OneUnited looks for reinvention with falling profits and deposits
OneUnited Bank opened its Grove Hall branch in 2007 to much fanfare, with a visit from the mayor and promises by bank officials to rejuvenate the Roxbury neighborhood and lend hundreds of millions of dollars to the Boston community.
The reality has been much more sober for the country’s largest African-American-owned bank. Hobbled by the financial crisis and a series of controversies, it is now fighting to reinvent itself in the face of falling profits and shrinking deposits.
Last year, OneUnited made just $48,000 in profit, among the lowest in Massachusetts. The bank has written just over half a dozen mortgage loans in the Boston area since 2014, while community banks of similar size in Massachusetts, including those that serve urban communities, make that many loans in their core area in a month. And inside OneUnited’s Grove Hall branch on a recent morning, tellers worked quietly at empty counters while across the street at the Bank of America, the only other bank branch for about a mile, customers were chatting with employees and lined up to use that bank’s ATM machines.
“You’ve can’t live on that very long,” Bill Kozak, the founder of WTK Associates Inc., a Rockport-based bank consultant, said of OneUnited’s paltry profits.
The bank faces a major question, he said. “Has it achieved, and can it achieve, its purpose, given its performance?” Kozak said.
The bank, which received a $12 million government bailout in 2008, is one of 10 banks nationwide that hasn’t repaid the government. Individual and business deposits in 2015 were $175 million, a nearly 40 percent drop from $292 million in 2006.
Officials with OneUnited believe they can reverse the bank’s fortunes. It recently shed a regulatory cease and desist order from 2008. It is cutting half its branches in California, investing in technology, and doubling down on its presence in Roxbury, with plans to move its headquarters there from downtown Boston. The bank is poised to see significant growth and expand its online presence to attract new customers, OneUnited officials have said.
The bank has launched a social media campaign aimed at students and alumni of historically black colleges and universities.
“The bank has positioned itself to be one of the premier financial technology companies in the United States,” Teri Williams, the bank’s president, said in a statement.
Its profits tumbled last year — from $830,000 in 2014 and $3.2 million in 2011 — because OneUnited decided to invest heavily in technology, the bank said.
It only posted one year of losses in 2008 — $33 million — after the value of its security investments in mortgage giants Fannie Mae and Freddie Mac plummeted when the housing market collapsed, Williams said.
Williams said that the bank now has $50 million in equity and is meeting regulatory requirements. Its profits improved in the first quarter and the bank made $251,000, according to its regulatory reports.
The bank’s largest shareholders are Williams and her husband Kevin Cohee, OneUnited’s chief executive officer. It’s a closely held institution that is appropriately capitalized and does not need to be “overly concerned with short-term earnings,” Williams said. Its core capital was about 6.3 percent of its total assets of $649 million last year, the highest it has been since 2005.
Melvin B. Miller, publisher of The Bay State Banner, a weekly newspaper covering Boston’s minority neighborhoods and a former long-time director of OneUnited, said the bank can succeed with its current strategy to focus on technology, such as offering customers the ability to deposit checks by taking photos on their mobile phones, something most larger banks have offered for several years.
The bank, which has branches in Boston, Miami, and Los Angeles, lends primarily in low- and moderate-income and minority neighborhoods and needs to thrive to ensure those residents have access to financial services, Miller said.
“The survival and profitability of OneUnited Bank is far more critical than a lot of blacks understand,” Miller said.
OneUnited isn’t alone in struggling for profits. The low-interest-rate environment and competition for loans has eaten into the bottom lines of many small community banks. Four smaller Massachusetts banks posted losses in 2015, including Boston-based Admirals Bank, which did so for the second year in a row. The average profit of banks between $500 million and $1 billion in assets, similar in size to OneUnited in Massachusetts, last year was $3.6 million, down from $4.2 million in 2006, according to the Navis Group, a New England bank consulting company which tracks data.
African-American-owned banks have fared even worse since the financial crisis, since many of their customers are in lower-income neighborhoods that were hit harder by the foreclosure crisis and have taken longer to recover after the recession.
Their ranks declined to just 22 nationwide at the end of last year, from 25 in 2011 and 48 in 2001. Some have merged, regulators have shut others down after years of sustained losses, and others had to raise capital from outside investors, shrinking their African-American ownership.
OneUnited’s problems were compounded when the Federal Deposit Insurance Corp. issued a cease and desist order against the bank in 2008, requiring it to boost its capital, limit its growth, and cut back on expenses, including luxury cars and a mansion in Santa Monica, Calif., for Cohee, which the bank was forced to sell.
OneUnited also sparked controversy when it pushed to auction the Charles Street African Methodist Episcopal Church’s main building in Roxbury over a $4 million construction loan that the church never repaid. The church filed for bankruptcy protection in 2012 and the case is unresolved.
OneUnited did start to increase its lending last year, after cutting back following the financial crisis. The amount of the bank’s loans were up 24 percent, to $425 million from $342 million the previous year. The bank has held financial literacy events for students and participated in workshops for small business owners in Dorchester in recent years.
The bank also gave at least $25,000 to the Black Economic Council of Massachusetts, which formed last year to tackle issues of income inequality and challenges of African-American businesses. Williams, the bank’s president, is a founding member of the council and serves on its board of directors.
But OneUnited, whose mission is to serve urban neighborhoods and offer them affordable financial services, could be doing more, along with other businesses, said Ed Gaskin, executive director of Greater Grove Hall Main Streets, a neighborhood group.
The nonprofits in Grove Hall have been active in hiring neighborhood children for summer jobs, organizing efforts to get Hubway bikes, and are trying to put together a farmer’s market, Gaskin said.
And while other banks that don’t have branches in the neighborhood have donated to Grove Hall Main Street’s events, OneUnited has not, Gaskin said.
OneUnited says that it is working to help the community.
“The bank’s most important community outreach today is to bring immediate and forceful attention to the need to close the wealth gap,” Williams said.
Still, bank consultants said that despite its low profits and limited activity, OneUnited will likely be able to continue for years. Regulators usually only force a merger or sale of a bank after repeated losses and regulators are sensitive to closing one of the few remaining African-American-owned banks in the country, analysts said.
“These are the community banks of the inner city,” said Russ Kashian, an economics professor at the University of Wisconsin Whitewater, who has studied minority-owned banks. “The FDIC and Treasury are conscious of the value of the institutions.”