Lansing bank president breaks barriers, restores profits

Paula Cunningham is believed to be the only African-American woman in charge of a non-minority owned bank in the U.S.

It was the winter of 2009 and America was in the throes of the Great Recession; the worst economic times since the Great Depression.

All across the country the banking industry appeared to be collapsing as institutions both big and small crumbled under the weight of a long overdue market correction. After years of lightly regulated markets encouraging exotic derivatives, credit-default swaps and collateralized debt obligations, the world banking system was near collapse.

Already experiencing tough economic times due to difficulties in the auto industry, Michigan banks were reeling from market instability. According to the Michigan Bankers Association, between 2009 and 2011 an unprecedented 13 banks shuttered their doors as a result of contraction or regulatory failure. And 54 Michigan banks lost their charters by 2011 as a result of disruptions in the market.

In the midst of all the economic chaos swirling around her, calmly stood a petite, soft-spoken Lansing bank president name Paula Cunningham. Just two years earlier she had been a highly respected community college president who although used to wrestling with multi-million dollars budgets, did not have much hand on experience in the financial industry.

She had been hired as the President and CEO of Capitol National Bank (CNB) in 2006 and her appointment resonated strongly among women and members of Lansing’s sizeable African-American community, who fondly remembered Cunningham’s earlier work as an education advocate, small business owner, professor and as the first black female president of Lansing Community College. Now, nearly 35 years after Cunningham moved to Michigan from Akron, Ohio she was not only the first black female bank president of a white-owned bank in Michigan, but the first in all of America.

“Paula has always been very active in the African American community in Lansing,” said Teresa Bingman, former deputy general counsel to ex-Michigan Gov. Jennifer Granholm and President and CEO of the Lansing-based Black Success Network. “Whatever new position she took on, we were all excited for her because we knew not only did she possess highly effective leadership skills and would make us proud, but we also know how committed she is to fairness and equity and that Paula opens doors wherever she goes.”

Michael Grant is President of the National Banker Association; the country’s largest and oldest trade association for minority and women-owned banks. Its members include banks owned by African-Americans, Native-Americans, American-Indians, East-Indians, Hispanic-Americans, Asian-Americans and Women. He said although there are currently four African-American women who are President and CEOs of minority owned banks and one who is the President and CEO for the holding company of a minority owned bank, Cunningham is the only African American woman that he is aware of who is President and CEO of a non-minority owned bank.

While acknowledging her historical role, Cunningham said her number one charge from CNB’s board of directors was to prepare the bank for the next quarter century. However, before she could even settle in to her new job, Cunningham found herself confronted with the very real possibility of presiding over the demise of the state capital’s only community bank.

Losing customers

This was due to CNB’s primary customers being local small and medium-sized businesses and the upheaval in the financial markets was wreaking havoc on them.

“Our focus as a community bank has always been on small to medium-sized business and they were the ones negatively impacted the most from the economic downturn,” Cunningham said. “So we were losing as much as 40 percent of our total assets because people just weren’t paying back their loans. They were turning in their keys and saying ‘Here, take the building.’ Some just weren’t trying anymore.”

When she took over the reins in 2006, CNB had total assets of more than $200 million. By 2010 it had been reduced to slightly above $100 million.

If the bank was to survive, it had to stem the hemorrhaging by reducing overhead and managing the balance sheets by decreasing CNB’s problem loan portfolio and reserving additional dollars for loan losses.

“That meant engaging in everything from cutting overhead, working closely with our loyal customers that had been with us for years and for the first time in our 25 year history laying off people,” she said.

Laying off 32 of the banks 68 employees to be exact.

“It was very difficult because we are a small bank with a family like atmosphere,” Cunningham said. “Forty percent of our employees have more than two decades of service with us.”

However, the austerity measures and a $10 million dollar cash infusion from CNB’s holding company, Capitol Bancorp LLC, helped stabilize the bank and allowed it to ride out the worst of the Great Recession, and to do so without accepting any money from the federal Troubled Asset Relief Program (TARP).

Profits return

Today CNB has not only been profitable for nine consecutive quarters, but regained 25 percent of the assets lost during the recession. And it started the New Year off as a private, totally independent financial institution after ending its 31-year affiliation with Capitol Bancorp in December. Capitol Bancorp filed for bankruptcy in 2012.

In spite of its new independence, Cunningham remains cautious. She said she wants the bank to remain community focused and plans to again begin an expansion of products and services, particularly in Small Business Administration lending.

Looking back, she acknowledged her transition to bank president also brought a bit of culture shock to the testosterone heavy and nearly exclusively white banking sector in Michigan, but she took it all in stride and with good humor.

“I remember walking in to the room during my first banking conference and when I walked in all the conversations stopped,” she said with a laugh. “I don’t think people often have the tools or resources to deal with minority leadership or women of color in banking leadership as well as in other areas.”

Given it was a new situation for everyone, she set about building trust with her colleagues and employees by listening to people, finding talented employees and allowing them to do their jobs. “And then get out of the way and let them do what they do best,” she said.

Recalling how Cunningham so deftly navigated circumstances that ruined many others with far more banking experience, her colleagues offer nothing but praise.

“She’s smart, she understands banking and she understands people,” said Joel Ferguson, an African American businessman who was a founding Director and major stockholder in Capitol Bancorp. “She’s in charge and doesn’t blink.”

Ferguson, the owner of Ferguson Development LLC, was the first African American on Lansing City Council and chairman of the Michigan State University Board of Trustees. He acknowledged Cunningham went through a tough few years, but said she was brought on by the board of directors precisely because of her leadership abilities.

John O'Leary a former member of the CNB board of directors and President of O’Leary Paint Company agreed. He said her ability to navigate CNB through such tough times was a testament to those skills.

“She’s an extremely bright person so her making the transition from the education to finance sector wasn’t going to be the problem,” he said. “It was a matter of having the organizational and management skills and being charismatic enough to have people follow her. You can teach those basic things like finance, but is hard to teach people to be a leader; people skills are how you get people to follow you. Those are just part of her make up.”

Trevor W. Coleman is a veteran metro Detroit journalist and winner of a 2014 Detroit SPJ First Place Award for News Reporting and 2012 and 2011 NABJ and Detroit SPJ First Place Awards for Feature Writing and Editorial writing, respectively.