Survival Of Fittest -- Founder Of Black-Owned Bank Lauded For Profits, Criticized On Minority Loans

Editor's note: After reporting on Seattle's Emerald City Bank, The Times decided to look at other West Coast black-owned banks. We found that on the entire West Coast, including some areas with substantial minority populations, only one other black-owned bank exists, the American State Bank of Portland.

Richard Buck, Times business reporter, went to Portland to take a look. Here is his report.

PORTLAND - Twenty-one years ago, when the civil-rights movement was in its heyday, Venerable F. Booker, then a 48-year-old real estate broker, combed the neighborhoods of Northeast Portland, home to many minority businesses, raising money to start a black-owned bank.

Along with some other bankers, Booker raised $600,000 in capital, personally selling 90 percent of the stock that launched American State Bank in July 1969. He is chairman and president.

``During the 1960s it was quite fashionable to create new minority enterprises,'' Booker said. ``Seattle had just started a black bank (Liberty Bank), and we thought it would be a good idea to have one down here.''

Other black-owned banks chartered in the 1960s have come and gone - including Liberty in Seattle and three in California - but American remains the oldest black bank on the West Coast - and now the only one other than Emerald City, which was chartered in 1988 to succeed Liberty.

The National Bankers Association says 35 black banks are in operation in the United States.

American's 12 employees and $15 million in assets make it less than 1 percent the size of Portland banking giants such as U.S. Bank and First Interstate.

Despite its small size, American has earned a good reputation for being well-run and profitable.

Frank Brawner, executive vice president of the Oregon Bankers Association, called American one of the more successful minority banks in the country. Brawner helped Booker incorporate the bank in 1969.

``Part of the success is Venerable Booker himself,'' Brawner said. ``He is teller, janitor and president. You see him everywhere, shaking hands in the lobby and making loans. He works extremely hard, and everybody who comes into the bank knows him.''

However, like Emerald City Bank in Seattle, American has been criticized for doing too little to serve the interests of the minority community.

``They are very conservative. They don't take too many risks, too many chances,'' said Samuel Brooks, executive director of the nonprofit Oregon Association of Minority Entrepreneurs.

``Mr. Booker is very careful about the folks he is going to lend money to, and there are not very many,'' Brooks said.

``They are very successful as a bank,'' Brooks said. ``Whether the bank serves the needs of the minority community, that's a whole different story. Some people in the minority community who need access to capital are not getting it from the bank.''

Booker is familiar with the criticism. He says he pays no attention to the race of borrowers. ``Whoever you are, if you come in and qualify, I'll deal with you,'' he said.

``We cannot be all things to all people,'' he said. He said his bank faces conflicting expectations to operate a sound business and to be a sort of social agency.

``You have to walk a very tight rope, like you're walking on eggshells, if you want to survive,'' Booker said. Booker prefers to lean toward the side of a sound business.

``I admit we are very conservative,'' Booker said. ``My feeling is that if people don't qualify and meet credit standards,'' there is no point in lending them money.

Despite Booker's conservative loan policies, American has not escaped the credit risks that have driven some banks into insolvency.

At the end of 1989, American reported it had $640,857 of problem loans, or 13.5 percent of its total loans. For most banks, problem loans are 2 percent or less, and bank analysts say anything over 3 percent is considered dangerous. But despite the problem loans, American is healthy and profitable. Last year it had net profits of $110,448, up 18 percent from $93,666 in 1988. At the end of 1989, American had $1.8 million in equity capital, or 11.8 percent of its assets, a ratio that far exceeds the government's capital requirements.

Booker said American specializes in making loans guaranteed by the Small Business Administration. In addition, it makes home loans throughout Portland.

``We have tried to help people buy housing, and we have gone out of our way to do that. It stabilizes the community when you can turn people into homeowners instead of renters,'' Booker said.

``You cannot deny that he has handled that bank well from a banking standpoint,'' said Leon Harris, editor of the Observer, a black weekly newspaper in Portland.

``It has done an excellent job of guarding the money,'' said Harris. But he said American ``has a reputation as not being responsive to minority needs. It is almost impossible for a black to get a loan from American State Bank unless he is substantially secured.''

American ``has not served the purpose it was originally set up for,'' said Willie Harris, a barber in Northeast Portland for 33 years.

``It is hard for black businesses to get loans,'' he said, adding that the difficulty comes from white-owned banks as much as from American.

For American's 980 shareholders, mostly minorities, the bank has been a modest but stable investment. ``The overwhelming majority'' of those shareholders are original investors, says the bank's annual report. The stock, originally sold for $7.50 a share, is not traded actively.

American shareholders ``bought that stock for a reason, and they keep it,'' Booker said. ``There is very little movement in the stock; maybe two or three times a year'' some shares change hands.

The bank's 1989 annual report says the stock's market value was no lower than $3.50 nor higher than $5 a share in 1988 and 1989. The bank paid dividends of 50 cents a share in 1987, raising it to 55 cents in 1988 and 60 cents last year.

In 1978, American tried to diversify out of its immediate area by opening a branch in downtown Portland. Booker said the venture was not successful, and the branch was closed in the mid-80s.

``We just were not able to compete with the big banks,'' he said. ``They were too much for us - it was like David and Goliath. They can spend more on advertising than all the money I have in deposits.''