Financial News: a deal to bank on.

Banking has long been a business of relationships. It's a truism black-owned banks have apparently adopted as they look to create synergy of their own in growing numbers. Most recently, New York City-based Carver Bancorp, the nation's largest African American bank, sold its Roosevelt, New York, branch to City National Bank, another black-owned bank in Newark, New Jersey.

City National's purchase of the Roosevelt branch, which had $10.3 million in assets, marks the 25-year-old bank's entree into the lucrative New York market. It is also the continuation of an initiative among black banks to forge strategic alliances with each other. "This transaction offers City National the opportunity to enter the New York arena, which is the perfect place for us to spread our horizons," says Louis Prezeau, president and CEO of City National. The ownership change will allow opportunities for services like small-business and personal loans, services that Carver didn't provide at that branch. City National has about $138 million in assets and four branches in New Jersey.

To be finalized, the deal must still clear regulatory hurdles because of rules preventing certain transactions between national banks and federal savings banks. If no regulatory issues derail the sale, the deal is expected to close this spring.

Prezeau expects to see more mergers in the African American banking community, as the groups face industry pressure to consolidate operations and cut costs that supersede the will to be independent. "The black-owned banks now see the need to says Prezeau, either by merging with other banks or by making acquisitions where possible."

Analysts agree, saying these banks will have to unite and become stronger in order to meet challenges of mainstream banks that are now focusing on black communities. Recently, two black-owned banks in Atlanta, main-stay Citizens Trust and newcomer First Southern of suburban Lithonia, joined to become the fifth-largest African American bank (see "The Urge to Merge," Newspoints, October 1997).

For Prezeau and Thomas Clark, president and CEO of Carver, the relationship between their two institutions is far from new. When Prezeau, former acting president of the now-defunct Freedom National Bank, moved across the river to take the helm at City National in 1989, he took his connections with the Harlem banking world with him. Ever since then, the two banks have partnered on several mortgage and lending deals when neither had sufficient funds to do it alone.

Howard Dabney, senior vice president and chief lending officer at Carver, says it was that long-term relationship that made Carver aware that City National was looking for a foothold in the New York City area. And Carver had a branch it could afford to lose if the price was right. Prezeau approached Carver about a year ago over the possibility of selling a branch as part of its strategic plan to expand beyond New Jersey.

Clark says the sale of the Roosevelt branch was a cost-effective, strengthening play for Carver, as it was one of the bank's smallest branches and was only marginally profitable. Carver's largest deposit bases are in Brooklyn and upper Manhattan.

The money from the sale will be used to reinvest in mortgages in the African American community, an area where analysts say Carver had shown considerable weakness. Over the past three years, Carver, which has assets of about $415 million, has boosted its mortgage lending from 13% of assets to about 55%. As of the third quarter of 1997, Carver's loans totaled $245 million vs. $48 million in 1995.