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Troubles remain, future uncertain for OneUnited

Few loans since federal bailout

By Beth Healy
Globe Staff / September 10, 2010

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Five years ago this month, Mayor Thomas M. Menino stood with community leaders in Roxbury to hail plans for a new OneUnited branch in the neighborhood. The bank’s president pledged to make loans worth hundreds of millions of dollars across Boston, with a special emphasis on low-income borrowers.

OneUnited said it would partner with the city to offer the mortgages to first-time and current homeowners, and provide financial literacy training to residents. “As a child of an inner-city community I can tell you, it doesn’t get any better than this,’’ the bank’s president, Teri Williams, told the crowd that day.

But no loan program ever emerged — one in a long list of failures by the nation’s largest minority-owned bank, which is controlled by Williams and her husband, Kevin Cohee, the bank’s chairman.

In recent years, regulators have admonished the bank for poor performance and lavish executive pay, and Cohee himself has had personal run-ins with the law in California. And the bank, despite its diminished role as a community lender, sought and received help from US Representative Maxine Waters, a California Democrat, to secure $12 million in federal funds after the bank lost money on risky investments. Waters now faces House ethics charges in the matter because her husband had a stake in the bank.

Nearly two years after receiving a bailout, OneUnited Bank remains financially troubled and its plans unclear. Its assets have plunged 18 percent in that time, to $518 million. Total loans on the books have dropped by 13 percent, to $322 million, and few new loans have been made this year.

US Representative Barney Frank, the Newton Democrat who chairs the House Financial Services Committee and who helped craft the bailout bill so small institutions like OneUnited could seek assistance, said in an interview this week that the bank’s lack of lending has been “very disappointing.’’

Frank said he’s also concerned about OneUnited skipping six dividend payments to the US Treasury on its bailout money. As to whether the government should name directors to the bank’s board, as it has a right to do when so many payments have been missed, Frank said: “Given this, I’d be inclined to think so.’’

Cohee, in a recent interview, acknowledged the slow lending, but defended the bank’s performance overall. He said the government’s Troubled Asset Relief Program has been misunderstood by the public. “The goal became to give the money back as soon as possible. That was a serious error. It was an error on the part of everyone.’’

OneUnited, which has 10 branches nationwide, has made $24 million in loans so far in 2010 and hopes to hit $50 million by yearend, Cohee said. But that’s a far cry from the goal he laid out in February. At that time, he said the bank would write $100 million to $150 million in loans nationally, for single- and multi-family homes.

OneUnited has done very little new business in Boston, where it was founded in 1968, or in Miami, or its largest market of Los Angeles. The bank has made fewer than a half-dozen mortgages in the Boston area since getting bailout funds in December 2008, according to a public records review by the Globe. The largest of those loans went to wealthy developer Cecil Guscott, and to a Dorchester health care agency.

Cohee acknowledged that the bank has been “deemphasizing’’ home mortgages. One of the lessons of the subprime mortgage crisis, he said, was “the reality that not everybody’s going to be able to own a home.’’ Instead, he believes the bank is better off backing developers of affordable rental housing.

OneUnited has backed community institutions like the Agape Christian Church in Pasadena, Calif., which is building offices and day-care space, and helping poor families find housing. The bank cut Agape’s interest rate last year after it missed several payments on its $1 million loan.

“We’re very, very appreciative of Mr. Kevin Cohee and OneUnited Bank for taking a chance with us,’’ said Henry P. Sideropoulos, a physician and senior pastor of the church.

OneUnited has taken a tougher stance with other struggling customers. Last week, the bank filed a lawsuit against a prominent Boston client, the Charles Street AME church, run by the Rev. Gregory G. Groover, for repayment of an overdue $3 million note. The loan, to finance construction of the church’s new Roxbury Renaissance Center, has been extended several times, according to the Suffolk Superior Court complaint.

“The church has been trying to have discussions with the bank, but somewhat to our disappointment, the bank filed the lawsuit,’’ said D. Ross Martin, a lawyer at Ropes & Gray who is representing Charles Street AME.

