Illinois-based First Mid Bank & Trust has agreed to operational improvements, including making small business loan subsidies and establishing branches in underserved areas, in response to criticism that threatened to derail its proposed merger with Jefferson Bank and Trust.
Advocacy groups, including St. Louis Equal Housing and Community Reinvestment Alliance (SLEHCRA) and Woodstock Institute, last year complained to the Federal Reserve Bank of redlining and low levels of service to Black borrowers by First Mid. The advocates asked the Fed to block the proposed bank merger and alleged the bank was failing to comply with fair lending laws and the Community Reinvestment Act.
Those groups now have entered into a Community Benefits Agreement with the bank which they say will “clear the way” for the merger with Jefferson Bank and Trust – known to many St. Louis residents as the focus of civil-rights era protests over discrimination in hiring.
“Once again, we’ve shown that community advocates can and should demand better from our region’s lenders,” Elisabeth Risch, co-chair of the housing and community reinvestment alliance said in a statement.
“We believe that this agreement’s provisions show a significant commitment to improving First Mid’s lending performance in communities of color, including commitments on expanded branching, loan targets, and significant dollars committed for community development,” she added. “Our work with First Mid is not done, and we look forward to continue working productively to implement this [agreement] and increase access to financial services for all in our community.”
The National Community Reinvestment Coalition (NCRC) also supports the newly reached agreement, according to a news release. The advocates have dropped their request that the Fed block the proposed bank merger.
Talks between the advocates and the bank produced a 3-year agreement that includes:
• Opening 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 also committed to maintaining current branches in low-to-moderate income and minority communities.
• Establishing target lending goals for mortgage applications and originations to minority borrowers, Black borrowers, residents in minority census tracts, low-to-moderate income census tracts and to low-to-moderate income borrowers. The bank also will offer affordable home mortgage products and programs, including FHA, VA, and USDA loans, and will hire community mortgage loan officers in the St. Louis and Champaign markets that are focused on communities of color and low-to-moderate income communities.
• Establishing target lending goals for small business loans in low-to-moderate income communities, as well as increasing financing opportunities to minority and women-owned small businesses. The bank also will provide $100,000 in small business loan subsidies to small businesses in low-to-moderate income and minority communities.
• Positioning an executive Community Development Officer and Community Reinvestment Act
Leaders who will develop and lead community development strategies, as well as create an internal Community Development Committee of bank representatives. The CRA market managers and Community Development executive will oversee CRA activities in all of the bank’s markets.
The bank also plans to create an external Community Advisory Board composed of members representing low-to-moderate income and minority communities.
First Mid has agreed to target community development loans and investments at 2% of the bank’s asset size, including providing $150,000 annually in CRA-eligible donations that will go to organizations that serve low-to-moderate income communities. The donations are expected to increase by 5% each year.
The merged bank’s combined asset size is expected to be about $6 billion.
First Mid also agreed to provide $50,000 annually to support financial education to low-to-moderate income borrowers and communities, including sponsoring financial literacy classes; and to proactively increase racial and ethnic diversity within the staff, management and board of directors of the bank.
The bank plans to commemorate the civil rights history of Jefferson Bank with a $10,000 donation to the Griot Museum of Black History.
The agreement marks the second recent announcement of plans to add more traditional banking services in areas of St. Louis where high-fees options such as payday lenders, are predominant.
Last month, the Urban League of Metropolitan Saint 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 formed in 1990 to boost the flow of private capital into traditionally underserved communities, lists 843 branches in the bi-state St. Louis metropolitan area. That includes 313 in St. Louis County and 66 in St. Louis.
“With the way so many banks are closing branches, winning new ones in low-to-moderate income communities is a pretty big deal,” said Glenn Burleigh, a community engagement specialist with the Metropolitan St. Louis Equal Housing and Opportunity Council.
“Additionally, we’ve found that these community advisory boards are key, as they provide a channel for direct feedback with the communities that have been underserved. This often leads to specifically tailored loans and other products that directly address community needs. That ends up helping the banks really serve the community.”
Burleigh added: “We’ve seen how getting banks to diversify leadership and include community voices and feedback as key to not just changing numbers for the duration of an agreement. We’ve seen these things change banks’ cultures, and those shifts in internal culture are key to changing these institutions and making our region’s banking ecosystem more equitable.” Horacio Mendez, CEO of Woodstock Institute, said in a statement the sale highlights a larger outstanding issue.
“If we want more loans in African-American or other majority people of color communities, we must demand federal bank regulators raise the standards they use to grade lenders,” Mendez said. “This year we have several important opportunities to reform CRA on the table – national reforms planned by the federal bank regulators and the creation of an Illinois CRA stand out among them. If we raise standards for all lenders and get more high-performing loans out to more low- and moderate-income communities and predominantly Black, Latino and other communities of color, doing better can become the norm.”
The proposed target of the merger, Jefferson Bank, played a central role in the civil rights history of St. Louis.
In August 1963, just days after Dr. Martin Luther King’s historic March on Washington, the local Committee of Racial Equality began protests against the hiring practices of Jefferson Bank and Trust in St. Louis, which had refused to hire African Americans for white-collar positions, according to past media coverage. Protesters ignored injunctions and many were arrested.
A key figure in the demonstrations was then city alderman, William Clay, who later was elected to Congress. Eventually, the bank quietly hired five black clerical workers, according to St. Louis Public Radio. There have been dozens of annual “Jefferson Bank Commemorative” protests since then.
Karen Robinson-Jacobs is The St. Louis American / Type Investigations business reporter and a Report for America corps member.