What’s gone wrong at Chicago’s last Ghanaian owned bank?

Under the Nduoms, the bank has closed one of its two locations, cut staff, alienated many longtime customers and effectively stopped making new home loans

The bank’s board meeting on April 28, 2016, started with a prayer. Then it turned to plans for keeping the bank alive.

That week, federal regulators had signed off on a deal allowing new owners to take control of Illinois Service Federal Savings and Loan, one of the last Black-owned banks in the country. For more than a year, regulators had warned the bank could be shut down if it didn’t raise capital. They had also ordered it to improve its management.

Papa Kwesi Nduom offered an infusion of money and a fresh face. An entrepreneur from Ghana, Nduom led a successful business empire that included hotels and a large banking chain in West Africa. He had been looking for an opportunity to invest in Black-owned banks in the United States when he heard about ISF and agreed to put $9 million into it. To make the deal work, ISF would be restructured so that Nduom, his wife, Yvonne, and four of their adult children controlled all of its stock.

Longtime bank leaders saw no other way to keep the 82-year-old institution open. The deal would also ensure that the bank remained Black-owned.

As he led the April 2016 board meeting, Nduom emphasized his intention to bring the bank back to full health. One of his top priorities, he said, would be talking with federal regulators about lifting their order restricting the bank’s activities.

It hasn’t turned out that way. Five years later, the historic institution — renamed GN Bank — remains deeply troubled. Under the Nduoms, the bank has closed one of its two locations, cut staff, alienated many longtime customers and effectively stopped making new home loans, though that’s one of the central reasons for its existence. In 2020, the bank was again put under restrictions after regulators found “new violations of law, rule or regulation.”

Yet the Nduoms aren’t solely responsible for GN’s struggles. Regulators have failed to carry out a federal mandate to “preserve and promote” Black-owned banks, a ProPublica investigation has found.

Leading up to the Nduoms’ acquisition, the federal Office of the Comptroller of the Currency ordered the bank to reduce the risk in its loans, which led to less revenue. Then, the agency signed off on the new owners, even though they lacked banking experience in the United States and had investments abroad that posed known regulatory risks. Since then, the bank has been under close watch, yet the Nduoms have made a series of decisions that diminished the bank’s profile and quality of service.

GN Bank has fallen on hard times amid a nationwide decline in Black-owned banks. In 2001, 41 Black-owned banks were open in the United States, according to federal data. By this June, just 17 remained. In most cases, struggling banks shut down or were acquired even after federal regulators stepped in to order changes, as they’ve done with GN.

The OCC, for example, intervened multiple times over 10 years to turn around City National Bank of New Jersey; it was closed in 2019. First State Bank of Danville, Virginia, ceased to be a Black-owned bank in 2017, when it was bought by a white owner while under consent order with the Federal Deposit Insurance Corp. And the Community Bank of Lawndale on Chicago’s West Side was unable to stay afloat after it was acquired by a suburban pastor and members of his congregation, who pooled money to try to save the institution.

Regulators “seem to have abdicated their responsibility to look out for the public interest,” said William Michael Cunningham, an economist and the founder of Creative Investment Research, a firm that focuses on financial products that promote social good. “They’re not following the law.”

GN Bank’s difficulties are also part of a larger story about racism and economic disparities. For decades, white-owned banks largely refused to do business in Black communities, and even when they did, they often loaned at higher interest rates or with predatory conditions. National banks and mortgage companies still issue loans in Black Chicago neighborhoods at a fraction of the level they do in white areas.

Black-owned banks have long been viewed as a critical solution to those problems, receiving renewed attention after the 2020 murder of George Floyd led to protests and a national conversation about racial injustice. But because they tend to serve communities with fewer resources, many Black-owned banks have trouble staying open. Experts say they can’t be expected to reverse generations of economic segregation on their own.

“It’s a Catch-22: You are struggling with the same forces of poverty, segregation and lack of capital that your bank is intended to remedy,” said Mehrsa Baradaran, a professor at the University of California, Irvine, law school and author of “The Color of Money: Black Banks and the Racial Wealth Gap.” “And that’s why you see so few of them.”

In a statement provided through a lawyer, Nduom did not respond to questions about customer complaints. But he said his efforts and the work of the bank’s board “are allowing the bank to thrive and are bearing fruit for the community. Our work is not completed but we have made great strides and continue to do so.”

