Stand and deliver: Kevin Cohee turned OneUnited into the nation's largest black banking institution one acquisition at a time. And he's not finished yet. (B.E. Financial Company Of The Year).

When Kevin Cohee, chairman and CEO of OneUnited Bank, looks at One Lincoln Street in Boston's financial district, he sees his vision for the future of black-owned banks slowly coming into focus. The $370 million, 36-story, 1 million square foot office tower, which officially opens for business in July, was built in no small part because of his bank's leadership in financing the purchase of the development rights to the construction site in 1997.

It was a move that gave the bank the largest minority ownership stake in the project and key influence in determining who would develop the site and how much minority participation would be involved during and after construction. The project has meant more than 4,000 permanent jobs for the community and a steady stream of income for the bank and the building's other shareholders.

But financing deals like the Lincoln Street project are only part of Cohee's vision. In fact, the Harvard Law School alumnus spent the last six years transforming the former Boston Bank of Commerce into the largest, and arguably most progressive, black-owned bank in the country. Implementing an acquisition strategy mirroring those used by mainstream banks during the 1990s, Cohee has linked black-owned banks in Boston, Miami, and Los Angeles to create the first black-owned interstate bank in the nation.

"This bank is taking advantage of the bank reform policy developed during the 1990s, the Gramm-Leach-Bliley Act, which removed the firewall that previously existed between financial institutions and opened the door for mergers of the mega-financial institutions like Citigroup," says Bernard E. Anderson, Ph.D., professor of management and economics at The Wharton School of the University of Pennsylvania and member of the BLACK ENTERPRISE Board of Economists. "Competition for capital is very intense in the financial services industry and smaller banks have a very difficult time serving their customers without more capital. So the effort by this financial institution to merge other African American institutions is an attempt to remain financially viable and profitable, and to continue to serve the community under very different financial conditions."

The acquisitions have increased the bank's assets from $137 million in 1999 to $499.7 million by the end of 2002, providing more resources for the bank to deliver greater financial services.

Under its new name, OneUnited Bank offers a national approach to banking. It started in January when the institution's name was changed and it continues with upgrades in technology and personnel that make bank operations as seamless as those of major banks. Cohee, 44, and his management team are rolling out a set of innovative products that include financial literacy seminars, home mortgage initiatives, and a low-fee banking program designed to help customers escape the costs associated with mainstream banking.

By using an acquisition strategy to unseat Carver Federal as the No. 1 bank on the BE BANK list, Cohee's OneUnited Bank has signaled a new level of competition among black-owned banks. He is also creating a model for other banks to follow as they struggle to remain black-owned in an industry that is consolidating at the highest levels. Because of this leadership role in the black banking community, OneUnited Bank is the 2003 BE Financial Company of the Year.

FROM RETIREMENT TO REVOLUTION

This isn't the first time Cohee has turned around a company. While carving out a successful career as an investment banker at Salomon Smith Barney in the 1980s, he began dating Teri Williams, who at the time was one of the youngest vice presidents at American Express at age 29. In 1989, the two purchased Military Professional Services, a firm that markets credit cards to military personnel. After improving the company's financial picture, they made a fortune selling it to First Chicago Corp. in 1991. The two married and were able to retire, but early retirement didn't suit Cohee very well.

In 1995, Cohee and Williams used $1 million of their own money to purchase a controlling interest in the Boston Bank of Commerce, which, at the time, was run by Ron Homer, a hero in Boston's black financial circles. Cohee was appointed chairman, and although he had been brought on to assist Homer in reviving the ailing institution, within a year, the board appointed him as CEO. His aggressiveness at pushing a local icon out of a leadership role at the bank earned him a reputation as a hard-nosed manager who played to win at all costs. Walter B. Prince, partner at Prince, Lobel, Glovsky & Tye L.L.P., and OneUnited board member, says, "The reputation is probably exaggerated. Kevin is a bright, intelligent businessman, and he's made some marvelous creative business decisions."

But no matter what you think of Cohee's style, he has proven effective in business. He has demonstrated the savvy to pull off three acquisitions since 1999, establishing the foundation for what he says is a movement to change the nature of banking in low-income communities. Ultimately, Cohee wants to create a bank that has the strength of billions of dollars in assets to facilitate significant community development in black neighborhoods.

"Citibank and the larger financial institutions have created a paradigm where the wealthy don't pay fees, but guess who does? Those who can least afford to," says the Kansas City, Missouri, native. "We've got to change the paradigm so that people don't have to be afraid to save their money because they will be [hit with exorbitant fees]."

Cohee intends to change people's attitudes about banking with OneUnited's "membership program," an innovative low-cost banking initiative that gives customers the ability to open up an unlimited amount of checking, savings, or money market accounts for a $5 monthly charge. The program is free to seniors and students. Williams, now a OneUnited executive vice president, says the program has helped the bank "see significant increases in account growth as well as deposit dollar growth."

"If you have access to a large number of bank accounts with which to save, you can save for your children's education, or squirrel money away for a down payment for a home," says Robert Patrick Cooper, senior counsel for OneUnited. "[But] if customers are afraid to bank or they believe they are going to be penalized by banks that charge high fees, [they're not going to save quite as much]. We really want to make it easy for our customers to save their money, to put it in a safe and sound institution."

For Cohee, creating a "safe and sound institution" meant getting bigger. "We're in an industry that requires scale to deliver modern-day financial services and products," he says. "We have to be able to do everything from transactions such as financing a skyscraper to being involved with programs for the poor."

