US bank outlines $100 billion community benefits plan linked to merger

Diving brief:

  • American bank announced a $100 billion community benefits plan on Monday, aimed at winning the support of community activists for the proposed acquisition by MUFG lender Union Bank.
  • Andy, CEO of American Bank Cecerus first announced the five-year, $100 billion plan two months ago at a public hearing on the merger.
  • Under the plan, U.S. Bank would pledge to increase mortgage lending by 20% nationwide and 30% to non-whites and low-to-moderate incomes (LMI) borrowers in California. Notably, the plan would also require US Bank to analyze demographics and consider community feedback before closing branches in a LMI Region.

Overview of the dive:

The Minneapolis-based bank developed its plan in conjunction with the National Community Reinvestment Coalition (NRC) and the California Reinvestment Coalition (CRC), two community groups that had declined their support for the merger.

The CRC and 66 partner organizations expressed concern, in a November letter to the Federal Reserve and the Office of the Comptroller of the Currency (OCC), that the proposed merger would hurt low-income, rural and minority borrowers, and asked the US Bank for a plan to support local investment and avoid branch closures.

The bank finalized the community benefits plan after hearing and listening sessions with more than 200 community groups, she said.

“Banks are the economic engines of our communities. As such, we can have significant and meaningful impacts by supporting the capacity of low and moderate income people (LMI) communities and communities of color to access capital and create wealth,” Cecerus said Monday in a press release. “Our CCP is results-driven and combines the best programs and thinking from US Bank and MUFG Union Bank. We want our actions today to create a ripple effect that will uplift future generations.

Among other efforts in the plan, US Bank pledged to increase lending to small businesses and farms by 15% nationally and 25% in California. The bank would also develop special-purpose credit programs aimed at boosting small business lending, mortgage lending and affordable housing development. About 60% of the plan’s commitments would support efforts in California.

Jesse Van tolPresident and CEO of NRCcalled the plan “a milestone not only because of its overall size, but also because of the magnitude of the increases committed to mortgage and small business lending, affordable housing, environmental and social impact lending, and for the clear focus plan on racial equity and access to credit aimed specifically at communities of color.

In terms of scope, the US Bank Community Benefits Plan surpasses a similar $88 billion deal PNC announced upon its acquisition BBVA American footprint last year.

“We appreciate the commitment of US Bank and the personal leadership of Andy Cecerus collaborate with us, CRC and our members to develop the greatest community benefits plan ever,” Van tol said.

Even with the support of community groups, however, the deal must be approved by regulators. When the acquisition was announced in September, US Bank and MUFG Union Bank estimated the deal would be completed in the first half of 2022. However, US Bank said in a regulatory filing last week that the timeline is “uncertain,” according to American banker.

JThe Biden administration has ordered the Justice Department, the Fed, the OCC and the Federal Deposit Insurance Corp. (FDIC) in July to update the guidelines to “provide greater scrutiny” of bank mergers.

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