“The bank has been and is diligently working to place itself on solid financial footing and we are working with regulators to do that,” the statement said.

A spokesperson for the OCC, the federal agency that approved the sale, declined to discuss GN Bank, saying it “does not comment on specific banks or supervisory activities.” In a written statement, the spokesperson said the OCC carries out its mandate to preserve minority-owned banks by offering training and support through an outreach office and an advisory committee of bank leaders.

“The OCC recognizes the vital role that minority depository institutions (MDIs) play in promoting the economic viability of the communities they serve and has several programs and initiatives in place to support the creation and preservation of these institutions,” the statement added.

Josephine Wade-Smith’s worries about GN Bank started one afternoon in late 2018, when she found several copies of a letter taped to the front door of her Chicago home. It stated that the bank had sold her mortgage to a company she had never heard of. And it said that the account was past due.

It was the first time Wade had heard that she could be behind on her mortgage, she said, though she usually paid at the bank in person each month. And she didn’t understand why anyone would post personal financial information on her door.

“The mailman saw it,” she said. “Everyone saw it.”

Known as Mother Wade to friends and everyone else with a passing acquaintance, she is warm, savvy and sometimes blunt; a longtime acquaintance describes her as “straight, no chaser.” For almost 40 years, her restaurants have anchored a stretch of East 79th Street that the city has marked as honorary Mother Josephine Wade Way. She counts aldermen, members of Congress and mayors as friends and allies.

Wade, 78, had been a customer of the South Side bank and had known its leaders for decades. Banking with Black-owned institutions had always been important to her. “If we go outside of our banks and take everything away from our community, then our community is not strong enough to make loans and risk loans,” she said.

But in the three years since she found the letter on her door, her trust in GN Bank has been shattered. After getting the letter, a man showed up at her home and told her it was going into foreclosure. For a while, bank employees said they would only accept cash, she said, but she continued to make payments in person at the bank until they stopped giving her receipts more than a year ago. In April, Nduom texted her that he was trying to get her mortgage “regularized,” according to messages she shared with ProPublica. The texts confused her even more.

Now she worries that somehow the bank will take her home.

“I haven’t been sleeping. I can’t eat,” Wade said. “When you get old and you’ve worked hard and you’re worried about not having a place to stay — this is stressful.”

A Modest Beginning

In 1934, 13 Black leaders on the South Side pooled together $7,000 to launch Illinois Federal Savings and Loan. Their mission: to help people buy homes in parts of the city where white-owned banks wouldn’t lend. One member of the group was Robert Taylor, a property manager who later became chairman of the Chicago Housing Authority. Among the other bank founders were a doctor, an attorney, a minister and an insurance executive, A.W. Williams, who would end up serving as president and board chairman over the course of his 35 years with the institution.

“He was not the kind of person who believed that one pulled oneself up by one’s own bootstraps,” said Williams’ son Norman. “He believed that we’re all connected.”

Norman Williams joined the bank’s board in 1976, as his father was preparing to step away. He ended up staying for 40 years, the last 19 years as board chairman and 13 years as bank CEO. Now 69, Williams serves as president of Unity Funeral Parlors, another family business launched by his father that became a South Side institution.

Norman Williams’ father, A.W. Williams, was one of the founders of Illinois Federal Savings and Loan, which became GN Bank. The younger Williams joined the bank’s board in 1976 and ended up staying for 40 years. Credit:Danielle Scruggs, special to ProPublica

The bank, Williams said, tended to have two types of customers. Some had the means to bank anywhere but wanted their money reinvested in the Black community. Others didn’t have other options. Both groups appreciated that the bank was small and accessible.

“They were more comfortable going somewhere where people knew their names and knew their history,” Williams said. “Some people even had their favorite tellers. Those relationships were important to people in the community.”

In 1976, as many small banks tried to stay solvent, Illinois Federal merged with another Black-owned savings and loan and changed its name to Illinois Service Federal. Six years later, ISF took over the assets of a second Black-owned savings and loan that was closing.

From its small initial investment, Illinois Service Federal grew to have more than $104 million in assets by 1992. In spite of that growth, it remained a small institution and struggled to compete with larger banks and lending companies that had started to do business in its neighborhoods.

That wasn’t unusual. Even when the economy is thriving, the profit margins of Black-owned banks tend to be smaller and their risk tends to be higher, Baradaran said, because they serve communities with historically lower levels of wealth and housing stability.

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