Durham consumer advocacy group Reinvestment Partners is opposing First Tennessee Bank’s plan to acquire Capital Bank, arguing that neither of the banks have a satisfactory record of serving people with low incomes and minorities.
“As a result, we believe that low-income and minority communities will be worse off if the merger is approved, particularly in North Carolina,” Peter Skillern, executive director of Reinvestment Partners, wrote in a letter to the Federal Reserve Bank of St. Louis that was released to the public.
“With greater size,” Skillern stated, “comes greater expectations.”
The corporate parent of First Tennessee Bank announced in May that it had agreed to acquire Charlotte-based Capital Bank for $2.2 billion, a deal that would create the fourth-largest regional bank in the Southeast and consolidate the two banks’ presence in the Triangle. The combined bank would have more than 360 branches in the Carolinas, Tennessee, Florida and Virginia, including 18 in the Triangle.
First Tennessee spokesman James Dowd said the bank had no immediate comment on Reinvestment Partners’ opposition.
Reinvestment Partners noted that First Tennessee’s latest Community Reinvestment Act review by the Office of the Comptroller of the Currency found that the bank’s distribution of loans to lower-income borrowers was “poor.” The CRA encourages banks to meet the credit needs of those in low- and moderate-income neighborhoods.
The advocacy group complained that of 114 mortgage and home refinance loans made in the Winston-Salem and Raleigh-Cary metropolitan areas from 2010 through 2013, just four of those loans were in neighborhoods designated as moderate income by the U.S. Census Bureau, and none were in low-income neighborhoods.
As for minorities, just 5.5 percent of First Tennessee mortgage applicants were African-American in 2016. Yet, in Tennessee, which is where First Tennessee has its largest market share, African-Americans make up 17 percent of the population, according to Reinvestment Partners.
Similarly, “Capital Bank’s lending record demonstrates that it struggles to serve underserved communities and (low- and moderate- income) and minority borrowers,” Skillern wrote.
Tony Plath, a finance professor at UNC-Charlotte, predicted that Reinvestment Partners’ opposition effort “will go nowhere.”
Both First Tennessee and Capital Bank can defend themselves by pointing out that they each received satisfactory ratings in their latest CRA reviews, Plath said.
“They will have plenty of evidence to rebut the claims,” he said.
Reinvestment Partners acknowledged in its opposition letter that the banks received satisfactory ratings, but went on to say that those reviews also showed that “the banks are failing to meet needs of the underserved.”
Skillern said in an interview that Plath’s dismissal of Reinvestment Partners’ opposition would likely be accurate under normal circumstances, but in this case a “unique regulatory situation” is in play.
When First Tennessee sought regulatory approval of its plan to acquire Raleigh-based TrustAtlantic Bank in 2015, Skillern said, the Office of the Comptroller of the Currency granted a “conditional approval” that included submitting a CRA plan to meet the needs of low- and moderate-income borrowers.
“We are arguing, don’t give them another approval when they haven’t honored the last one,” Skillern said, contending that First Tennessee hasn’t met the targets set out in its CRA plan.
In addition, Skillern said, last year First Tennessee agreed to a $1.9 million settlement with the U.S. Department of Housing and Urban Development to resolve allegations of racial discrimination. The bank allegedly discriminated against African-Americans and Hispanics by denying them mortgages “at disproportionate rates” and failing to place branches in “minority-concentrated areas.”
If the merger is to be approved, Reinvestment Partners is asking that regulators impose a number of conditions. They include mandating a commitment to increase lending in low- and moderate-income areas and offering a “second chance” checking account that doesn’t charge fees for insufficient funds or overdrafts.