When banks combine these days, community groups push them to step up their investments in low- to moderate-income neighborhoods and communities of color.
That's what happened after U.S. Bancorp announced an $8 billion merger with MUFG Union Bank. Following months of meetings with community groups, chiefly in California where MUFG Union is based, the Minneapolis bank company on Monday announced a $100 billion community benefits plan for the five years after it completes the deal.
"We are grateful for the time 208 organizations took to participate in the listening sessions," U.S. Bancorp CEO Andy Cecere said in a statement. "Their insights and perspective were critical to helping us understand where we can improve financial outcomes for underserved communities."
Only a small portion of the plan represents new spending by U.S. Bank. Much of the $100 billion value is in wages, loans, investments in economic development, capital to community development financial institutions, philanthropy and other programs.
The company's counterparts in developing the plan were the National Community Reinvestment Coalition, a Washington-based nonprofit organization that negotiates with banks on such agreements, and the California Reinvestment Coalition.
It's the largest agreement of its kind to date. Last year, PNC Bank announced an $88 billion community plan related to its acquisition of BBVA, and Huntington Bancshares announced a $41 billion plan related to its purchase of TCF Financial.
U.S. Bank executives said the company's plan expands on initiatives it started in recent years to reduce the racial wealth gap and integrates some of MUFG's existing programs.
U.S. Bank committed to increase mortgage lending to lower income individuals and people of color by at least 20% nationally and 30% in California over the next five years. It also said it will boost lending to small businesses and small farms by 15% nationally and 25% in California over that time frame.
It will increase by more than 40% nationally, and more than 50% in California, investing and lending in community and economic development, affordable housing, and environmental and social impact areas with a focus on racial equity. And it will create special purpose credit programs for mortgages and affordable housing development.
Some groups were particularly vocal about their concern that U.S. Bank will close many branches as a result of the merger, pointing to the bank's track record of closing a large number of branches in the last few years.
When U.S. Bank executives first unveiled the merger last fall, they signaled some branches could be consolidated, but emphasized that the company would not exit any markets nor reduce services in low- to moderate-income neighborhoods. They also vowed to retain all MUFG branch employees.
Under the plan announced Monday, U.S. Bank also agreed to open five new branches in low-income or "majority minority" neighborhoods in California over the next five years, and to open or preserve another five in consultation with community groups.
Jesse Van Tol, president of the National Community Reinvestment Coalition, said bank mergers can be detrimental to communities if the combined bank ends up doing less overall in the community than the two entities did on their own.
"With size and scale they ought to be able to do more for underserved communities and communities of color," Van Tol said.
Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition, said U.S. Bank's plan will increase community support by 30% above what the two banks would do on their own.
The California group initially opposed the merger, but withdrew its objection after the agreement was reached. But now, said Gonzalez-Brito, "we see an additive value now to this merger."
U.S. Bank executives aim to close the MUFG Union deal later this year.