Key community groups told regulators Tuesday that they aren’t yet supportive of U.S. Bancorp’s pending acquisition of MUFG Union Bank, as they engage in negotiations to establish a series of tangible public benefits.
The groups spoke during a public hearing on the deal, a rare occurrence that reflected the fact that the $8 billion acquisition is among the largest since the financial crisis of 2007-09.
U.S. Bancorp CEO Andy Cecere said at the hearing that details are still being finalized on what would be the largest community benefits agreement in history — with a plan to invest some $100 billion in communities over five years. That amount would
But several community leaders in California — where San Francisco-based Union Bank has most of its branches — said they will oppose the merger until they see a finalized community benefits agreement.
Those agreements, also known as CBAs, typically includes commitments to lend and invest in low- and moderate-income communities.
“Competition will be slashed with this merger,” said Kendra Noel Lewis, executive director of the Sacramento Housing Alliance, who added that unless the banks agree to increase their lending and affordable housing commitments in California, the group will withhold its support.
Kevin Stein, deputy director of the California Reinvestment Coalition, said that his group and 66 of its partner organizations will “oppose this merger unless U.S. Bank commits” to a detailed plan to increase its investments in communities and avoid branch closures in communities of color and rural areas.
“We thank U.S. Bank for continuing discussions regarding a CBA, but no such agreement is in place,” Stein said.
The Union Bank acquisition would give Minneapolis-based U.S. Bancorp a larger presence on the West Coast and make it the nation’s seventh-largest bank holding company by assets. Union Bank's branch footprint in California, Oregon and Washington state overlaps with that of U.S. Bank.
Cecere said the deal will “foster competition,” and that U.S. Bank will be “far from the largest bank in the nation or even in California,” with a size far smaller than competitors such as JPMorgan Chase and Wells Fargo.
Several other community and economic development groups said they support the deal and lauded the banks for their work. Those organizations included Neighborhood Housing Services of Southern Nevada; the African American Alliance of CDFI CEOs, who lead community development financial institutions; and the Denver-based affordable housing nonprofit Mercy Housing, whose CDFI lends to smaller groups across the country.
“U.S. Bank is highly regarded in our affordable housing community for the work they do every day,” said Mercy Housing President and CEO Ismael Guerrero.
MUFG Union Bank’s owner, the Japanese banking giant Mitsubishi UFJ Financial Group, is selling its U.S. retail bank to focus more on U.S. corporate and investment banking.
The Federal Reserve and Office of the Comptroller of the Currency announced the virtual public meeting last month, a step that community groups had argued was necessary. House Financial Services Committee Chair Maxine Waters, D-Calif., has called for more public hearings on major mergers.
Before regulators approve any merger, they should require a “forward-looking commitment that demonstrates clearly significant public benefits,” Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, said at Tuesday’s hearing. He thanked Cecere and other U.S. Bank officials for engaging with community groups, telling regulators that the talks have been “productive, but they are not yet resolved.”
Reba Dominski, U.S. Bank’s chief social responsibility officer, said the bank is “conscious of the fact that this has taken time.”
But she said the longer timetable was “intentional” and the product of a decision to “hear all voices and perspectives,” noting that the bank has held listening sessions with more than 200 community leaders.
Union Bank and U.S. Bank "have been long-standing leaders in serving communities, but we can do even more" through the proposed acquisition, Dominski said.
"With size comes the ability to scale," she said. "In our plan, we will not simply put the two entities together. We will meaningfully increase community investments."
During the hearing, U.S. Bank executives laid out several elements of the yet-to-be-released community benefits agreement. Cecere said the bank is “committed to retaining all frontline branch employees throughout Union Bank’s footprint” and that minimum hourly base pay will rise from $15 to $18 later this year for all U.S. Bank employees, including those who would join from Union Bank.
He also said U.S. Bank is "committed to staying in every market that Union Bank currently serves."
"There will be no branch closures in LMI communities, or majority-minority census tracts in California that would result in U.S. Bank exiting a community," Cecere said. "In fact, we intend to open new branches in LMI and majority-minority communities."
U.S. Bank’s Dominski said the plan will lay out “significant lending and investment goals nationally and in California,” focusing on communities of color as well as areas where residents have low and moderate incomes. Those commitments will include investments in small businesses, affordable housing, environmental projects and supplier diversity initiatives, she said.
She also said the plan will include a “governance and accountability model to further two-way dialogue” with community groups, but did not share more details.
U.S. Bank said it will commit to ensuring that half of its leadership consists of members of underrepresented groups in the next five years. While it wasn’t clear what the comparable numbers are today, the company’s
Sherri Jackson, a mortgage broker and president of the Los Angeles-based Multicultural Real Estate Alliance for Urban Change, said at the hearing the “pandemic has ravaged our community.” The group of real estate professionals was founded in 1992 after the police beating of Rodney King and the subsequent riots.
Jackson pressed U.S. Bank to increase its affordable housing investments, pointing to rising homelessness in the region, renter evictions and many residents’ struggle to get mortgage loans, partly due to existing housing programs with “strenuous” credit score requirements.
“This is a crisis we're in right now,” Jackson said. “I've been in business over 30 years. I've never seen anything like this.”
