans are a size where we don't get out too far over our skis.

Now that the consent order has been lifted, is there any interest in using capital to buy other banks or tech companies focused on the underbanked?

WRIGHT: Our board is having no conversations about M&A. Part of our derivation during the credit crisis was in prior M&A, specifically the acquisition of Community Capital Bank. Those loans were at the core of our credit issues. So I'd say organic is the name of the game.

What's your take on the state of community development banks and minority-owned banks?

WRIGHT: The regulatory response to the credit crisis created a demand for different types of talent. Our board meetings are substantially longer. The amount of paper we put in front of them is tenfold. It is astonishing how much infrastructure is needed to police the new business functions and to make sure we're covering everything. That is not going away. That puts a lot of pressure on small companies to either make money to cover the growing expenses. Or you can merge or fail.

We're very lucky to be in New York City. It would be very tough to be elsewhere and in the niche that we are in. It is tough to get the talent, capital, et cetera. I hope that one of the outcomes is that our industry will learn how to merge, versus people going it alone because the mainstream community banking sector has come a long way in terms of consolidation. Our niche has had a hard time merging. We've spent a lot of money trying to merge and I hope under Michael's leadership there will be some breakthroughs. I think it is hard to be under $1 billion to carry the expenses, and I don't see a regulatory pullback.

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