| Saving a historic bank
The big push for
profits at Consolidated Bank & Trust
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by
Paula C. Squires
Virginia Business
July
2004
It’s noon on a weekday at Consolidated
Bank & Trust, and customers file in. Many greet
tellers by name and chat for a spell. Others wrap up
business quickly, before heading out to grab lunch at
a nearby kiosk. The only clue of this inner city bank’s
struggle is the sign on an outdoor walk-up window which
says, “permanently closed.”
That’s not the fate CEO Kim D.
Saunders envisions for this 101-year-old Richmond bank
— the oldest continuously operated black-owned
bank in the country. She left her job last December
as an executive vice president and chief lending officer
at City First Bank of D. C., to take the helm of Consolidated,
fully aware of its tenuous standing.
In 2002, the bank lost $2.7 million.
Last year, losses totaled $1.2 million. The red ink
and a drop in assets from more than $100 million to
$87 million prompted federal and state bank regulators
to intervene. The bank operates under an agreement signed
in 2000, which outlines steps it must take to maintain
profitability. An amendment last summer demanded more
internal controls. Yet even with regulators from the
Federal Reserve Bank and State Corporation Commission
looking over her shoulder, Saunders is undeterred.
After all, this is the bank started
in 1903 by Maggie Lena Walker, the first African American
woman in this nation to charter a bank. It seems only
fitting that the bank’s second black female president
might be the one to save it.
It was the strong pull of history and
the chance to be part of a legacy that convinced Saunders
to take the high-pressure job in the first place. Maggie
Walker’s mother had been a slave, she notes, and
opportunities for women — particularly blacks
— were limited in the early 1900s. Against those
obstacles Maggie Walker got an education and founded
the St. Luke Penny Savings Bank. It made loans to African
Americans, which helped them buy homes and bury their
dead. The bank also encouraged children to start savings
accounts with pennies, a tradition that continues today.
“If Maggie Walker had the courage and the vision
to start a bank to help her people in 1903, then what
I’m doing is nothing. It pales in comparison,”
says Saunders.
The 44-year-old banking executive finds
inspiration from the bank’s founder and its many
supporters. One 90-year-old woman, now living in Florida
and a lifelong bank customer, wrote to wish her well.
Yet the good faith doesn’t lessen the sense of
urgency to turn the bank around. Saunders says
Consolidated will focus on maintaining
its personal style of community banking while carving
out a new niche as downtown Richmond undergoes a massive
facelift. “On Broad Street alone, $50 million
is planned in economic development.” Consolidated
could play the same role as City First Bank of D.C.,
she says, by providing loans to developers involved
in urban renewal in low- to moderate-income neighborhoods.
Saunders plans to apply for a federal designation as
a community development financial institution, which,
if granted, would position the bank to apply for various
grants.
Meanwhile, a key challenge is improving
the bank’s capitalization. Over the past six months,
Saunders has trimmed expenses, reducing staff from 61
to 45, consolidating branches and outsourcing some functions.
To raise capital for new services such as Internet banking,
Consolidated is working with Hurshell Associates in
Vienna and other investment consultants to raise $10
million to $15 million through a private placement of
more than a million of the bank’s available shares.
They are being offered for sale to foundations, wealthy
individuals and institutional investors, with $500,000
raised so far.
April brought welcome news: the bank had its first profitable
month this year.
Saunders expects a trend of month-to-month
profitability to continue, although Consolidated will
still experience a loss for 2004. By the end of the
first quarter, the bank reported losses of $199,977,
far below the $599,209 for the same period a year ago.
“Overall, losses should be significantly improved
over 2003,” she says.
That the bank was profitable during
the same month it met with regulators was a good sign,
says Gilbert H. Scott of Hurshell Associates, who has
worked with Consolidated as a consultant. “My
read is that they’re pleased with Kim’s
leadership,” Scott says. “They gave us positive
feedback on the progress,” he adds “but
they want more significant results as soon as possible.”
Virginia Banking Commissioner E. Joseph Face says he
can’t comment on the bank’s condition but
did say no additional regulatory action has been taken
since last July.
So the clock is ticking. To move the
bank ahead, Saunders admits to putting in 12-hour days.
Still, she appears unruffled in a suit and stylish pearls
and comes across as upbeat and energetic — a person
who enjoys fresh flowers on her desk and singing in
her church choir. Church helps to center her, she says,
as does her management philosophy, summed up in a quote
attributed to President Harry S. Truman: “It is
amazing what you can accomplish if you do not care who
gets the credit.”
The bid to save Consolidated is a team
effort, she points out, involving staff, the board of
directors and bank customers and supporters. She believes
together they will pull it off. “This is a chance
to make money by doing good. It’s what we call
the double bottom line.” Doubly hard it appears
but, if all goes well, doubly sweet as well.
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