ImpactAlpha, February 29 — The Rev. Dr. Martin Luther King Jr., impact investor.
In King’s last public address before he was assassinated, he laid out a vision for Black-owned banks as drivers of equitable and inclusive wealth in financially-underserved communities of color.
“My father preached the imperative to accelerate the financial inclusion of Black Americans by supporting mission-driven Black banks — something he called ‘a bank-in movement,’” King’s youngest daughter Bernice A. King said in announcing an agreement to acquire Holladay Bank and Trust, a state-chartered commercial bank in the affluent Holladay suburb of Salt Lake City.
When completed and pending federal regulatory approval, the transaction will mark the first time that Black investors have purchased a non-minority-owned bank.
Sorenson Impact Foundation provided a $1 million program-related investment to Redemption Holding Company, the Delaware public benefit corporation formed by King and former White House policy advisor Ashley Bell to acquire Holladay Bank. As of December 31, 2022, Holladay Bank manages $68 million in total assets, including $56 million in total deposits.
“We worked with the Redemption team to ensure that their documentation was PRI-friendly to catalyze other investors to come in with PRI capital, either for the first time or very early on in their PRI portfolios,” Sorenson’s Savannah Johnson told ImpactAlpha. Other investors in Redemption include high-net-worth Black doctors, lawyers and business leaders in Utah and from across the country (disclosure: Sorenson Impact Foundation is an investor in ImpactAlpha).
Black-owned banks
Bernice King said after more than a half century of struggle and incremental progress since her father’s death, “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.”
Between 1888 and 1934, 134 Black-owned banks were formed to serve Black communities in the US, according to OneUnited Bank, the largest Black-owned bank in the country with roughly $650 million in assets. Many Black-owned banks in the once thriving Black community of Greenwood, Oklahoma, also known as Black Wall Street, were burned down in the 1921 Tulsa Race Massacre.
Since then, the number of Black-owned banks in the US has dwindled, a trend exacerbated by the 2008 financial crisis and the COVID pandemic.
“In general, Black-owned banks will go up for sale when they are in distress and aren’t performing well, and they’ll be bought by Black investors who want to keep the bank under Black ownership,” said Johnson. “But they’re walking into a very difficult business situation to manage since the bank isn’t performing well.”
Redemption’s acquisition of Holladay Bank flips the script. Black owners are acquiring a well-performing, non-minority-owned bank to widen access to financial services for financially-underrepresented individual and business borrowers. Johnson said the deal was a no-brainer for Sorenson, which is based in Salt Lake City, and has a mandate to help close the racial wealth gap.
“We probably would have come in regardless of where they were doing this, but they just so happened to be acquiring a bank in our backyard,” she said. “I think Holladay Bank is two minutes from our office.”
Financial inclusion
Redemption will become the 17th Black-owned bank in the country, according to data from the Federal Deposit Insurance Corporation, or FDIC, and the first commercial bank to convert to a minority depository institution, or MDI, defined as a federal-insured depository institution of which the majority of voting stock is owned by shareholders of color, or a majority of the board and the community the institution serves is predominantly made up of minorities.
King will head strategy and alliances for the bank and sit on its advisory board. Bell is executive chairman and CEO. King and Bell co-founded the National Black Bank Foundation, which Bell says has helped direct over $1 billion of deal flow to Black-owned banks since 2020.
“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 under-capitalized for hundreds of years,” said Bell. “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.”
Black borrowers are more than twice as likely to be denied credit than their white counterparts.
With the acquisition of Holladay Bank, Redemption is looking to meet the banking needs of a wave of Black Americans moving to Utah, a historically majority-white state. Between 2010 and 2022, Utah saw the fastest growth in its Black population, which increased by 86%, according to data by the Pew Research Center.
“We’re catching this at the right time,” Bell told ImpactAlpha. “Utah has put all of the pieces together to attract those willing to take a risk on themselves and their talents and come invest in a state that is just a great place to be in the banking world, a great place to be a tech entrepreneur.”
Redemption will partner with other minority depository institutions to increase lending for minority-owned businesses nationwide and will originate mortgage loans for homeowners of color. Redemption is launching a full-service digital banking platform to reach borrowers all over the country.
Bell says the goal is to build Redemption into the Black-owned version of Ally Bank, one of its investors. “Ally is a unique bank in the sense that it doesn’t have branches, but it’s one of the larger banks in our country and has utilized technology in a very innovative, consistent, and really consumer forward way that allows it to be extremely competitive across the country.”
