But these institutions have been struggling for years. In 2001, there were 41 Black-owned banks, but by the end of last year, there were just 17. The investors behind Redemption say they are on a mission to reverse that trend.
The deal to buy Holladay Bank and Trust, founded in 1974, still must be approved by financial regulators. The bank had $68 million in total assets at the end of 2022.
“Holladay’s leadership was excited by this unique growth opportunity and by the chance to extend capital to new markets and underbanked customers,” Katie Spratling, who will serve as the bank’s president, said in a statement.
Redemption will be one of the smallest Black-owned banks in the country, but Ashley Bell, who will serve as the new bank’s chairman and CEO, said the acquisition will give it a unique advantage in the competitive banking world.
“We have never seen a Black bank start off in an affluent neighborhood and with a balance sheet with zero to no delinquencies,” said Bell, who formerly served as a policy adviser in the Trump White House and regional administrator of the Small Business Administration. “If Black banks are going to survive, we’re going to have to leave Martin Luther King Drive and go to Main Street.”
The struggles of Black banks reflect the struggles of the Black community, said Brandon Comer, managing partner of Comer Capital Group, a financial services company. “Every time we have an economic downturn we lose more Black banks because Black people always get hit the hardest,” said Comer, who is not involved with the Redemption deal.
Dhani Jones, chairman of the investment fund Qey Capital and a Redemption investor, traces the new bank’s story back to 2020, when he was trying to access loans through the Paycheck Protection Program, launched under the Trump administration to provide forgivable loans to businesses during the covid-19 pandemic.
Jones, a retired NFL player, said he struggled to find a bank that would help him apply.
“The traditional banking world didn’t have the time or energy to work with minority-owned small businesses,” Jones said.
“After all of that, we turned to each other and said, ‘How come we can’t go out and start a bank that will be positioned to help these people?’”
Bernice King, youngest child of the Rev. Martin Luther King Jr. and Coretta Scott King, is also an investor. She will serve as the bank’s senior vice president. Other investors include the New York Community Bank and Ryan Smith, the billionaire owner of the Utah Jazz professional basketball team.
The bank will face several challenges as it tries to compete against large financial institutions, including holding onto its current customer base. The potential to grow within the hometown Black community is limited: Only 2 percent of Salt Lake City’s population is Black.
“A big challenge will be the headlines we get from this: Black people take over White bank,” said Zachary Smith, managing director of Crescent Capital Group, which is not involved in the deal. “And so there’s the prospect of White flight, but I grew up in Holladay. My family lives in Holladay. My sister Melissa is the president of the PTA … so I’m looking to my family to help me spread the message.”
The track record of Black banks in closing the wealth gap is mixed, said Mehrsa Baradaran, a law professor at University of California at Irvine.
In her book “The Color of Money: Black Banks and the Racial Wealth Gap,” Baradaran found that even though these banks have frequently been touted as a solution by policymakers, they have proved to be no match for the forces of segregation and disinvestment in Black communities.
“If they’re offering the right products and the right interest rates, it has the potential to do some good,” Baradaran said of Redemption. “But we need to be very clear that Black banking and Black capitalism alone won’t close the gap.”
Andre Perry, senior fellow at the Brookings Institution, said that whether Redemption proves to be a game changer will depend on how much it is able to break out of the mold of the mainstream banking industry.
“We’re just talking about one fairly small bank, but the symbolism cannot be overstated. This is about changing the face of ownership in this country at a very deep level,” said Perry, who studies solutions to the racial wealth gap. “But what will make this acquisition truly successful will be its ability to do what the best Black banks have always done, finding ways to grow without exploiting Black people and communities.”
