Drive to Bolster Black Banks Is a Hit : Savings: The post-riot campaign generates millions of dollars in new deposits.

An eight-week-old campaign to strengthen the three black-owned banks in Los Angeles has dramatically bolstered the institutions’ level of deposits, as individuals and businesses poured millions of dollars into the small facilities and opened about 1,200 accounts.

The early success of the campaign is the first sign of a major move by Los Angeles blacks to reinvest their money in the black community. Such a campaign had been a dream of some community activists for decades.

With the millions of dollars in new deposits--and hopefully more on the way--the banks plan loans to businesses and prospective homeowners in the riot-torn communities.

“African-Americans in Los Angeles are now realizing that self-help is the only way to free ourselves from economic dependence,” said the Rev. Edgar Boyd of Bethel AME Church, who helped organize a coalition of black ministers representing about 250 congregations. “The campaign will continue, and we hope and expect the (deposit) trend to continue.”

Indeed, some observers of the Los Angeles campaign--part of a community-based effort to stimulate economic development in riot-torn areas--have been so impressed that they believe that the push can serve as a national blueprint for strengthening black banks and revitalizing the communities they serve.

“If the politicians and community activists are watching, they might find a model in the Los Angeles situation,” said William Cunningham, who analyzes black financial institutions as president of Creative Investment Research in Washington. “This kind of campaign doesn’t require legislation, just encouragement. This notion of self-help--especially when it’s reinforced and backed by various segments of a community--can trigger a revival of minority financial institutions.”

During June alone, deposits at Family Savings Bank, Broadway Federal Savings & Loan and Founders National Bank rose more than $5 million, five times as high as their combined average monthly rise.

And the flow of money to the institutions--in the form of new and larger savings and checking accounts and certificates of deposits--continues to grow, registering a net increase of about $3 million in the first half of July.

For one of California’s larger financial institutions--some of which have assets of more than $1 billion--an $8-million increase in deposits in a month and a half would not be particularly significant. But the three black banks have combined assets of about $300 million, and for them the influx is dramatic.

The city’s black banks--like other financial institutions--do not release information on the identity of depositors. However, executives at the institutions say black community support for the “empowerment campaign,” launched June 1, has been swift and substantial.

There are no statistics revealing how many of the deposits represent withdrawals from other banks. Officials at the three black-owned banks said some of the money coming in probably had not been deposited in other banks. Some, however, was likely withdrawn from larger competitors.

Some of the large banks in the area are troubled by parts of the campaign. Jay Janis, president of the California League of Savings Institutions, has urged the campaign’s advocates not to concentrate solely on urging deposit transfers. He has said that residents of South Los Angeles can encourage non-minority banks to make loans in that area by maintaining accounts in those banks.

Heads of black-owned banks and thrifts nationwide cite statistics showing that they have a better record than non-minority banks in making loans in minority neighborhoods. However, many of the executives have said that they need to significantly increase their deposit base and their assets to be more effective.

“This is a mere fraction of what can be done,” said Carl Dickerson, head of the Black Business Assn. of Los Angeles. “This effort is important because these institutions are familiar with the business owners in South-Central Los Angeles and they know what can--and should--be done.”

However, Boyd, Dickerson and other black bank supporters also say that the campaign has had a successful launch because others in the Los Angeles area--corporations and civic organizations among them--have also shifted deposits.

Among those rallying to support the black banks is Rebuild L.A., the task force formed to help revitalize the city in the wake of the riots. Peter V. Ueberroth, chairman of Rebuild L.A., has deposited task force money in the institutions. Ueberroth has said that he is urging corporations to shift some of their business to the three institutions.

There have been efforts in the past to encourage more support of black enterprise. For example, Recycling Black Dollars, an Inglewood-based organization, has been trying to rally more support for black businesses since 1988.

However, the group, which circulated about 20,000 flyers to promote the bank empowerment campaign, has not had much success until now because there had been no galvanizing events such as the recent riots, said Muhammad Nassardeen, head of Recycling Black Dollars.

“Now, all segments of the community--Latinos, Asians and whites--want to see black business do well,” he said. “And, we’re showing the nation how to rally support for black banks.”

The campaign continues to bolster Founders, a bank with two locations. It had a net deposit increase of $2 million in June, and deposits swelled $1.5 million during the first half of July, said Carlton Jenkins, managing director of Founders. In comparison, Founders’ monthly deposit increase averaged about $250,000 during the five-month period preceding the campaign, Jenkins said.

In June, 370 new accounts were opened at Founders--more than three times the average. Another 120 accounts were opened in the first half of July.

Founders is already making plans to expand lending activity. Jenkins said it plans to form a foundation that will make loans and investments to black business and would-be entrepreneurs. In addition, the bank set aside $200,000 to provide loans to minority contractors in construction-related trades.

“This campaign will enable us to enhance our role as a lender in South-Central,” Jenkins said.

Family Savings, a savings and loan with two locations, makes 78% of its loans--primarily home mortgage loans--to applicants in South Los Angeles. It now plans to carry out lending activity in that area with “renewed vigor,” said President Wayne Kent Bradshaw.

Family had a net deposit increase of $827,000 in June and $610,000 during the first half of July. This compares to recent monthly increases of about $500,000. In all, 250 accounts were opened in June--more than twice the monthly average--and 143 accounts had been opened by mid-July.

“I’m pleasantly surprised and heartened by the response,” Bradshaw said. “Since the riots, there has been a heightened awareness of all black institutions. Many people were not aware that Family existed.”

Broadway, a savings and loan with three locations, said it also plans to step up lending in South Los Angeles. The thrift said deposits increased about $2.4 million in June--about $2 million of it in new accounts. In all, 199 accounts opened in June, about 40% more than the monthly average. Through the first half of July, 105 accounts were opened, giving Broadway a net deposit increase of $1 million.

“We normally have no significant (monthly) increase,” said Paul Hudson, president of Broadway. “I’m appreciative of the support--and it’s coming from a wide spectrum of the overall community. The ministers involved in the campaign wanted to encourage everyone to do business with us, and they’re accomplishing their goals.”