Illinois-based First Mid Bank & Trust agreed to operational improvements, including providing small business loan subsidies and setting up branches in underserved areas, in response to criticism that threatened to derail its project merger with Jefferson Bank and Trust.
Advocacy groups including St. Louis Equal Housing and Community Reinvestment Alliance (SLEHCRA) and Woodstock Institute complained last year to the Federal Reserve Bank about redlining and low levels of service to black borrowers by First Mid. The lawyers asked the Fed to block the proposed bank merger and alleged that the bank was not complying with fair lending laws and the Community Reinvestment Act.
These groups have now reached a community benefits agreement with the bank which they say will ‘pave the way’ for the merger with Jefferson Bank and Trust – known to many St. Louis residents as the center of the era protests. of civil rights against discrimination in employment.
“Once again, we have shown that community advocates can and should demand better from lenders in our region,” Elisabeth Risch, co-chair of the housing and community reinvestment alliance, said in a statement.
“We believe the terms of this agreement demonstrate a meaningful commitment to improving First Mid’s lending performance in communities of color, including commitments on branch expansion, lending targets and significant amounts committed for the community development,” she added. “Our work with First Mid is not over, and we look forward to continuing to work productively to implement this [agreement] and increase access to financial services for everyone in our community.
The National Community Reinvestment Coalition (NCRC) also supports the recently reached deal, according to a press release. Proponents dropped their demand for the Fed to block the proposed bank merger.
Talks between the lawyers and the bank resulted in a 3-year contract including:
• Opened two new service locations in the St. Louis and Champaign, IL market areas. These new locations will be located in low to moderate income and minority communities. The bank is also committed to maintaining current branches in low-to-moderate income and minority communities.
• Establish target lending goals for mortgage applications and originations for minority borrowers, black borrowers, residents of minority census tracts, low-to-moderate income census tracts, and low-to-low income borrowers. moderate. The bank will also offer affordable mortgage products and programs, including FHA, VA, and USDA loans, and hire community mortgage loan officers in the St. Louis and Champaign markets who focus on low-income and color communities. to moderate. communities.
• Establish target lending goals for small business loans in low-to-moderate income communities, as well as increase financing opportunities for minority and women-owned small businesses. The bank will also provide $100,000 in small business loan grants to small businesses in low-to-moderate income and minority communities.
• Positioning of a Community Development Executive Officer and Community Reinvestment Act
Leaders who will develop and lead community development strategies, as well as create an internal community development committee made up of bank representatives. ARC Market Managers and the Community Development Executive will oversee ARC activities in all of the bank’s markets.
The bank also plans to create an external community advisory board made up of members representing low-to-moderate income and minority communities.
First Mid agreed to target community development loans and investments at 2% of the bank’s asset size, including providing $150,000 per year in CRA eligible donations that will go to organizations that serve low to middle income communities. Donations are expected to increase by 5% each year.
The combined asset size of the merged bank is expected to be approximately $6 billion.
First Mid has also agreed to provide $50,000 per year to support financial education for low-to-moderate income borrowers and communities, including sponsoring financial literacy classes.; and to proactively increase racial and ethnic diversity within the bank’s staff, management and board.
The bank plans to commemorate Jefferson Bank’s civil rights history with a $10,000 donation to the Griot Museum of Black History.
The deal marks the second recent announcement of plans to add more traditional banking services to areas of St. Louis where high-fee options, such as payday lenders, predominate.
Last month, the Urban League of Metropolitan St. Louis announced a partnership with Simmons Bank that will establish a full-service bank branch on the first floor of the league’s headquarters, formerly the old Sears building.
A database maintained by the National Community Reinvestment Coalition, which was established in 1990 to stimulate the flow of private capital into traditionally underserved communities, lists 843 branches in the St. Louis bi-state metro area. This includes 313 in St. Louis County and 66 in St. Louis.
“With the way so many banks are closing branches, gaining new ones with low to moderate income communities is a big deal,” said Glenn Burleigh, community engagement specialist at the Metropolitan St. Louis Equal Housing and Opportunity Council.
“Additionally, we have found that these Community Advisory Councils are essential, as they provide a channel for direct feedback with communities that have been underserved. This often leads to specifically tailored loans and other products that directly address community needs. This ends up helping banks to truly serve the community.
Burleigh added, “We’ve seen how to get banks to diversify their leadership and include community voices and feedback as key elements to not just change the numbers over the life of an agreement. We have seen these things change the cultures of banks, and these internal culture changes are key to changing these institutions and making the banking ecosystem in our region fairer. Horacio Mendez, CEO of the Woodstock Institute, said in a statement that the sale highlights a larger unresolved issue.
“If we want more lending to African Americans or other majority people from communities of color, we need to demand that federal banking regulators raise the standards they use to classify lenders,” Mendez said. “This year, we have several significant CRA reform opportunities on the table – nationwide reforms planned by federal banking regulators and the creation of an Illinois CRA stand out among them. If we raise the standards for all lenders and make more high-performing loans to more low- and moderate-income communities and predominantly black, Latino and other communities of color, doing better can become the norm.”
The proposed merger target, Jefferson Bank, has played a pivotal role in St. Louis’s civil rights history.
In August 1963, just days after Dr. Martin Luther King’s historic march on Washington, the local Committee for Racial Equality began protesting the hiring practices of Jefferson Bank and Trust in St. Louis, which had refused to hire African Americans for white collar work. positions, based on past media coverage. The demonstrators ignored the injunctions and many were arrested.
A key figure in the protests was then city alderman William Clay, who was later elected to Congress. Eventually, the bank quietly hired five black office workers, according to St. Louis Public Radio. There have been dozens of annual “Jefferson Bank Commemorative” events since then.
Karen Robinson-Jacobs is a business reporter for the St. Louis American/Type Investigations and a member of the Report for America corps.