Since the turn of the century, America’s Black-owned banks have taken a tumble. Black-owned banks insured by the Federal Deposit Insurance Corp. numbered 47 in 2002, but by last year, that figure fell to 16, accounting for less than 0.03% of assets at all FDIC-insured financial institutions.
A group of Black investors, led by a former White House adviser and the daughter of Dr. Martin Luther King Jr., is creating a new one — through acquisition.
Redemption Holding Co. announced Tuesday its plan to purchase Holladay Bank and Trust, a one-branch community bank that has served the Salt Lake City area for 48 years.
Pending federal regulatory approval, RHC would become the only Black-owned bank serving the Mountain West, and it would mark the first time an existing U.S. commercial bank would become a Black-owned minority depository institution through acquisition.
"Black banks make the American dream possible for all Americans by deploying resources that uniquely address the financial realities of communities that have been systematically excluded, overcharged and undercapitalized for hundreds of years," said Ashley D. Bell, a former White House policy adviser for entrepreneurship and Small Business Administration regional administrator who will serve as RHC's CEO.
"Redemption will serve as a lifeline to the next wave of Black and Brown first-time home buyers and small business entrepreneurs across the country," Bell said.
Dr. Bernice A. King will be RHC’s senior vice president of corporate strategy and alliances, and serve on the bank’s board alongside Dhani Jones, a former NFL linebacker and the bank’s director and co-founder.
Bell and King founded the National Black Bank Foundation three years ago, and it has since driven $600 million of deal flow into Black-owned banks. Historically, Black-owned banks have served small businesses, nonprofits and homebuyers, with a focus on predominantly Black communities, the Urban Institute said in a report.
Between 2007 and 2013, for example, the number of mortgages originated by Black-owned banks for Black borrowers increased 57%, bucking a national trend that found a 69% drop in mortgage lending to Black borrowers.
Michael Neal, senior research associate at the Urban Institute, told CNBC last year that the dwindling of Black-owned banks in part aligns with a broader trend in the banking sector.
“We’re seeing the number of banks overall declining and assets being concentrated, particularly in your larger global and more complex financial institutions,” Neal said.
Mehrsa Baradaran, a banking law professor at the University of California at Irvine, expanded on the challenges of Black-owned banks.
“Whatever the struggles are of the community, the banks have the same struggle because they’re enmeshed in that community,” Baradaran told CNBC. “They cannot change it unless the community itself has more wealth and has more access, and we have less discrimination as a society.”
Holladay Bank and Trust counted $68 million in assets and $56 million in deposits as of Dec. 31. RHC plans to increase the products offered at Holladay with a planned launch of a full-service digital banking platform, SBA loans, and mortgage origination offered in partnership with other national banks.
Current management and staff will remain once the deal is closed, according to RHC.
In his final public address on April 3, 1968, Bernice King’s father implored Black Americans to move their money to Black-owned banks in advocacy of what he called “a bank-in movement.”
"More than half a century of struggle and incremental progress later, we're making good on daddy's call to bank-in by creating new centers of opportunity for people of color, starting with this Black-led bank acquisition,” she said. “Redemption is just that: delivering families from the cycle of unjust financial exclusion and intergenerational poverty."