Hanging Tough in Harlem
from Winter 1999
by Antonio Ramirez
Given the fact that the banking industry believes that bigger is better and mergers are the only way to survive, you’d think that the directors of Carver Federal Savings Bank in New York City’s Harlem would have jumped at an offer to join up with The Boston Bank of Commerce. Instead, they told suitor Kevin Cohee, an African-American entrepreneur who controls 66% of the Boston bank, to get lost—twice.
The rejections startled many, including newspaper columnist Frank McCoy of Black World Today. He lamented that “much larger white-owned firms continue to expand in black and brown communities and are merging to create more powerful economies of scale, while African-American-owned firms stick with the status quo.” The most recent rejection of Cohee came at the end of a tough 12 months for Carver, which went public in 1994. CEO Thomas L. Clark had left in the wake of computer failures, bad loans, and the arrest of an employee for fraud. Carver lost $4 million for the year ended in March.
To replace Clark, the board hired Deborah C. Wright, 41, former commissioner of New York City’s Housing, Preservation & Development Center and former president of the Upper Manhattan Empowerment Zone. Wright soon had three new top officers in place, including—for the first time in the bank’s history—a chief administrative officer to handle technology. She is now moving toward creating what she calls “a first-rate management team” with years of commercial banking experience. She also vows to double the bank’s assets, which currently total more than $420 million. Cohee’s bank has assets of $145 million. Despite Wright’s claims, some wonder whether she has the industry experience to save the bank, a criticism also aimed at the overall composition of the board, which includes former New York mayor David N. Dinkins.
The Boston Bank of Commerce owns 7% of Carver. Cohee’s latest proposal was that Carver buy his bank and make him head of the combined operation. But Carver’s directors felt the deal was unfair, since it valued Carver at less than book value and The Boston Bank at one-and-a-half times book.
Cohee, 42, has not given up. He says he’ll rally for a seat on Carver’s board at its next annual meeting, which is yet to be scheduled. That same annual meeting is likely to see the return of private investor Joseph Sonnenberg, who also has his sights on a merger deal. Last year he pushed Carver to put itself up for sale, a resolution that got 26% of the vote. Sonnenberg maintains neither Wright and her management team nor Cohee will do enough to maximize shareholder value. For that, he says, an acquisition by a major bank is needed.
Setting aside merger talk, Wright says that her mandate is to “turn the bank around and grow it,” adding only that “if we’re made an unbelievable and fabulous offer down the line, of course, we’ll consider it.”
Carver’s strongest asset may be its loyal clientele; many customers have banked there since 1949 as a matter of community pride. But with three nearby Chase Manhattan branches luring them away, neither Wright nor the Carver board has much breathing room left.
