How does a small, regional Black-run bank thrive in NYC?

Carver Bank, a financial lifeline to Black consumers and businesses in New York City for 75 years, has been through it.

Last year, Michael T. Pugh ended his well-reviewed run as president and CEO of the Harlem-based institution, which has long been billed as one of the country's largest African American-operated banks.

His departure came as banking faced a time of uncertainty, with many small and regional banks folding or struggling to stay afloat due in part to poor risk management and lax oversight. Bank officials said the search for Pugh's successor continues.

Carver, which has just seven branches and $732 million in assets as of March 2023, has faced challenges before, including Jim Crow, multiple wars, the Civil Rights Movement, redlining and the COVID-19 pandemic. But after 75 years, the institution faces new hurdles and a daunting landscape.

Lloyd Doaman, the executive director of Carver's Community Development Corporation, discussed the bank's essential past and future in an interview.

He said persistent problems — including the racial wealth gap, African American entrepreneurs' struggles to get funding, and the need for banks to develop trust with Black banking customers — help justify the continuing need for institutions like Carver. He described the bank as “community-driven” and said it was formed to serve African American and Caribbean residents, businesses and institutions who have had limited access to mainstream financial services.

Here’s more from our conversation with Doaman.

Carver was founded in 1948, the same year the military was desegregated but also the year the Dixiecrat Party was formed to preserve racial segregation. What can you tell us about the conditions that led to the formation of the bank?

Back in 1948 and before that, it was very difficult for African Americans and Caribbean Americans just to get basic banking services, such as opening a checking and savings account, getting a mortgage to purchase a home or even getting a loan to start a business. We all know that one of the building blocks of wealth has to do with home ownership. And so during that time, African Americans were not able to get mortgages to purchase a home. And so a group of civic leaders got together and applied for a state charter and unfortunately were denied.

They went on to file for a federal charter, and they were awarded that charter to start Carver Federal Savings Bank, which is named after the famous scientist George Washington Carver. Just having a banking institution that's managed and led by African Americans to address some of the needs that existed during that time was really important.

It's a part of economic empowerment. It's also helping when it comes to racial injustice, the racial wealth gap that exists. And so it was really important for us to have banks that could provide these essential banking services for residents who were looking to build wealth.

Any particular success stories you can think of?

This past Friday, I actually spoke on a panel. And right after the panel a gentleman came up to me who actually is a photographer and has his own business. And he said that Carver Bank was the only bank that would lend to his parents when they migrated here from Trinidad. And he mentioned that today his parents own 15 properties. I was so amazed to hear that, because that actually was the start of wealth and then also led to the transfer of wealth from generation to generation. So that is an important part of our story that you may not see in the media, those everyday people that you run into that remember Carver in the community, their grandparents, their parents who banked at Carver because no other banking institutions would provide basic financial services to them.

Carver was even in the Green Book, "the Bible of black travel" during Jim Crow. How much changed when it came to lending and banking thanks to the Civil Rights Movement?

Yes, Carver was one of three banking institutions in the Green Book, which is important because it just shows not only did Carver have a strong reputation in communities of color, but Carver was still seen as a really important institution moving forward to help individuals along their journey, whether it's just their basic banking services, getting a loan or mortgage, or whatever that might be.

As it relates to the Civil Rights Movement, basic civil rights were needed in our communities at that time. But one area that doesn't get discussed as much is economic empowerment. And Carver was a big part of that. And during that time, there was a strong push for African Americans to own their own businesses, to purchase property and residences and to own a piece of the block. And it was a tremendous movement in Harlem, which is where our headquarters is. We have two branches here in Harlem, we have four in Brooklyn, and we have one in Queens. But during that time, there was a lot of legislation that led to some of the first community development corporations.

I actually manage our Community Development Corporation. And during that time, there was a lot of investment in the community because it was understood that these communities had been underinvested over time. There were not enough of the resources necessary for those communities to thrive. And so that's a big part of what we do. Eighty cents of every dollar is reinvested back in the communities.

We help stimulate small business growth, job creation and economic development, so the very essence of what started during the Civil Rights Movement continued until this day.

There’s a legendary Eddie Murphy "SNL" skit from the ‘80s where he wears whiteface, walks into a bank as “Mr. White” and is basically handed stacks of cash, no questions asked. Does this skit still convey an emotional truth?

I am a big Eddie Murphy fan, and his comedy has always exposed a lot of truths in our society. We just know through some of the data that's available that an African American-led business is twice as likely as a white-owned business to be turned down for a loan.

We also know that the wealth gap is pretty sizable. The average Black family has 10 times less wealth than a white family. There are well-documented examples of the racial wealth gaps that exist. And another statistic that we saw, post-pandemic, was that 41% of Black- and brown-led businesses were likely to go out of business or had already gone out of business.

So whenever you see a comedian like Eddie Murphy put on whiteface or make jokes about what's happening, there's a lot of truth that comes out of that.

Are credit scores at the heart of racial lending disparities?

I think credit scores play a big part. And why I say that is because if you were to take a look at African American small businesses, just based on some of the data that I've seen, a lot of the Black-led small businesses may utilize a lot of revolving debt, you know, credit cards to support working capital needs, right?

So if you are maxing out or you're using a lot of your credit card debt, then it definitely can drive down your credit score. So one of the things that we wanted to do with our small business microloan program was provide a little bit more flexibility there, because if we had the same standards for our broader lending program, we might not be able to help a lot of those small businesses. So we brought our credit qualifications down to a 600 FICO score. That way we could try to see if we could help a lot more of the borrowers that may have had some challenges with credit.

Typically for a small business to go into a bank, they usually have to have a good credit score — high 600s, maybe 700. And that could be a challenge for a lot of businesses of color that may have had to rely on credit cards or revolving debt. And that's where community development financial institutions come into play, because institutions like Carver and other CDFIs can provide a little bit more flexibility when it comes to credit requirements, and we can look at other factors to get to a "yes," versus just saying, “Hey, you don't meet that minimum requirement.”

Does it take more work — more personal interaction — if you want to get beyond the numbers?

It does. There's a little bit more handholding. It takes a little bit more time to get to know the business. It's not just a transaction-based situation where you look at the numbers and move on. You really have to have an interview with the business owner, find out more about what they're doing, what some of the cross-drivers are for their revenues and costs, what their needs are, take a look at their financials — and sometimes they may not have everything that's needed to be bank-ready to apply for a loan. So we do a number of workshops, called Access to Capital workshops, to help small businesses be prepared to apply for loans. This is information that's really important for them. So it does take a little bit more time and resources to not only just get to know the client but also to find out where their pain points are, where the gaps exist, and then just provide innovative solutions to help them get there so that they can get access to capital.

Carver has branches in Harlem, Bedford-Stuyvesant, Flatbush, Fort Greene, Crown Heights and St. Albans. What unites your customers in all these neighborhoods?

It really starts with trust. Black and brown communities, it really starts with us being a trusted institution that they can come to. That's where it starts. A lot of times our clients may feel like they can't get a decision-maker on the phone when they need something. They can call me on my cell phone. They can call me on a weekend. And matter of fact, many of our clients do, whether they actually need a loan, they need some kind of merchant services for their business or they need to process a wire. There needs to be a relationship.