The newest Black-owned bank in the US is in an affluent, mostly white suburb, nestled at the base of the Wasatch mountains just north of Salt Lake City.
Redemption Holding Co., which last fall completed the acquisition of Holladay Bank & Trust in Holladay, Utah, has flipped the script on Black bank ownership, which has been in decline for decades. Now called Redemption Bank, it’s the first non-minority-owned bank in the country ever to be purchased by Black investors.
“What separates us from every other African American owned bank in history is that all of the previous banks have operated out of, and were birthed out of, low to moderate income areas, and they were surrounded by a lot of economic challenges that made it really hard for those banks to succeed,” Redemption’s Ashley Bell says on the latest episode of the Agents of Impact podcast.
“We flipped that on its head and started the first Black-owned bank in a very affluent area, with a great deposit base, with a great regulatory environment. We think the sky’s the limit for what’s possible.”
In the wake of the pandemic, Bell, a former White House policy advisor and regional administrator for the Small Business Administration, teamed with Bernice King, the youngest daughter of Martin Luther King Jr., and went looking for an institution to anchor a nationwide financial services provider.
Dr. King’s final speech, his “I’ve been to the mountaintop” address in Memphis in 1968, called for a national “ bank-in movement” to drive equitable wealth-creation in financially-underserved communities of color. Black-owned banks, for example, approve 83% of mortgage applications from Black home buyers, nearly double the national average.
Redemption’s choice of Utah was no accident. The state’s banking regulations make it an attractive location from which to provide financial services nationally. The state is a financial powerhouse, with major financial institutions that manage over $200 billion in industrial bank assets and most of the nation’s credit card issuers.
Redemption is preparing to issue its own credit card, to be called Bank King, in time for this year’s celebration of Juneteenth, marking the day in 1865 when federal troops arrived in Galveston, Texas, to enforce the Emancipation Proclamation months after the end of the Civil War.
The card could have widespread appeal for its flat, 12% interest rate, about half the average rate of cards in the US. In addition, Redemption will give half of its transaction fees to a network of programs providing a monthly income stipend to single mothers living in poverty across the country – shifting minds of card holders from hoarding points to investing in hope, as Bernice King puts it.
Technology gap
Bell and King were spurred to create Redemption by the racial disparities revealed by the pandemic. Many small businesses in low-income communities were unable to access the Paycheck Protection Program, flexible loans that were intended to keep such enterprises afloat through the shutdown.
“Those who were the most influential and the most powerful were first in line, and the money ran out very quickly, and the rest, the least, the last and left behind, didn’t get access to the first phase,” Bell says. Many community development financial institutions stepped into the breach, but the disparities in access revealed the technology gap between small banks, including minority-owned banks, and major financial institutions.
“That wasn’t just an inconvenience,” Bell says. “It was an existential threat to those businesses by not having access to banks that they could trust, that could get them access to the resources they need.”
Bell and King worried about the risk of “white flight” by depositors uncomfortable with the new ownership.
“The easiest way to take out a bank is instability and deposits can sink any ship. That has happened several times in American history,” Bell says. “We had to pick a place that had not only a good regulatory environment, but also had a community that would be open to and receptive to the concept that the color shouldn’t matter about the ownership.”
Redemption spent two years cultivating relationships with local leaders, including Robert and Katharine Garff, Peter and Brynn Huntsman and Utah Jazz point guard Collin Sexton. Sorenson Impact Foundation provided a $1 million program-related investment and helped Redemption identify other investors (disclosure: Sorenson Impact Foundation is an investor in ImpactAlpha).
“There’s not enough African Americans in Utah for the bank to exist just off African-American, so you have to be good at representing and serving everybody,” Bell says.
Redemption has moved to improve technology and services for all of the bank’s customers, and has grown assets by 10% in less than a year. It’s now going into the market to raise an additional $20 million to expand its loan-making capacity.
“If you’re not an African American, you can walk into any bank or go on any website that does lending, and it probably never crosses your mind that you may or may not get access to what you’re looking for because of your race,” Bell says. “But if you’re an African American, you absolutely think about that.”
“I can walk into Redemption, and I know that they won’t deny me because of the color of my skin,” he says. “That makes a level playing field for you, for me and for anyone else that walks through the door.”