To create such an institution, he first purchased the People's National Bank of Commerce (with branches in Miami and Lauderdale Lakes, Florida) from the Federal Deposit Insurance Corp. in 1999. Then, in 2000, he used a stock swap, worth reportedly $10.2 million to acquire Founders National Bank in Los Angeles. The star power of investors Magic Johnson, Janet Jackson, and former Motown President Jheryl Busby also helped in the deal. His most recent acquisition came last year, when he wrestled Family Savings Bank in Los Angeles away from FBOP Corp., a large, white-owned, bank holding company that had negotiated a deal for the bank against the protests of community residents who wanted it to remain black-owned. Taking advantage of community pressure, Cohee found a way to convince Family's board of directors to back out of the deal with FBOP and sell to OneUnited.

Cohee says the combined banks, with 10 branches and two ATM centers, can do more than any of the banks could do separately. Anderson says the acquisitions are "a very positive thing because a number of black banks have been acquired by white-owned institutions and, without mergers of this type, a number of the black banks would probably cease to exist."

COMMITTED TO CUSTOMERS

Even though a black-owned bank may have been preserved in the communities where the acquired banks are located, Cohee still faces the challenge of unifying the banks under one name--OneUnited--to make his organization most effective. While the name change has been official since Jan. 20, 2003, to coincide with Martin Luther King Jr. Day, getting customers and employees to embrace the dramatic changes that come with having a national black-owned bank is not an overnight process. Since black-owned banks have historically had a very strong link and commitment to the black communities they've served, erasing the bank's name may cause customers to flee in protest.

"The case has to be made by the board of directors before they agree to be acquired that the shareholders are going to be the major beneficiaries and that the community will continue to benefit from the presence of the financial services made available by the new institution," says Anderson.

Cohee has enlisted the help of his high-profile investors Johnson, Jackson, and Busby to convince customers that OneUnited will continue the legacy of the merged banks. While the celebrities made appearances and were quoted in press releases, the bank also increased customer care and stepped up community involvement.

One area in which they hope to improve community participation is in the bank's investment in the Revolving Loan Fund of the Miami-Dade Empowerment Zone Trust, an entity that provides loans to small businesses that are usually not deemed creditworthy by traditional institutions. Publicizing new banking initiatives like the membership program and its national home ownership drive may also help win customers over.

Perhaps a bigger challenge for Cohee has been bringing in a number of highly-skilled professionals to upgrade technology, connect all the different banking systems, and reconfigure the management of the bank so that it can operate nationally. In the process, he has had to change his staff, and while the process has gone smoothly so far, it may become a more complex issue as more banks are merged into the institution.

"When you talk about change and replacing people with better people, some like to look at that as a bad thing--this guy is taking people's jobs away. That's silly," says Cohee. "We do these things in as humane a way as we can. We treat everybody with dignity and respect, but you must remember, our first responsibility is to our community and our customers, and we have to ensure that we have employees that are skilled and capable enough to serve them."

STAYING THE COURSE

Even as Cohee establishes OneUnited as a national bank, he continues to look to expand. In fact, he hopes to grow the bank into a $3 billion institution over the next three to five years. His next acquisition target? Since he already has a presence in Los Angeles, the No. 1 banking market in the country, it makes sense for him to look to the next-largest markets with African American populations. He has already made two attempts at New York's Carver Bank since 1999. He and his wife purchased a 7.8% interest in Carver stock "and pursued a proxy contest to get themselves appointed to the board of directors at an annual meeting in February 2000. They were only named to the board as part of the settlement of a related litigation," says a Carver spokesperson. Then Cohee attempted a hostile takeover of the bank in 2000 and was defeated. A Carver spokesperson now says, "Kevin Cohee has not been a director since the last annual meeting on Feb. 4, 2003. During the month of August 2002, he and his wife, Teri Williams, sold substantially all of their Carver stock. There is no relationship between him and Carver."

But Carver seems to continue to be of major interest to Cohee. Since New York is the No. 2 banking market, Cohee says, "Carver represents a tremendous opportunity for black America.... We like to believe that the opportunity has not been lost and at some point in time the two organizations will be able to come together because we think that is what's in the best interest of everybody involved--the shareholders, the community, and the management of both organizations." However, since Cohee tried to remove Carver CEO Deborah Wright as head of the bank getting these two institutions together would be a remarkable feat.

Of course, there are other black-owned banks that would welcome a merger with OneUnited. In addition, several banks seem poised to follow OneUnited's acquisition strategy. He says Newark-based City National Bank of New Jersey is looking to expand. This bank "has made noises about possible interests in mergers and they have the capital to pull it off."

OneUnited's Cooper listed Citizens Trust Bank of Atlanta, Liberty Bank and Trust in New Orleans, and United Bank of Philadelphia as other banks trying to increase in size and scale. "You've seen [mergers] in majority banks, where they have gone coast to coast, gaining greater economies of scale by linking management with capital and technology," he says. "You haven't seen this in the minority sector of banking, but we've acted as a catalyst in this area."

Smaller banks must deal with the influence mega-institutions have in taking away their core audience. All banks must increase their asset base to compete or they won't survive. Black-owned banks will have to compete against each other for the black audience, as well as compete against other banks for market share in nonblack communities.

"By linking financial institutions, we're linking these communities together and making them all stronger," says Cohee. "Essentially we're trying to fulfill the age-old dream of African Americans garnering our economic spending power and redistributing it in our communities."

OneUnited Bank Sales/Staff

Founded 1982

         Sales *   Staff

1998     $105         23
1999     $138         52
2000     $264        113
2001     $262         87
2002     $500        143

* IN MILLIONS OF DOLLARS, TO THE NEAREST THOUSAND. AS OF DEC. 31,
2002.
PREPARED BY B.E. RESEARCH. REVIEWED BY THE CERTIFIED PUBLIC
ACCOUNTING FIRM EDWARDS & CO.