By Oscar Perry Abello for NextCity | February 14, 2023
Adelphi Bank in Columbus, which raised $20 million in startup capital, marks the country’s first new Black bank since 2003.
Jordan Miller never thought it was in the cards for him to help start a new bank. Over the course of a 40-year career in banking, he witnessed the number of banks across the country dwindle from more than 14,000 to around 5,000 by the time he retired in 2019.
But after coming out of retirement to co-found the country’s first new Black bank since 2003, the Adelphi Bank co-founder and CEO is really just picking up almost exactly where his predecessors – brothers in his Black fraternity, as it turns out – had left off on the near-east side of Columbus, Ohio.
“We got the name Adelphi Bank from a Black-owned bank that was here in the 1920s, Adelphi Building Savings & Loan Company,” Miller says. “Three of my fraternity brothers owned it and they owned the building.”
That building went up at 818 East Long Street in 1921. It was during what banking historian and author Mehrsa Baradaran called “the golden age of Black banking.”
The U.S. banking system has long relied on groups of local investors, often local business or civic leaders including church groups, to pool their wealth and invest in new community banks. The thinking is that local investors have the knowledge and relationships to run a community bank. They understand local markets, can judge whether a business or real estate project has a reasonable chance of success, and ultimately have “skin in the game” — since they put their own wealth at risk by investing in the bank, they have a strong incentive to make sure the bank is successful.
By relying so much on local investors to start new community banks, the whole system is inherently set up to serve some communities better than others. When the Emancipation Proclamation was signed in 1863, Black households held less than 1% of wealth in the United States, a number that has barely budged since then. With relatively less wealth among Black communities to invest in new community banks, by the end of Black banking’s golden age, in 1934, Black banks still only made up less than 1% of all 14,000 banks across the country at the time.
To put that disparity in perspective, from 1934 to the mid-1980s, the number of banks across the country hovered between 13,000 and 15,000 – nearly all of which were community banks. But over those decades, those thousands of community banks invested in white communities while discriminating against Black communities. Even today, there are still more than 4,300 community banks across the country, but there are only 20 Black banks.
While segregation is no longer the law or an explicit policy for banks, research still shows that minority banks are more likely to serve more diverse communities and typically reach customers that have lower incomes or face constraints accessing credit at other banks.
“These minority banks are punching well above their weight in terms of the larger share of their portfolio of mortgages and small business loans going to communities that, historically, your mainstream financial institutions aren’t serving,” says Nicole Elam, CEO of the National Bankers Association, the main national trade association for minority banks.
For those Black banks that have gotten up and running, lack of access to shareholder capital also makes it harder for them to survive an economic downturn. “When you think about Black versus white banks, during the Great Recession, the closure rate was two-and-a-half times more for Black banks,” Elam says. “Under-capitalization leads to higher closures.”
Surviving remnants like the facade of the original Adelphi Building Loan & Savings stand as a reminder that Black business and civic leaders have long held an interest in investing what wealth they had back into their communities. But the wealth they had by themselves has never been enough to make up for the gap that started with slavery and continued through Jim Crow, segregation and mass incarceration.
All of the Adelphi Bank founding board members — seven out of nine of whom are Black — invested some of their own personal wealth as startup capital for the bank, and they found a few other startup investors from Black communities in Columbus. But they went outside Black communities to raise the rest of the $20 million they needed in startup capital.
“We received tremendous support from the African American community and the at-large community,” Miller says. “They know Columbus can’t be a great community without this.”
Read the full story at NextCity.org.