Black-owned banks in the United States are getting more attention these days.
Following the death of George Floyd, a Black man, at the hands of Minneapolis police officers, the hashtag #bankblack has gained popularity, encouraging people to move their money from traditionally white-owned banks to Black-owned banks.
But even back in 1968, civil rights leader Martin Luther King Jr. encouraged an audience in Memphis to support a local Black bank.
“Take your money out of the banks downtown and deposit your money in Tri-State Bank,” King said.
Currently, Black Americans make up about 12.4% of the U.S. population, but less than 1% of U.S. banks are Black owned.
In fact, according to the Federal Deposit Insurance Corp. (FDIC), as of December 2021, only 16 of the 142 FDIC-insured Minority Depository Institutions (MDI) were Black owned.
MDIs are financial institutions where at least 51% of the stock is owned by one or more “socially and economically disadvantaged individuals.”
The reason for the disparity lies with a wide wealth gap between Blacks and whites. In addition, 2019 statistics show that about half of Black Americans were unbanked or underbanked compared to just 15% of white Americans that year.
Sidney King, president and CEO of the Black-owned Commonwealth National Bank in Mobile, says the Community Reinvestment Act of 1977 is partly to blame. The Act was an effort to get banks and thrift institutions to “serve the convenience and needs of the communities in which they are chartered to do business,” including low- and moderate-income (LMI) communities, and to do so in a manner “consistent with the safe and sound operation of such institutions.”
“While it was a good act — it’s the anti-redlining law — that forced banks to go inside the red lines and do business — the bigger banks went in and cherry picked a lot of the bigger customers, the doctors, lawyers and preachers,” King says.
King points out that at many of the larger banks, only about 1% of home loans go to Black customers. In fact, according to the Federal Reserve, the denial to Blacks seeking mortgage loans is 84% higher than whites.
But things are looking up. Since Floyd’s death, which sparked protests for racial justice around the country, some companies and financial institutions have stepped up to help narrow the racial wealth divide.
Netflix and Yelp have announced plans to deposit $100 million and $10 million respectively into Black-owned banks.
Moreover, the FDIC last year debuted a $120 million investment fund, with backing from Truist Financial Corp. and Microsoft, to support Black-owned financial institutions.
And then this year, Major League Soccer announced plans to take out $25 million in loans from Black-owned banks as part of a partnership with the National Black Bank Foundation (NBBF). According to the MLS press release, the deal marks the first time any sports league has participated in a major commercial transaction exclusively with Black banks. Black-owned Citizens Trust Bank, with branches in Birmingham and Eutaw, was a lead arranger of the deal. Alamerica Bank, another Black-owned bank in Birmingham, is also a participant.
Today, Alabama has only four Black-owned banks: Commonwealth National Bank, Liberty Bank & Trust Co., Citizens Trust Bank and Alamerica Bank. Only Commonwealth National and Alamerica are headquartered in Alabama. The others, Liberty Bank & Trust and Citizens Trust Bank, have their headquarters in New Orleans and Atlanta respectively.
Commonwealth National Bank
Established in 1976, Commonwealth National Bank in Mobile opened after a group of local businessmen decided to build a financial institution that would serve the African American community.
As of the end of 2021, Commonwealth has 22 employees and assets of $56,890,000, deposits of $50,263,000, liabilities of $50,554,000, total equity capital of $6,336,000 and net loans and leases of $22,604,000.
“We’re the only bank in Mobile that’s headquartered in Mobile,” King says.
The bank’s commercial customers run the gamut from electricians and restaurant owners to contractors and even a sawmill company, King says.
“Our customers, both commercial and consumer, are probably about 95% African American,” King says.
The bank offers commercial, consumer, mortgage and vehicles loans and customers enjoy online and mobile banking.
Commonwealth also serves underserved, low-income communities and is designated as a Community Development Financial Institution Fund (CDFI) institution. A CDFI provides economic opportunity by offering underserved communities access to financial products and services.
“We consider ourselves a bank for all people,” says King, “but our focus is, and our founders created us to serve, the historically underserved African American community.”
Alamerica Bank got its start when several businessmen in Birmingham got together and opened the financial institution in 2000.
