Woodstock asks regulators to delay acquisition of Heartland Bank by Midland States Bank

Ten mortgages to African Americans in 2012. Zero bank branches in low-income communities or communities of color. And below-peer-level lending to low-income communities in all of its assessment areas.

These figures highlight the dismal performance of Midland States Bank at adequately serving the needs of the diverse communities where it works in Champaign County, Will County, and the greater St. Louis area.

Midland States’ terrible track record raises advocates’ concerns about its proposal to acquire Heartland Bank in St. Louis. Is a bank with a history of disproportionately providing loans and services to higher-income and predominantly white communities going to meet the needs of consumers in the diverse St. Louis area?

Woodstock Institute recently submitted a comment letter asking the Federal Reserve Bank of St. Louis to delay the acquisition until the institution commits to improving its record of meeting community needs. As part of the Bank Holding Company and Mergers act, which governs bank mergers and acquisitions, financial institutions are required to show the public benefits that can reasonably be expected from an acquisition. Assessing how a bank has previously served classes protected under the Equal Credit Opportunity Act as well as underserved borrowers and communities can indicate how well the acquisition would benefit the public going forward.  

We recommended that the St. Louis Fed request a public benefits commitment that would include clear goals and measurable benchmarks. Additionally, we urged the St. Louis Fed to hold off on its approval until after the fair housing complaint against Midland States, filed by the Metropolitan St. Louis Equal Housing Opportunity Council, is resolved by the Department of Housing and Urban Development.

Another concerning aspect of the proposed acquisition is that Heartland Bank has an above-average record of serving underserved communities—and these resources could be lost if it is acquired by a bank that does not serve community needs. While Heartland Bank outperformed its peers in lending to low-income families in both 2011 and 2012, Midland States Bank underperformed its peers both years in Illinois and St. Louis. The same can be said for mortgage lending to communities of color. In both 2011 and 2012, Heartland Bank outperformed its peers in home lending to African Americans while Midland States made few home loans to African Americans in its Illinois and Missouri assessment areas.