US bank seeks to appease community advocates in merger hearing

US Bank and MUFG Union Bank touted the expected benefits of their proposed merger Tuesday at a public hearing convened by the Federal Reserve and the Office of the Comptroller of the Currency (OCC). However, some community groups have said they will remain opposed to the deal until those benefits are finalized.

“We thank US Bank for continuing discussions regarding a [community benefits agreement]but no such agreement is in place,” said Kevin Stein, deputy director of the California Reinvestment Coalition (CRC), according to American Banker.

CRC and 66 of its partner organizations are seeking a detailed plan in which the Minneapolis-based lender discloses how it will drive local investment and avoid branch closures in communities of color and rural areas. The group raised its concerns in a 36-page letter to the Fed and the OCC in November.

In a statement posted on US Bank’s website, CEO Andy Cecere said the bank plans to invest $100 billion over five years in the communities it touches — a figure that exceeds the $88 billion deal announced by PNC when acquiring BBVA’s U.S. footprint last year.

Cecere said the bank would maintain its presence in every market served by Union Bank and pledged not to desert any low-to-moderate income (LMI) areas in California, adding that US Bank plans to open new branches in LMI areas.

Cecere also said U.S. Bank would retain all frontline workers at Union Bank branches and raise the minimum wage for all U.S. employees this year to $18 an hour from $15.

Reba Dominski, head of social responsibility at US Bank, said the deal prioritizes “access to capital, small business growth, affordable housing, environmental impact, philanthropy and diversity. providers” of LMIs and non-white majority communities.

“We are committed to advancing neighborhood revitalization and the preservation of affordable housing, including a willingness to fund more complex deals focused on racial equity and environmental sustainability,” Dominski said, adding that the plan “includes a governance and accountability model to pursue two-way dialogue with community organizations to develop shared solutions.

Jesse Van Tol, CEO of the National Community Reinvestment Coalition, acknowledged the listening sessions held by US Bank – which the bank estimates gathered feedback from more than 200 community leaders. Van Tol called the talks “productive, but not yet resolved.”

He urged regulators to require banks involved in a merger to issue a “forward-looking commitment that clearly demonstrates significant public benefits” before a merger is approved.

Tuesday’s hearing may have provided a glimpse of a new normal around bank mergers. President Joe Biden issued an executive order in July requiring the Justice Department, the Fed, the OCC and the Federal Deposit Insurance Corp. (FDIC) are updating their guidelines “to provide more in-depth consideration” in this area.

House Financial Services Committee Chair Maxine Waters, D-CA, supported an increase in public hearings on big bank mergers. The US bank agreed to acquire MUFG Union Bank in September in a deal worth $8 billion.

The impact of the merger on LMI areas isn’t the only concern raised by community advocates during Tuesday’s hearing. Kendra Noel Lewis, executive director of the Sacramento Housing Alliance, raised the prospect of less competition in Union Bank markets, which she said could make housing less affordable in the absence of a commitment of the US Bank.

Cecere sought to counter that point, saying that US Bank has about a third (or less) of assets compared to California’s three largest banks.

However, size can work to the bank’s advantage, Dominski said.

“With size comes the ability to scale,” she said. “In our plan, we will not just bring the two entities together, we will significantly increase community investments.”

Not all community advocates present at Tuesday’s hearing spoke out against the deal. Ismael Guerrero, CEO of Mercy Housing, a Denver-based affordable housing nonprofit, called US Bank “very popular” in his organization’s space, according to American Banker.

Two executives from MUFG Union Bank also spoke at the hearing. Kevin Cronin, CEO of MUFG Union, noted that the smaller bank will hold a 2.9% stake in US Bank after the deal closes – enough to be a “substantial” shareholder.

“We believe that the principles set out in [U.S. Bank’s community benefits plan] reflect the spirit and will continue to build on the legacy of community support of MUFG Union Bank in California,” said Julius Robinson, corporate social responsibility manager for MUFG Union in the Americas, on Tuesday, adding that he s expects a “continued high level of engagement with our communities” that extends the bank’s “exemplary” record with respect to the Community Reinvestment Act (CRA).

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