"The Alabama Penny Savings Bank."

The Penny Savings Bank,founded by Reverend William Reuben Pettiford in Birmingham in

1890,was the first black-owned and operated financial institution in Alabama.Created as a necessity of De facto and later codified segregation,the bank backed and encouraged development of black business,especially in urban areas,as well savings by African Americans,until its closing in 1915.William was born to free parents in North Carolina in 1847.He moved to Alabama in 1869 to seek better educational and financial opportunities.After seven years of studying while holding down jobs, William completed his degree at the Lincoln Normal School (a predecessor of Alabama State University)in Marion,Perry County.In 1877,William became a teacher at Selma University and simultaneously entered the theological department of the school taking courses from President Harrison Woodsmall.Three years later,he voluntarily severed his connection with the school to become pastor of the First Baptist Church of Union Springs,where he also served as principal of the city school for African Americans.In 1883,he accepted the pastorate of the First Colored Baptist Church of Birmingham,later named the Sixteenth Street Baptist Church,at the urging of state leaders and educator Booker T Washington,who assured him that he could provide necessary leadership for Birmingham's expanding black population.William motivation to establish the Penny Savings Bank came from several sources,including his former position as financial agent for Selma University and his growning friendship with Booker T.Washington,who was a strong advocate of thrift and self-help for the black community.William related how,while riding a streetcar one Friday night,he observed an African American woman drinking whisky after receiving her weekly pay.That experience led him to think about establishing a business where blacks could save their money rather than waste it.Another impetus came from William Washington Browne,president of the black-owned Savings Bank of the Grand Fountain United Order of True Reformers of Richmond, Virgina,who expressed an interest in opening a branch of his bank Birmingham.Rather than letting an outsider establish a bank,William and the local black leaders,including J.O. Diffay,N.B. Smith,T.W. Walker,Peter F. Clarke,B.H. Hudson,and A.H. Parker,decided that they could do a a better job.To ensure the bank's success,William and a carde of community leaders engaged in three months of education,speeches,and advertising.The Alabama Penny savings Bank opened its doors on October 15,1890,with William as its president.It received on deposit that day $555,which,along with the $2,000 already paid in from the sale of stock,constituted its working capital.The bank was not incorporated until 1895,when it finally accumulated the $25,000in cash assets that was required under Alabama laws of the 1890s.Because its success in Birmingham.officials of the Penny Bank later established branches in Selma,Anniston,and Montgomery.Although the bank achieved success,some African Americans distrusted black operated banks because of the failure of the Freedmen'sBureau Bank in 1873.Like  Booker T. Washington,William believed in self-help and racial solidarity.Because he also agreed With Booker,emphasis on developing partnerships with powerful whites,William established working relationships with white bankers.He obtained assistance from Birmingham's white financial institutions to train his workers in bookkeeping and banking procedures.Administrative help from the Steiner Brothers Bank appears to have been the major factor in the Penny Bank's ability to survive the economic crisis's of 1893,when even some white banks failed.As a member of Booker T Business League,William helped organize the National Negro Banker's Association in 1906 and served as its president until his death.The organization's stated purpose was "to foster and encourage the establishment of banks among our people and to look after the interest and welfare of those already organized." William traveled throughout the south to assist in the establishment of black banks and become the nation's leading figure in the African American bank movement.Under his management,the Penny Bank continued to grow.On July 15,1902,the deposits were $78,124.21;by October 1911,they had reached $421,596.51.Much of the bank's success resulted from William and the directors emphasis on home ownership.Records show that the Penny Bank was the leading mortgage to persons buying homes in Smithfield,the most prominent black community in Birmingham.In addition,during the bank's first decade,William and other officials engineered many real estate transactions that proved highly lucrative for the bank.In 1913 the Penny Bank constructed its own building Eighteenth Street in Birmingham's thriving business on its district.The five story-story  building housed other black businesses on its upper floors.Of its 64 rooms,businesses occupied all of them except one,paying a total $8,000 in rent to the Penny Savings Bank. The building represented a tangible demonstration of the director's philosophy of self-help and economic solidarity:African Americans cooperating to assist other African Americans.By the time of William death in 1914,the Alabama Penny Savings Bank was the largest and strongest African American owned bank in the United States,doing business in excess of $500,000.In 1915,the bank merged with another bank with another black-owned bank,Prudential Savings,and became the Alabama Penny-Prudential Savings Bank,with J.O. Diffay as acting president.Despite the Penny Bank's success and its merger,the institution failed in 1915,less than one year after William death.The likely reason for its failure was the absence of William,who nurtured a unique relationship with the larger banks,and during times of financial crisis no one could convince these financial institutions to lend assistance as William had done in the past.As a result,the Alabama Penny Savings Bank was forced to liquidate its assets and sell its $150,000 building to the Knights of Pythias for $70,000.Despite its rather short life of 25 years, the Penny Bank contributed in great part to the black ownership of homes,the building of churches and business,and teaching many African Americans in the city how to properly manage their financial resources.