Over the last couple of years, as we have witnessed a growing number of bank mergers and acquisitions (M&As), federal bank regulators increasingly have issued conditional approvals that require banks to develop and implement Community Reinvestment Act (CRA) plans. The CRA is a federal law that encourages depository institutions insured by the Federal Deposit Insurance Corporation (FDIC), such as national banks and savings associations and state-chartered commercial and savings banks, to serve the financial and credit needs of all communities in which they are chartered, including low- and moderate-income (LMI) people and communities.
The growing use of conditional approvals is a very positive development and one which provides opportunities for community groups serving LMI people and communities and other underserved populations, such as people with disabilities, to share information about community needs and to request that the CRA plans include specific kinds and levels of lending, investments, products, and services to meet those needs. When CRA plans are required as a condition of the approval, the regulator retains jurisdiction to ensure that banks follow through.
The National Community Reinvestment Coalition (NCRC) and its members have lead several recent efforts to obtain conditional approvals and negotiate strong CRA plans, including plans developed in connection with the Key Bank acquisition of First Niagara and the Huntington Bank acquisition of First Merit. Those CRA plans will result in $16.5 billion and $16 billion, respectively, in lending, investments, and retail services to LMI communities.
NCRC members have also advocated for conditional approvals of M&As and negotiated CRA plans with smaller banks in various regions across the country. For example, California Reinvestment Coalition (CRC) and other NCRC members convinced the Office of the Comptroller of the Currency (OCC) to issue a conditional approval in 2015 of CIT’s merger into One West Bank, which requires CIT to develop and implement a CRA plan with community input. In that case, however, community leaders were not satisfied that the plan put forth by CIT adequately reflected community input. The Metropolitan St. Louis Equal Housing and Community Reinvestment Alliance and Woodstock Institute obtained a conditional approval in 2014 from the Federal Reserve of the Effingham, Illinois-based Midland States Bank acquisition of Heartland Bank, which not only incorporates a strong CRA plan but also requires the bank to establish a branch in an underserved, predominantly African American neighborhood of St, Louis, a loan office in the St. Louis region, and a branch in Joliet, Illinois. Those CRA plans will result in $16.5 billion and $16.1 billion, respectively, in lending, investments, and retail services to LMI communities.
More recently, the OCC issued a conditional approval in July 2016 of MB Financial’s acquisition of American Chartered in Illinois, which requires MB to develop a CRA plan with community input by October 19, 2016. Woodstock Institute and over a dozen Midwest community groups have repeatedly requested an opportunity to meet with MB Financial to provide input about community needs for its CRA plan but, to date, MB has refused to meet.
Woodstock Institute applauds the OCC, Federal Reserve, and FDIC for their efforts to require strong CRA plans with community input and measurable outcomes for serving the needs of LMI people and communities. In cases where banks put forth weak CRA plans that do not reflect community input, this may indicate poor management by bank leadership. In such cases, we expect the regulators to hold the bank management’s feet to the fire.