NEW YORK - When one of the country's largest financial institutions operated by blacks went public, it made good sense to its depositors and other interested investors to buy shares at the IPO price. Historically such conversions have, in many instances, produced windfall profits for depositors who got in early, but in Carver Federal Savings case, torrential losses resulted.
Brought in at the height of the crisis two years ago, Manhattan public relations firm G.S. Schwartz & Co. repaired investor confidence in Carver, whose stock price plummeted 40 percent within two days of its initial public offering (IPO). Now, it seems, Carver's Schwartz-engineered turnaround has fully evolved. A recent issue of Crain's New York Business featured a balanced but optimistic story titled, "Carver Says Its Time Has Come; Redefinition Is About To Pay Off."
"Crains has always been tough in its analysis of Carver, holding it to the same standard as other banks," says Croghan. "Schwartz could have gone into retreat mode, fearful we might rough it up, again. But instead, Schwartz gave me a chance to look at the progress being made. I had access to management, and they communicated what the numbers don't yet show - that the labor's been done, and the future looks good."
G.S. Schwartz & Co.'s success with Carver is a case study for managing the troubled investment image of an urban ethnic community financial institution.
In 1996, at the National Creativity in Pubic Relations Awards (sponsored by Reputation magazine), Schwartz won first place for investor relations, a special coup for account supervisor Carl Hymans, vice president and Investor Relations Group manager at the 16-year-old independent agency.
And last week it learned that it won the Big Apple Award from the New York chapter of PRSA in the investor relations category.
For Carver, Schwartz and Hymans did not just prepare and execute an investor relations program. As its most trusted consultant, the agency actually became a part of Carver's core management and structure. Schwartz is known for doing work that changes people's opinion and thereby sells products and services.
"We are not spin doctors," says Hymans. "Nor are we inexpensive - in fact we probably charge more than other agencies our size, but we deliver great results."
The Crisis
When it went public, the 49-year-old Harlem thrift was solidly entrenched in the revitalized heartland of New York's African-American community. But Carver Federal Savings remained relatively unknown to Wall Street and the financial media. That is, until its stock took a nose-dive. Then, all eyes were watching.
The Carver Federal Savings Bank sold 2.4 million shares, about 90 percent of them to its depositors, at $10 a share. A few days later, shares were trading at $6, with many depositor/investors taking immediate losses, further eroding public confidence in the bank's stability. Word got out that the institution performed poorly - ranking in the lowest percentile of its peers - and that the 85-year-old president had a board of directors comprised mostly of fellow octogenarians. Overwhelmed by their crisis, Carver became aware of Schwartz through a sympathetic African-American reporter named Franklin Smith, who used to write for The American Banker. Hymans had just joined the mid-size agency, which has about 45 clients and 38 people.
G.S. Schwartz' initial goal was to immediately halt the decline in Carver stock price. Hymans long-term objective for the client was to build confidence in Carver as a growth opportunity within the investment community. The success of Carver's investor relations program is the result of a combination of media and analyst contact. It is a program that has benefited the bank and its shareholders.
The Response Strategy
- Once retained, G.S. Schwartz & Co. moved quickly. Their research revealed that Carver was selling at the lowest percentage of book value of any thrift in the country. Schwartz compiled contact lists of securities analysts, retail brokers and money managers, who on the whole had reacted negatively, with particular sensitivity to the aging management.
- One-on-one meetings were arranged with key members of the New York financial community to gain support of the stock.
- As Carver did not have the financial fundamentals to use as a selling point to Wall Street, G.S. Schwartz & Co. decided to focus the program on its recommendation that Carver hire a new and younger president, reflecting a new beginning at Carver. Carver hired Thomas L. Clark, Jr., who is now recognized as one of the premier African-American bankers in the United States.
- New president Clark gave interviews to major New York-based print media, including The New York Times, Crain's New York Business, the New York Daily News, The New York Post and The Amsterdam News.
- Schwartz initially arranged crucial meetings with Tom O'Donnell, thrift analyst for Smith Barney & Co. in New York; David Ellison, analyst for Smith Barney in Boston; and Bishwarp Mukerjee, Carver's Chief Financial Officer. Ellison became an advocate of Carver and his interest generated additional investor interest.
- Schwartz advised Carver's board of directors to form a holding company which could then participate in a stock buyback program.
- When upset Carver investors filed a class action suit, the PR firm handled investor calls directly - some 15 to 25 a day - as well as managed the ensuing media.
The Results
Carvers' stock began to rebound, reaching an all-time high of $11 a share in September 1995 - less than a year after Schwartz came on board. Today it hovers around $10 and is recommended by industry watchers as a good buy for the longer-term investor. About 30 percent of Carver's 2.2 million shares are institutionally held. The bank has seven branches and $372 million in assets.
"Schwartz has done a yeoman's job with our message, explaining the restructuring and how it will benefit the investors," says Thomas L. Clark Jr., president and chief executive of Carver Federal Savings Bank. "They've always been accessible. As we go forward, if we don't have the overall relationship with Schwartz that we've had, we'll deal with them on a transactional basis, because we know that we need to invest in outside communications expertise."
(Carl Hymans, G.S. Schwartz & Co., 212/725-4500; Thomas L. Clark, Jr., Carver Federal Bancorp, 212/876-4747, ext. Lore Croghan, Crain's New York Business, 212/210-0277; Tom O'Donnell, Smith Barney & Co. 617/50-9050)