Lender's future tied to community's past Druid Hill financial firm has history of doing things its way

September 14, 1997|By Marilyn McCraven | Marilyn McCraven,SUN STAFF

When Koinonia Baptist Church was founded five years ago, church members could find only one place that would accept their initial $251 deposit: Ideal Federal Savings Bank.

"It was the only financial institution in Baltimore that would let us open an account with less than $500," said the Rev. Douglas Miles, pastor of the now 300-member church in East Baltimore.

"The other banks also wanted us to be in existence for a year and already incorporated," Miles added.

Koinonia's story is echoed by dozens of others who laud the West Baltimore institution for working with customers who don't fit the lending standards of many banks.

Today, after surviving Maryland's savings and loan debacle a decade ago, the family-run institution is still on the same block of hTC Druid Hill Avenue where it was founded nearly 80 years ago. It reports stagnant deposits, but is looking to grow by offering checking accounts beginning next month, and is scouting locations for its first branch.

"There's a need for growth because I want to better serve the public," said Yvonne Lansey, 51, Ideal's president and the fourth generation of her family involved in running the institution. She noted that she would like to make more construction loans to help generate income.

The institution, although known as Ideal Federal Savings Bank, is actually a mutual association owned by its depositors. Tiny by the standards of the lending industry -- its $7 million in assets make it the smallest of the state's five black-owned financial institutions -- Ideal is nonetheless rich in history.

Located on the cramped first floor of a rowhouse near the Druid Hill YMCA, Ideal was founded as a home loan association by eight black men in 1920 to provide mortgages for African-Americans at a time when many banks wouldn't.

Like many such neighborhood associations at that time, it opened just one night a week to do business.

On Thursday nights -- then the night off for household help -- dozens of cooks, chauffeurs and maids, along with some professionals, mostly teachers -- would line up at the association's two teller windows to deposit their money, turning it into something of a social occasion.

It wasn't unusual for men to gather in the back for a beer and a friendly card game, regulars recall.

Even after it was open five days a week, the association also opened for a couple of hours one night a week through the early 1970s in keeping with the tradition, Lansey said.

Like many banks, the association ran into trouble when President Franklin D. Roosevelt called a bank holiday in March 1933 at the height of the Depression. There was a run on banks and many folded, unable to pay their customers. But Ideal "paid off every depositor 100 cents on the dollar," though it took several years, Lansey said.

Eventually, its officers closed the association and let the charter lapse in the mid-1940s.

In 1962, Ideal was re-established by Yvonne's father, E. Gaines Lansey, and William Murphy Sr. to provide home loans to blacks -- many of whom were moving to newly integrated neighborhoods. Murphy later became a well-known community leader and is now a retired district judge.

The association's viability was threatened again in 1985 when it got caught up in the collapse of Maryland's state-chartered, privately insured S&L system.

But while panicky depositors formed lines at many savings and loans demanding their money back, only two of Ideal's customers closed their accounts, Lansey said.

Lansey's father considered closing the association, but out of loyalty to the thousands of customers who remained calm during the panic, he stayed in business and sought and received federal insurance.

It was during the '60s and '70s that Ideal gained a loyal customer base -- members of the expanding black middle class who left the Druid Hill Avenue area for such city neighborhoods as Ashburton and Forest Park or the suburbs, Yvonne Lansey said.

Today, many of those people keep money in low-yield passbook accounts rather than more lucrative investments, at least in part because "they recall when they could not go to white banks to get loans," said James Crockett, a long-time real-estate company owner.

Crockett said his only criticism of Ideal is that "it's ultraconservative" when it comes to making home loans.

State Treasurer Richard N. Dixon said Ideal "has been one of the most solid financial institutions in the state for a long time."

When he was a stockbroker, Dixon handled Ideal's investments and became friends with E. Gaines Lansey, whom he recalls as "one of the most astute businessmen I've ever known."

Even Yvonne Lansey marvels at the loyalty of her customers.

"We have customers who have retired, moved to Washington or somewhere else, but keep their bank accounts here,'' she said. "When they want to make a deposit, they'll mail their passbook in with their check and we mail it back to them."

But Lansey said the customer base is declining.

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