The Daughter of a Slave Who Did the Unthinkable: Build a Bank – The Wall Street Journal

The daughter of a former slave, Walker became the first Black woman ever to head a U.S. bank when she founded the St. Luke Penny Savings Bank in Richmond, Va., in 1903. Her success came from doing what great entrepreneurs do: Walker zeroed in on an underserved market and focused her prodigious energy on meeting its needs. But her story is all the more remarkable because it played out on a stage of such intense bigotry.

Her mother, Elizabeth Draper, was an illiterate teenager when Walker was born. Her father was a white Confederate soldier who, historians believe, raped Elizabeth. When Walker finished high school, her father, who still lived nearby, sent her a dress as a graduation gift. Her mother burned it.

As a girl, Walker helped her mother work as a washerwoman and soon joined her as a member of the Independent Order of St. Luke. This was a mutual-benefit society originally set up by a free woman in Baltimore that provided insurance, educational funding and other financial services to Black people after the Civil War.

After graduating high school and working three years as a teacher, Walker quickly advanced at St. Luke. She became the organization’s head in 1899, when it was on the brink of failure. Under her leadership, it blossomed to 100,000 members across 24 states.

Having grown up in a network of mothers who had to manage family finances to the penny, Walker saw the economic independence of Black women as an ethical imperative.

“Who is so helpless as the Negro woman?” she asked in a speech in 1901. “Who is so circumscribed and hemmed in, in the race of life, in the struggle for bread, meat and clothing, as the Negro woman?”

She called for St. Luke to create a department store and a newspaper—but, above all, a bank. That, she believed, was the way to uplift Black women. “Let us put our moneys together; let us use our moneys; let us put our money out…and reap the benefit ourselves,” she proclaimed. “Let us have a bank that will take the nickels and turn them into dollars.”

Walker had worked as an insurance agent and had taken correspondence courses in business and accounting, where the color of her skin wouldn’t disqualify her from participating. The manager of one white bank in Richmond allowed Walker to spend several hours a week there for months, studying how banking worked down to the finest details.

Few companies have ever launched into more hostile seas.

At the time, many white banks refused to lend to Black borrowers. Those that did often charged higher rates, creating resentment and further hardship that drove borrowers to pawnbrokers, payday lenders and loan sharks.

In 1865, Congress created the Freedman’s Savings & Trust Co. to serve formerly enslaved people. In 1874, the bank’s corrupt and incompetent white managers ran it into the ground. Most depositors reclaimed no more than 60% of their money; many lost everything.

For decades, thousands of Freedman’s depositors and their descendants pleaded with the U.S. government to recoup their deposits, usually in vain.

Even today, Black residents in areas that once had a Freedman’s branch are significantly more likely than whites to distrust financial institutions. In Walker’s time, the Freedman’s failure made many Blacks profoundly suspicious of banks.

So Walker traveled as far as New Jersey to urge Black depositors to trust her new bank. In Richmond, she had schoolgirls go door to door, handing out invitations to its grand opening.

The bank took in more than $9,400 on its first day. Assets grew to $79,000 by 1907, nearly doubled in the next four years and surpassed $300,000 by 1918. Assets hit $530,000 in 1920—about $7 million in today’s money, an enormous sum raised from people who often could afford to put up only a few pennies at a time.

White opposition—what Walker called “the lion of prejudice”—was fierce.

After she moved the bank into St. Luke’s department store in Richmond’s business district in 1905, white merchants threatened to boycott any vendor that supplied the store. A landlord said he would convert the adjacent building to a saloon, which would attract an unsavory clientele that “would simply be awful,” as Walker put it. The threat eventually drove the store out of business and the bank out of the neighborhood.

Later, the state banking commissioner, who bragged about shutting down Black banks, forced Walker to cease lending to the St. Luke’s store and newspaper.

Nothing stopped her.

Although the bank was open to all, Black women remained Walker’s preferred customers. They generally could work only as servants, laundresses or factory hands, often subsisting on $5 a week. To be a Black woman was “an existential risk,” says Shennette Garrett-Scott, a historian at the University of Mississippi and author of “Banking on Freedom: Black Women in U.S. Finance Before the New Deal.”

So Walker made loans as small as $5. The bank kept evening hours six days a week to accommodate workers who labored past 5 p.m.

Walker knew impoverished borrowers could be honest and diligent. So she turned local communities into ad hoc credit committees, enabling St. Luke to lend to borrowers with trustworthy references.

Most mortgages then required at least a 40% down payment and matured in about five years—with much tighter terms for Black borrowers. St. Luke, however, accepted down payments as low as 10% and let home buyers refinance as needed.

By the 1920s, St. Luke customers had fully paid off nearly 650 mortgages, and almost 40% of Black homes in Richmond were owned by their occupants, among the highest rates in the U.S.

Walker gave each of the bank’s stockholders, even those who owned only a fraction of a share, voting rights and input on operations.

In the bank’s elegant interior, holding a brass pen in their hands, even the poorest customers could feel respected.

By the 1920s, at least 100 Black women worked at St. Luke’s enterprises, probably more than at any other organization in the U.S. financial industry, according to Prof. Garrett-Scott.

In 1930, St. Luke absorbed two smaller Black banks in Richmond to become Consolidated Bank and Trust Co., which Walker shrewdly steered through the hardest years of the Great Depression. In 2009, its holding company was acquired by what is now Huntington, W.Va.-based Premier Financial Bancorp. Inc.

Yet today’s financial industry, like most businesses, remains overwhelmingly white and male. Was Walker’s work in vain?

“Often with pioneers, we shouldn’t think of their legacy as requiring the fulfillment of the path they blazed,” says Ethan Bullard, curator of the Maggie L. Walker National Historic Site in Richmond, operated by the National Park Service. “Their legacy was blazing that path. The fulfillment may be up to us.”

Walker knew that. On her deathbed in 1934, her last words were: “Have faith, have hope, have courage, and carry on.”

Write to Jason Zweig at intelligentinvestor@wsj.com