Black Woman Founds a Bank'To Help Level the Playing Field'

SITUATED one block from the Liberty Bell and a stone's throw from Independence Hall, United Bank of Philadelphia is making history of its own.

Founded in March 1992 by Emma Chappell, it is the first American bank founded by an African-American woman since Maggie Lena Walker opened Saint Luke Penny Savings Bank in 1903 in Richmond, Va. Just as significant, United, which is 56 percent minority-owned, is Philadelphia's only full-service, black-controlled bank since 1923 and the only one now in Pennsylvania.

One of 130 minority-run banks in the country, United was the first to turn a profit in less than two years. With almost 4,000 shareholders - including businesspeople, homemakers, children, and grandparents - United was built by the people for the people.

"This bank's mission is to help level the playing field for all," says Dr. Chappell, in her modest office at bank headquarters on Market Street. "It was especially created to serve the African-Americans, Hispanics, and women, and it was founded by those same people - they are the original shareholders."

Indeed, United has been on the fast track. It has grown from one office and $14.2 million in assets in 1992 to seven branches in Philadelphia neighborhoods and more than $95 million in assets in 1994. Most growth occurred through acquisitions of failed bank offices from the federal Resolution Trust Corporation (RTC). And recently, Black Enterprise magazine named United Bank its 1994 Financial Company of the Year.

Ambitious goals

The bank currently has about 16,000 depositors - 75 percent of them minority - and a staff of 75, 85 percent African-American. Chappell says her goal is to take the bank to $150 million in assets in the next five to six years, and she wants to open branches in Delaware and New Jersey next year.

Chappell, whose dynamic personality doesn't overshadow her businesslike approach, is no stranger to banking or the City of Brotherly Love.

Her intent in establishing a minority bank in Philadelphia, she says, was to better serve an extremely underserved community. In her research, she found that, of the city's eight major banks that made about $300 million in mortgage loans, less than $8 million came from the African-American community. A minority-controlled bank, on the other hand, acts as an "economic engine" for a community, she says, because it collects money from minorities and distributes it back to them.

The native Philadelphian spent most of her career at the city's Continental Bank, where she started as a $45-a-week clerk in 1960 and rose to become the bank's first woman vice president in 1977. She attributes much of her drive to the fact that her mother died when she was 14, which forced her to be independent. Her role models have been her father and the Rev. Leon Sullivan of Zion Baptist Church in Philadelphia, who landed her the job at Continental after she finished high school, she says.

Mr. Sullivan would preach in his sermons: " 'Use what you have in your hand,' and he'd say, 'Keep your hand in God's hand,' and it worked," Chappell says emphatically. "Even the creation of this bank was done that way - through a lot of prayer, a lot of faith, and a lot of support through the community." (Every Tuesday, United holds a prayer service open to the public in its main branch.)

In 1987, while still at Continental, Chappell began working part-time to establish the bank. Three years later, she took the plunge.

She raised close to the $3 million needed to become a state-chartered commercial bank. But then the Pennsylvania Department of Banking increased the amount required to $5 million. "So I had to go back to the community, and say: 'We can't open the bank because we don't have enough money.' And that was probably the most devastating period," she recalls.

Chappell moved from boardroom to living room, church to schoolyard rounding up investors. By March 1992, she had collected almost $1 million more than the $5 million necessary.

Rebounding from a loss

But last year was not a good year for United. The bank incurred a net loss of $747,000, compared with a net income of $862,000 in 1993. The loss was primarily the result of nonrecurring costs related to the acquisition of two branches, according to the bank. Chappell says the bank should have made about $1 million in profit last year.

James Bodine, United's vice chairman of the board of directors, says the net loss should actually be about $200,000 less due to unrecovered funds from the RTC. The bank has filed a suit, he says, and United expects to receive the money.

Today, the bank's greatest challenge is attracting the investment capital it needs while, at the same time, retaining its favored status as a minority-owned institution.

Last month, the bank launched its third stock offering, asking investors for $2 million to $3 million to shore up its financial base. United is limiting its appeal to about 3,100 shareholders, most of them African-American churches and individuals of modest means who hold small blocks of stock.

United's rapid growth stretched its capital close to limits set by regulators to ensure a bank's soundness. In fact, some analysts are not too optimistic about the bank's profitability prospects.

"United does a pretty good job of serving the community, but their financial performance pulls them down in our index," says William Michael Cunningham, president of Creative Investment Research Inc., in Washington. His firm tracks and rates minority institutions.

"If and when this bank returns to profitability depends on how well they manage the assets they've gotten from the [RTC]," he adds.

Mr. Cunningham also contends that United has also been expanding rapidly and may not have as many cost controls in place. (It expanded from 47 employees in 1993, he says, to 75 in 1994.)

But Chappell maintains that United will turn a profit by the fourth quarter of this year.