The 1927 merger of two black-owned and -operated Memphis banks which had been instrumental in launching and supporting African American businesses in the 1910s and 1920s created the Fraternal and Solvent Savings Bank and Trust Company. The bank's eventual failure, due to risky investments and poor management, devastated the local African American community, exerting an impact similar to that produced by the 1874 collapse of the Freedmen's Savings Bank.
In 1906 Robert Reed Church Sr. established the Solvent Savings Bank and Trust Company, which catered to entrepreneurial businessmen. By 1920 it had become the nation's fourth largest African American bank. The Fraternal Savings Bank and Trust Company opened in 1910 and successfully followed a similar course.
With a growing Memphis population and the positive World War I economy, both banks expanded rapidly and invested heavily in a variety of business endeavors. In the 1920s, like many other banks, Fraternal and Solvent found themselves deeply in debt. In an effort to resolve their dilemma, the two banks merged in October 1927. In December, though, Christmas Fund withdrawals depleted the bank's cash reserves, producing a run on the bank, and the closing of the institution due to bankruptcy. Investigators traced shortages of over five hundred thousand dollars to bank president A. F. Ward and five other officers. Twenty-eight thousand depositors lost nearly 90 percent of their savings, and numerous African American businesses and organizations sustained severe losses. African American banks in Memphis did not stabilize until the 1940s.
Lester C. Lamon, Black Tennesseans 1900-1930 (1977)