Boston Bank to Buy Family Savings

In a deal that would create the nation’s largest black-owned bank, Family Savings Bank in South Los Angeles is being acquired by Boston Bank of Commerce, the fast-growing institution that last year purchased Founders National Bank, another African American-owned bank in Los Angeles.

Executives at the privately held banks described the transaction--which is expected to be announced today--as an important step toward the Boston bank’s goal of establishing in black neighborhoods a nationwide network of banks with the access to capital, depth of management and technology found at larger banks.

As the industry has consolidated into larger institutions, the country’s four dozen black-owned banks have tended to remain small and focused on their communities--”doggedly provincial,” as Family Savings Chairman Clyde Oden put it.

But Boston Bank of Commerce Chairman Kevin Cohee said Tuesday that minority banks must strike broader partnerships “in order to obtain economies of scale as well as to help people in our communities achieve their aspirations.”

“You’ve had a bunch of small banks trying to fulfill the needs of their communities, but it was very, very hard without scale,” Cohee said.

The deal culminates a contentious auction, triggered when Family Savings’ majority shareholder, WattsHealth Systems, developed financial difficulties and was forced to put the four-branch thrift up for sale early this year.

With several bids on the table, Family Savings’ directors agreed in March to sell the thrift to FBOP Corp., a large, white-owned banking company in Illinois that has been expanding aggressively in California. FBOP promised to allow Family Savings’ management considerable autonomy. But community leaders protested that black ownership should be preserved, and Family Savings’ board backed out of that deal and accepted a higher offer from the Boston bank.

“This purchase is a giant step for our community,” said Rep. Maxine Waters (D-Los Angeles), a member of the House Committee on Financial Services and one of the chief opponents of FBOP taking over Family Savings.

Cohee, who previously told Black Enterprise magazine his company’s offer was “in the eight digits,” said Tuesday that the parties had agreed not to discuss terms of the deal.

People familiar with the transaction, speaking on condition of anonymity, said Boston Bank of Commerce had agreed to pay $12 million for Family Savings, topping an $11-million offer by FBOP, which was paid a $600,000 breakup fee when its deal fell through.

An FBOP representative said the Illinois bank “wishes the combined company every success.”

Family Savings’ board will stay on, providing its knowledge of Los Angeles to the new owners, Oden said. He said the bank would continue efforts to cater to Latino customers by having Spanish-speaking employees in each branch.

The Boston Bank of Commerce’s owners include wealthy African American businesspeople in Boston as well as NBA star turned entrepreneur Earvin “Magic” Johnson, singer Janet Jackson and Jheryl Busby, a former president of Motown Records. Busby had been chairman of Founders National Bank, now known as Founders Bank of Commerce; Johnson and Jackson were investors in Founders National Bank.

Cohee described Johnson’s endeavors to bring movie theaters, Starbucks Corp. coffee shops and TGI Friday’s restaurants to the inner city as a model for what he hopes his bank can achieve.

At the behest of federal banking regulators, the Boston bank also took over the black-owned Peoples Bank of Commerce in Miami. Family Savings has $208 million in assets, which would bring the total under Boston Bank of Commerce control to $468 million if the deal goes through.

That would make it slightly larger than Carver Bancorp, the parent of Carver Federal Savings Bank in Harlem, N.Y., which is the largest black-owned bank or thrift with $439 million in assets.

Citizens Bancshares Corp. in Atlanta has announced an expansion plan similar to the Boston bank’s. It recently agreed to buy the Alabama thrift CFS Bancshares, creating an institution with about $300 million in assets, which would be the third-largest black-owned bank in the country.

A large amount of problem loans at Founders has somewhat depleted capital at Boston Bank of Commerce, and Cohee said the investors may have to put more money into the institution to win regulator approval of the deal.

“We’ve all committed to do whatever is necessary to be successful,” Cohee said.

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Family Savings Bank

Snapshot: Largest black-owned thrift in California. Mortgage lending makes up 80% of its business.

Founded: 1948

Headquarters: South Los Angeles

Assets: $208 million

Offices: Two branches in Los Angeles, one each in Pasadena and Compton.

Ownership: Watts Health Systems bought control in 1996 to make residential mortgages and apartment loans to minority communities. Bank insiders hold lesser stakes.

Chairman: Clyde Oden

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Boston Bank of Commerce

Snapshot: Fast-growing institution aiming to become first black-owned bank with $1 billion in assets.

Founded: 1982

Headquarters: Boston

Assets: $264 million

Offices: Boston, Compton, Los Angeles, Lynwood and three Florida branches

Ownership: Black business leaders in Boston; Magic Johnson, Janet Jackson, music executive Jheryl Busby.

Chairman: Kevin Cohee

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Sources: Family Savings Bank, Boston Bank of Commerce, Thompson Bank Directory, Times files