The bank, in a statement, said of the church: “We are hopeful that their situation will be resolved. Their history and mission are essential to the community, and we appreciate the services they provide.’’

The Mattapan Community Development Corp. has a $2 million mortgage with OneUnited, on 24 units of affordable housing in four buildings. Spencer DeShields, the group’s executive director, said the bank is supportive and Cohee meets with him personally about once a year. But, he said, a community institution should also offer individual mortgages.

“I’m not a banker, but I would think that there is, especially in inner-city communities, a need for both of those options,’’ DeShields said. “Individuals need to get mortgages, and so do nonprofits that do affordable housing. You don’t want all affordable housing.’’

Cohee said the bank didn’t do more home loans — including the program with the city of Boston — because he didn’t want to compete against subprime lenders. “You had six slicksters whispering in your ear, saying, ‘Hey you don’t have to put anything down,’ ’’ he said.

But seven other banks that partnered with the city to provide affordable mortgages have made more than 1,000 loans to residents since 2005. Those banks include community institutions like East Boston Savings Bank and Hyde Park Savings Bank, as well as giants like Bank of America and Citizens Bank.

Cohee said OneUnited has been in “research-and-development’’ mode since the financial crisis, when it lost $50 million it had invested in the mortgage agencies Fannie Mae and Freddie Mac, which were taken over by the government.

“We’ve really been focused on this issue of how to have a widespread, a nationwide impact on job creation,’’ Cohee said. “The stuff we’re coming out with is absolutely cutting edge, absolutely state of the art.’’

Yet OneUnited is shrinking by almost any measure. Its assets, once over $650 million, have fallen by more than $132 million. Bank analysts point to the institution’s declining deposits, and expenses that now exceed the income the bank earns on loans. They also note that the bank has set no new money aside this year for potential losses on millions of dollars in past-due customer loans.

“That’s a big red flag’’ when regulators examine the books, said Suzanne Moot, a banking analyst in Milton. “If I were a regulator, I’d be talking to them.’’

Cohee further alienated his supporters in Washington last month when police arrests came to light that dated back to 2007. One was a sexual assault allegation that was dropped; another was a drug charge, which was dropped after Cohee agreed to go to counseling. Cohee denies any wrongdoing.

Meanwhile, OneUnited is planning to close its Lauderdale Lakes, Fla., branch to sell the building for $3.3 million. The office has just $2.1 million in deposits, down from $10 million in 2004, the bank said. One-quarter of the residents in the area live below the poverty line, and more than 80 percent are minorities, according to the bank’s regulatory filing. OneUnited said the branch is losing $285,000 a year, and that it wants to focus on the Miami market, 30 miles to the south.

Kenneth H. Thomas, a Miami consultant to banks on the Community Reinvestment Act and a longtime critic of OneUnited, said the bank has shown little commitment to south Florida since acquiring two branches there in 1999 and pledging to expand.

The Community Reinvestment Act requires all banks to lend in low-income communities where they take deposits, and federal regulators study their results every three years. OneUnited is in the midst of its first such exam since receiving a “substantial noncompliance’’ rating in its Florida market in 2007. The bank has a satisfactory rating nationally.

Thomas and other critics say they are surprised that the bank won the support of Representatives Waters and Frank in its effort to get bailout funds. “That’s why you have a bank like this — because they support the community. That’s not happening here,’’ Thomas said. “They can emphasize the kind of loans they want to make, but they’re not meeting community needs.’’

Cohee insists that, on the contrary, OneUnited remains committed to its mission. “We’re going to continue the dream that was begun right here in Boston in the 1960s,’’ he said. Cohee acquired the bank, formerly called Boston Bank of Commerce, in 1995.

He sounded confident that he can raise new capital from investors. He will need that money if he’s going to repay the government its $12 million. Said Cohee: “We’re probably going to give it back relatively soon just to kill the distraction.’’

Beth Healy can be reached at bhealy@globe.com.

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