By Marilyn Kennedy MeliaChallenge.
Swings in the economy, changes in consumer financial habits, and unrelenting competition—all financial institutions face such tests.
But some, like Carver Federal Savings Bank, have their origins in challenge. Founded 70 years ago in Harlem, Carver’s mission was to serve the local African-American community, which had insufficient access to mainstream banking services.
That mission remains, but it’s been augmented.
Indeed, much of Carver’s agenda will be familiar to community bank marketers everywhere:
- Getting the message to underserved populations that the bank welcomes them.
- Providing alternatives to high-cost or predatory products that erode the financial health of small businesses and consumers.
- Establishing a reputation based on the tangible good the bank has done in its community.
Publicly traded and run by a board composed entirely of African-Americans and Caribbean-Americans, Carver can highlight its many achievements in a kind of “It’s A Wonderful Life” -style message of how it has impacted lives.
President and CEO Michael Pugh, who came to Carver in 2012 from Capital One—and became CEO in 2015—frankly admits to pride in accomplishments, but also to failures and obstacles. And then of course, what’s good news to some banks might pose a dilemma for Carver. For example, some areas surrounding the ten Carver offices in three New York City boroughs have gentrified. “Our doors and arms are open for everyone,” Pugh told us in a recent interview.
We’ve seen plenty of discussion about the need for banks to adapt to new technologies and customer expectations. But how does a mission-driven community bank stay true to its core values at a time when everything else is changing rapidly? We asked Carver.
The current assessment
Carver, with an asset size of $666.4 million is the largest African-American operated bank in the United States. And right now, it’s one of only 23 banks that are majority black-owned or directed by African-Americans, according to recent FDIC stats.
That number is half what it was in 2001.
One reason for the decline, explained Russell Kashian, a University of Wisconsin-Whitewater professor who studies minority banks, is that “these banks are like community banks, and there has been a lot of consolidation. Minority banks aren’t immune to economies of scale.”
Also, the 2008 crisis and its aftermath hit minority-owned institutions especially hard. “When you lose tier one capital like these banks did in the downturn, it is difficult to replace without going to investors,” said Kashian. “It is difficult to replace.”
“Carver was fortunate to be successful in raising $55 million in capital,” Pugh said, pointing to a key factor in surviving the crisis. Still, at the end of its fiscal year, March 31, 2017, the bank had a loss of $2.9 million.
Commercial real estate loans made up 45% of Carver’s portfolio in mid-2017. That’s not unusual for either minority institutions or community banks. FDIC stats from 2013 show 32% of assets in CRE for minority banks, compared to community banks at a 27% share, and non-community banks standing at just 8%.
“Historically, commercial real estate was how banks served their neighborhoods,” Pugh noted. “A landlord who wanted [a loan]for a multiple-unit building that would provide affordable housing—or a business that wanted to buy a new factory—were ways Carver and others have been able to help.”
Without abandoning commercial lending, Carver is intent on diversifying its loan base, particularly with lending to minority and women-owned businesses enterprises (also known as MWBEs).
The power in partnership
Despite gentrification in areas, there are still plenty of MWBEs struggling for start-up money, as well as lower-income consumers needing better banking services.
Of course, first Carver must find them.
“We are reaching minority businesses through strategic partnerships, like the one we have with the MTA [New York City’s Metropolitan Transportation Authority],” Pugh explained.
As the exclusive partner to fund the minority and women contractors who complete the MTA business education course, Carver is able to connect directly with the borrowers it seeks. Not only that, the MTA training reduces loan risk.
Some of the agencies and non-profits that Carver partners with are local to New York. But other cities may have similar programs, and some are related to federal efforts, like the SBA.
One way that Carver impresses the partners it courts is through its Profit Mastery workshops. “We call these our ‘MBA in a day,’” said Takisia Whites, president of Carver Community Development Corp.
In partnership with the Small Business Development Center housed at area New York colleges, Profit Mastery offers complimentary training to small and aspiring business owners in the area. The workshop leader also offers one-on-one counseling to attendees afterward.
Once a businesses has a loan with Carver, Whites added, “We can cross-sell other products.”
What’s needed here
A recent report from the Atlanta and Cleveland Federal Reserve Banks found that among small businesses that received bank financing, only 40% of minority-owned firms received the full amount they requested, compared to 68% of non-minority businesses with comparable credit and financial profiles.
MWBEs also rely more heavily on higher-rate, online loans, the Fed report found.
That’s no surprise to Carver bankers. “Our leadership team is a talented group. We do spend time thinking about needs and what we can do,” Pugh said.
With the “Cash Access” loan program, business owners can find out whether they’re eligible for a line of credit within 48 hours. (Owners are notified if their situation requires further review.) Then, borrowers often have access to funds another 48 hours later, Whites says.
On the retail side, one of the clear needs was a way to serve consumers who would otherwise rely on relatively high-cost non-bank offerings, like check cashing services.
In response, “Carver Community Cash” (CCC)—which allows customers to purchase discounted money orders and debit cards, among other services— was launched several years ago. To date, some 38% of the 17,000 CCC customers have been converted to a traditional account, Whites said.
Marketing by-the-numbers…and by the relationship
Carver runs ads using:
- Banners on its websites
- Promotions through its partner agencies
The central message? To get the word out that it can improve the financial security of consumers and business enterprises with its unique products.
One particularly effective messaging medium is a “Carver by the Numbers” brochure that details how Carver re-invests 83 cents of every dollar in the community, said Whites.
Advertisements, brochures, and news releases can all help bolster a bank’s reputation for community service. But according to Kashian, “All community banking is predicated by personal relationships. You can innovate, but you need the personal relationships. The greatest innovation is the handshake.”
White agrees that their most effective messaging is probably when newly converted customers share their positive experience with others.
Marilyn Kennedy Melia is a banking and personal finance writer based in Chicago. Email: email@example.com.