Rebuilding, With Interest : Black-Owned Banks Seek a Shift in Deposits to Boost Reconstruction Effort


A month after rioting devastated much of Los Angeles' inner city, the city's black-owned financial institutions plan to ask black residents to help in the rebuilding effort by dramatically increasing their deposits in the three institutions.

Leaders of the institutions argue that they have a better record than non-minority banks in lending in inner-city and minority neighborhoods, but they need to significantly increase their assets to be effective.

To accomplish that goal, they plan to announce a campaign Monday--in cooperation with black churches--to persuade black residents to shift $10 million to $15 million in deposits from mainstream banks to black institutions by June 20. They hope that the campaign will bring millions more in new deposits to Family Savings Bank, Broadway Federal Savings & Loan and Founders National Bank of Los Angeles.

"Institutions that are of the (black) community and in the community are going to be more responsive to the needs of that community," said Lynne Joy Rogers, who helps minorities obtain business contracts as a procurement specialist at the Los Angeles Minority Business Development Center, a private agency operating on behalf of the U.S. Commerce Department.

The campaign, which will include a jointly sponsored advertising program and solicitation of deposits at shopping malls, is backed by a coalition of about 85% of the city's black clergy, who will urge their parishioners to shift assets to black-owned institutions and help disseminate information on how to transfer funds.

Some black ministers actually began to develop plans for the proposed bank deposit shift last March, sharing their ideas with the black financial institutions two weeks before the civil unrest. In the wake of the riots, the campaign is now urgent and timely, advocates say.

"This is the first step toward economic empowerment," said the Rev. Edgar Boyd of Bethel AME Church, one of the organizers of the campaign. "Broadway, Family and Founders will need more black support if they are to provide leverage for economic development."

Family, Broadway and Founders hold only 3% to 4% of the deposits in Southland thrifts and banks made by black residents within a seven-mile radius of the black institutions. The area includes sections of Los Angeles, Compton and part of Altadena, according to researchers at Family.

The black institutions have combined assets of $300 million, while a number of the state's larger banks individually have assets of $1 billion or more.

Some of those large institutions are likely to be troubled by the planned campaign. Said Jay Janis, president of the California League of Savings Institutions, a trade group representing nearly all the state's thrift industry: "It's important for non-minority savings and loans to continue to take deposits in South-Central Los Angeles because the taking of deposits motivates them to make loans in the area and the community needs all the lending it can get--both from black-owned and white-owned institutions."

But the campaign's supporters say mainstream banks have not invested adequately in communities with large minority populations.

"Every community that is growing and healthy has good access to financial resources," said the Rev. Algie F. Rousseau of East 105th Christian Church. "The black community has not had that access."

Nationwide, black banks and thrifts have historically had a better record of making loans to black home buyers and black entrepreneurs, according to Creative Investment Research, a Washington firm that tracks minority lenders.

Locally, Broadway has provided working capital to Solar Records, a black-owned record company in Los Angeles. However, the three black institutions--like other thrifts nationwide--have concentrated on home loans and have had little involvement in business financing. Founders was only recently converted from a thrift to a commercial bank.

Supporters of the "empowerment" campaign say the three institutions could provide more business loans if their deposit base were expanded.

The campaign to boost the black financial institutions has it roots in historical movements to persuade blacks to use their collective economic power for community development.

Collective economic power was a main theme of black nationalist Marcus Garvey's Universal Negro Improvement Assn., which had its heyday in the 1920s. Most recently, Los Angeles Recycling Black Dollars has urged blacks to spend money with black businesses.

Such efforts in Los Angeles have had limited success, but "there is now a higher sense of awareness of a need to support black business," Rogers said. "This campaign has a narrower focus. The city's black financial institutions are easily identifiable economic development tools."

The effort entails more than just a transfer of deposits, said Wayne-Kent Bradshaw, president of Family Savings.

"The issue is whether the black community will begin to coalesce to meet our needs," he said. "It's a question of whether we can unite and make long-term commitments to black enterprise and free ourselves of the psychological entrapment of relying on others."

Blacks have done relatively little of their business at minority-owned banks and thrifts for a variety of reasons, but convenience is the biggest factor, Bradshaw said. Blacks--like other consumers of financial services--like to bank at institutions with many conveniently located branches, he said.

Family Savings has two locations, Founders has three and Broadway had three until one was destroyed during the riots. Broadway plans to rebuild the third office.

Bradshaw said Family, Broadway and Founders pay interest rates that are competitive with other financial institutions on savings accounts and a full range of investment products such as certificates of deposit. The three also offer services such as direct deposit and automatic teller machines.

"The empowerment campaign will really be a long-term process of changing mind-sets and attitudes," said Carlton Jenkins, managing director of Founders. "Some have to be made aware that they are not putting their money at risk by banking with black institutions."

Churches plan to set an example by transferring some funds to the black institutions. Deposits will also be solicited at shopping centers and other places.

Also, using the theme "We're together," the black institutions will promote the empowerment campaign through radio and newspaper advertising. The campaign already has the support of the Black Business Assn. of Los Angeles and the African-American American Chamber of Commerce of Los Angeles.

Some observers hope that the Los Angeles campaign will spread. "This would be the first major investment drive of its kind," said William Cunningham, who analyzes black financial companies as president of the Washington-based Creative Investment Research.

"In the wake of the riots, black-owned financial institutions in Los Angeles and elsewhere have a great opportunity to attract deposits."

There was a similar campaign in Atlanta in 1989, but the effort was not organized on as large a scale as the Los Angeles plan, he said.

Minority Loans Data from the Federal Reserve Bank indicates that minority thrifts-those owned by blacks, Latinos and Asian-Americans-reject fewer black mortgage loan applicants than non-minority lenders. The following is 1990 nationwide data released by the Federal Reserve in 1992. Percentage of black loan applicants Minority thrifts: 9% All banks and thrifts: 4% Percentage of black applicants denied loans Minority thrifts: 15% All banks and thrifts: 34% Source: Creative Investment Research

The Banks at a Glance A coalition led by black ministers in Los Angeles are leading a campaign to help boost the deposit base of the city's three black-owned financial institutions as part of an economic development drive. Background on the financial status of those three institutions:

Broadway Federal Savings & Loan

Assets: $92.5 million

Deposits: $87 million

Branch offices :Two*

1991 Earnings: $500,000

Founders National Bank of Los Angeles

Assets: $61 million

Deposits: $50 million

Branch offices: Three

1991 Earnings: $1.2 million

Family Savings Bank

Assets: $132.9 million

Deposits: $109.7 million

Branch offices: Two

1991 Earnings: $900,000

* Broadway's main office was destroyed during the riots. It is rebuilding its third office.

Sources: Broadway Federal, Founders National and Family Savings.

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