The day before he was assassinated 55 years ago, Martin Luther King Jr. talked about creating a banking movement for African Americans. By pooling wealth and resources to Black-owned banks, he said, capital and opportunity would be injected into disadvantaged and underbanked communities.

At the time, 135 Black-owned banks existed. In 2002, there were 47. Today, there are only 16 such banks, says Ashley Bell, former White House policy advisor and Small Business Administration regional administrator.

Utah will soon be home to the nation’s 17th Black-owned bank. Redemption Bank will be formed when Redemption Holding Company acquires Utah-based Holladay Bank & Trust in Salt Lake City and converts it to a minority depository institution (MDI). That designation requires 51 percent or more of the voting stock to be owned by minorities, and those institutions tend to make a greater percentage of home mortgage and small business loans to minority and low-income borrowers as compared to other institutions. 

This marks the first time Black investors have bought a non-minority-owned bank. The deal must still get state and federal regulatory approval.

“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,” said Bernice King, lawyer, author and daughter of the late King in a press release. “Redemption is just that: delivering families from the cycle of unjust financial exclusion and intergenerational poverty.”

King will be the SVP of Redemption, while Bell will be CEO. Venture capitalist and former NFL linebacker Dhani Jones will sit on the board. The three came together over a shared belief that racial and economic justice are entwined.

“Credit is like water,” Bell says. “In communities that have credit flowing, opportunity grows. Without it, communities become financial deserts.”

Why Utah?

It might seem counterintuitive to put such a bank in Utah—where just 2.1 percent of the state’s population is Black, according to a Feb. 2023 report from the Kem C. Gardner Policy Institute—but the state’s economic strength is exactly what made it so appealing. Utah has one of the strongest economies in the country and ranks first in the nation for fiscal stability, according to U.S. News & World Report. The state also has one of the fastest-growing populations in the nation, with an influx of millennials and a burgeoning tech sector.

Utah offers a sort of “experiment” for a Black-owned bank, Bell says. Historically, these banks disappeared during economic downturns because they were tied to the health of the communities they served. Those communities were behind “red lines,” a discriminatory practice that limited banking opportunities to those who lived within those areas. Following the 2008 recession, the decline in Black-owned banks accelerated in a way not seen in the broader banking industry.

“You can pretty much tell that when Black unemployment hits about 14 to 15 percent, you’re going to lose the Black banks,” Bell continues. “What’s novel about this experiment is that this is the first time that there’s a Black bank in America that is not physically located in a community that is economically vulnerable.”

Why it’s needed

Redemption’s timing provides a glimmer of hope amid national tension over racism, following the murder of George Floyd in 2020, the Black Lives Matter movement and, most recently, the expulsion of two Black Tennessee lawmakers from the statehouse. As many as 65 percent of Black Americans say the increased national attention on racial inequality has not led to changes that improved their lives, and 44 percent say equality for Black people in the United States is not likely to be achieved, according to an October 2021 survey of Black Americans by Pew Research Center. Respondents say overhauls of several U.S. institutions are needed to ensure fair treatment—including support for Black businesses—to advance Black communities.

According to a 2020 report by the U.S. Federal Reserve, more than half of companies with Black owners were turned down for loans, though they were the most likely to apply for financing. Even when Black business owners did get approved, their rate of failure to receive full financing was the highest among all categories by more than 10 percent. They were also most likely to apply for a credit card and faced the highest rate of rejection.

Black-owned banks flourished in the late 19th and early 20th centuries because they were the only ones to lend to African-Americans, whose neighborhoods were rejected by and walled off from other banks. At the time, a number of Black business hubs flourished, creating “Black Wall Street” communities in places like Tulsa, Oklahoma, which was ultimately burned down in the 1921 Tulsa race riot.

Since 2020, a number of companies have attempted to address the racial wealth gap. PayPal, for instance, made a $535 million commitment to invest in minority-owned businesses. JPMorgan Chase said in 2020 it would spend $30 billion over five years on minority lending, while Citibank said it would spend $1.1 billion over three years. Other institutions, such as Rocket Mortgage and loanDepot, are also now providing financial services that may be better tailored to communities of color and offering loans that require less money down or to people with more nuanced credit ratings.

Today’s 16 Black-owned banks hold less than 0.03 percent of the assets at all FDIC-insured banking institutions—or $5.2 billion in total assets—and just 1.6 percent of the assets at minority depository institutions tracked by the FDIC. Because they are also less likely to have online banking services, they run the risk of losing customers if they continue to fall behind their nonminority peers in terms of digital banking offerings, says Michael Neal, principal research associate at the Urban Institute, a nonprofit that provides data and evidence to help advance upward mobility and equity.

“There is a risk that these particular institutions won’t continue to thrive in this brave new world of digital banking,” Neal says. “That really limits the reach of institutions to people who historically have been shut out.”

Redemption should offer a fresh change, Bell says. The acquisition will inject capital into Holladay Bank & Trust, which will be used to upgrade the bank’s technology and add digital banking apps and online services. The hope is that, as the only Black-owned bank between Los Angeles and Houston, it will serve people no matter where they live. “We’re the first Black bank in the Rockies, which has been a desert for the minorities that live here,” Bell says. 

A domino effect

The bank could also be the start of a movement to end decades of retrenchment by capital-starved Black banks. In February, Adelphi Bank, a Black-owned de novo in Ohio, won regulatory approval to become the first new Black bank to open in 20 years. Bell says he knows of five more Black-owned banks slated to open their doors within the next five years. “That’s huge when you’ve only had 16,” Bell says.

Redemption Bank pulls together a broad spectrum of investors, including Black business executives and Utah billionaire Ryan Smith, owner of the Utah Jazz. Redemption’s board of directors will include Yolanda Daniel, former VP of the Federal Reserve Bank of Chicago; Grant Brantley, chief information officer of the National Football League; and Sean Prendergast, CFO at Major League Soccer.

Holladay Bank & Trust was an attractive purchase because it is financially healthy, with $69 million in assets and $56 million in total deposits, Bell says. Redemption hopes existing customers will see a bank transformed by an influx of capital while keeping its existing employees whom customers already know.

“When you start a bank, you want to make sure you’re profitable and you’re being good stewards of your shareholders,” Bell says. “And I think we’re definitely going to be in a great position to do that. We’re making a good bank a great bank.”