RONALD HOMER and the black-owned Boston Bank of Commerce have set out to show that banking in minority neighborhoods can be profitable as well as socially useful. Many banks still do not perform well at making mortgage and business loans in the black community. A recent report by the Federal Reserve Bank of Boston, for example, showed that there is 24 percent less home mortgage activity in black neighborhoods than in white neighborhoods with similar incomes.
Part of the problem, Mr. Homer says, is bankers' perceptions of the community. ``If the black community is categorized as mostly poor people dependent on some form of government assistance, it's not going to be a place where people go looking to sell traditional banking services and make investments,'' says the bank's president and chief executive officer says.
But the perception is wrong, he notes. About two-thirds of US blacks live above the poverty level.
Referring to the Federal Reserve study, Homer says that ``the response of the banks was to build more low-income housing, for which they could receive tax credits. That's not an investment for economic purposes, but it fit their image of what a good investment in the [black] community would be.''
The Boston Bank of Commerce takes a markedly different approach.
``Our primary allocation of resources is around building economic infrastructure in the black community,'' the black executive says.
The bank has concentrated on three main areas, he says. The first is home mortgages. The houses black people buy are often in need of renovation, he explains. But most banks will grant a mortgage only for the purchase price of the house. Boston Bank of Commerce grants mortgages that include renovation costs. The bank also lends its clients a slightly larger percentage of their income than they might receive elsewhere.
Another emphasis is on helping nonprofit social service agencies use the value of their property to upgrade their facilities, Homer says.
But the bank's most significant project, he says, is its parcel-linkage program, which is ``in the middle of being a major success story.'' The bank pulled together a group of 50 minority investors - blacks, Hispanics, and Asians - to bid on development of the largest city-owned parcel of land in the mostly black Roxbury section of Boston.
To attract capital, the bank suggested linking the project with development of a state-owned property downtown. This led to $2.5 million in seed capital and a partnership with Metropolitan Structures to develop both sites.
The partnership has approval for a 1 million-square-foot office tower downtown and plans to built a hotel and three office buildings with 800,000 square feet of space on the Roxbury parcel. Homer estimates the Roxbury project would spin off $180 million in salaries from jobs locating there. The bank has agreements that 30 percent of construction contracts will be with minority-owned firms, and is working with colleges and unions to create job-training programs for black youth so they can work on the project. The developers are still seeking tenants.
When Homer came to the Boston Bank of Commerce in 1983, it was in financial crisis. After purchasing the assets of a predecessor black institution which had gone into conservatorship, the bank had lost more than half its original $1.7 million in capital. About 6,000 of its 8,000 depositors had account balances of less than $100.
The directors brought in Mr. Homer, who had worked for Marine Midland Bank in Rochester, N.Y., and then the black-owned Freedom National Bank in Harlem, N.Y. Under Homer the bank's assets grew from $11 million in 1983 to almost $70 million today. Its loan portfolio totals $57 million, $18 million of which is home mortgages.
``They've had nice, moderate growth,'' says James Moynihan Jr., senior vice president for regional banking at Advest Inc., a retail brokerage. ``As a community bank, they've done a good job.''
Ironically, by dealing with a community most banks steer clear of, Boston Bank of Commerce has so far escaped the damage the regional economic slowdown has done to larger banks. But if the slowdown continues and regional unemployment starts to increase, the bank will feel the effects, Homer says: ``Many of our customers may be the first fired.''
The Boston Bank of Commerce ``has had a positive impact, without a doubt,'' says Louis Elisa, president of the Boston chapter of the National Association for the Advancement of Colored People. ``The community is better off because someone out there was willing to take the lead and show other banks how it is done.''