Nearly 22 years later, the bank is the smallest of the Black-owned banks in Alabama with eight employees and one branch at 2170 Highland Avenue in Birmingham.
Alamerica offers online banking, personal and small business checking with interest, business money market accounts, savings accounts and certificates of deposit.
In December 2021, Alamerica Bank had $16,036,000 in assets, $13,536,000 in deposits, $13,674,000 in liabilities, $2,362,000 in total equity capital and $6,972,000 in net loans and leases.
Most of the bank’s clients are small business owners with revenues of less than a million dollars, says Vice President of Public Relations and Business Development Louis Willie IV. For most, getting loans from other major banks can be challenging.
“What I say to people is that I have two answers, and that’s yes, and how to get to yes. There are a lot of small business owners who aren’t necessarily prepared to get a loan today,” Willie says.
To help, Willie says he focuses on direct engagement with business owners through community events and hosting educational seminars at the bank.
But now Alamerica has formed a partnership with the Black-owned Carver State Bank based in Savannah, Georgia, which is now a majority shareholder in Alamerica. Jacqueline Smith, chairwoman of Alamerica’s board, says the partnership will help Alamerica expand its ATM program and upgrade web-based services.
“We’re combining resources and because of that, we’re making changes and restructuring where we are,” says Smith. “Because we’re restructuring, we’re expanding our focus on the community and our focus on interacting with larger banks as partners.”
Citizens Trust Bank
In 1921, five businessmen in Atlanta established the Black-owned and operated Citizens Trust Bank.
Eighty-one years later, in 2002, the Atlanta-based Citizens Trust Bank, a wholly owned subsidiary of Citizens Bancshares Corp., announced plans to acquire Citizens Federal Savings Bank, the Alabama bank that African American businessman and philanthropist A.G. Gaston founded in 1956.
The acquisition, a $10 million cash deal, made Citizens Trust Bank, at the time, the second largest Black-owned bank in the United States behind Carver Federal Savings Bank in New York City.
Today Fairfield native Jason Eppenger is the Alabama market president for Citizens Trust, overseeing the bank’s two Alabama branches in Birmingham and Eutaw.
Citizen’s Trust Bank, a certified CDFI, has 87 employees in Georgia and Alabama with, as of December 2021, $668,803,000 in assets, $600,225,000 in deposits, $612,300,000 in total liabilities, $56,503,000 in total equity capital and $281,750,000 in net loans and leases.
“We are generally more willing to extend credit on transactions that are in low- to moderate-income census tracts, which historically have been heavily dominated by Black people,” Eppenger says. “We also offer programs and services to provide financial literacy in the community, to help people rebuild their credit through various mechanisms of small dollar credit lending, as well as secured credit lending.”
Eppenger says that through partnering, Citizens Trust and other members of the syndicate of Black banks were able to offer MLS a deal that was both competitive and at a market rate.
“This allows us to tap into a revenue stream that we historically have not had. And when individual institutions are allowed to earn more, and we find alternative ways of earning, it strengthens that bank,” he says.
“For most African American-owned banks, their core mission is to provide services to underserved communities, and so, if we have more resources within our organizations, then, in turn, it makes our community impact stronger.”
Liberty Bank & Trust Co.
Liberty Bank & Trust Co., which declined to be interviewed for this story, is headquartered in New Orleans.
The bank launched in 1972 as “the first multi-national bank in New Orleans with both Black and white shareholders,” and opened branches in downtown New Orleans, Gentilly and New Orleans East.
In 2015, the bank acquired the assets and banking relationships of First Tuskegee Bank in Alabama through a merger agreement.
Today Liberty Bank & Trust Co., has 171 employees in branches in New Orleans and Baton Rouge; its Alabama branches in Montgomery and Tuskegee; and farther afield in Michigan, Illinois, Mississippi, Kansas and Tennessee.
In December 2021, the FDIC reported that Liberty Bank and Trust Co. held $971,090,000 in assets, $851,605,000 in deposits, $883,590,000 in liabilities, $87,500,000 in total equity capital and $502,599,000 in net loans and leases.
Gail Allyn Short and Dan Anderson are freelance contributors to Business Alabama. She is based in Birmingham and he in Mobile.