Two years ago, community activists were celebrating an $11.2 billion community benefits agreement with SVB Financial Group in conjunction with its purchase of Boston Private Financial Holdings.
Following last month's implosion of SVB's banking unit, Silicon Valley Bank, advocates are worried about the disruption and potential loss of the plan, which was set to run through December 2026. They are now applying significant pressure on acquirer First Citizens BancShares to uphold the commitments of the agreement.
The question is, will it work?
Discussions between Raleigh, North Carolina-based First Citizens and at least three community reinvestment groups began last week, shortly after First Citizens acquired large chunks of Silicon Valley Bank from the Federal Deposit Insurance Corp., which had been operating a "bridge bank" to protect Silicon Valley Bank's depositors until a
More detailed meetings between First Citizens and some community groups could take place as early as this week, said Debra Gore-Mann, president and CEO of the Greenlining Institute, a nonprofit in Oakland, California, that helped negotiate SVB's community benefits agreement.
The fact that First Citizens is engaged in its own five-year community benefits plan — a
"If you have a [community benefits agreement] sitting in both banks and now they're coming together, it makes sense that [an agreement] survives that process," she said. "Now, is it going to be exactly SVB's plan or will it be a 'First Citizens-plus' plan or is it going to be a new plan?"
Still, the fact that the FDIC did not make the implementation of the plan a condition of Silicon Valley Bank's sale to First Citizens disappoints groups such as the California Reinvestment Coalition. In late March, the organization delivered a petition signed by more than 20,000 people urging the FDIC to require that whoever bought Silicon Valley Bank would have to honor the plan.
Maxine Waters, the top Democrat on the House Financial Services Committee, made a similar demand. In a March 18 letter to FDIC Chairman Martin Gruenberg, Waters urged the agency "to ensure that the ultimate buyer of SVB maintains the bank's commitments to California communities, especially those who remain historically underserved by the U.S. banking system."
Paulina Gonzalez-Brito, CEO of the San Francisco-based California Reinvestment Coalition, said it was "a missed opportunity for the regulators to make sure that the public benefits" from the SVB agreement.
Because the sale wasn't a typical acquisition in which there is time to review and assess, "we end up with the situation where, after the fact, we have to figure out how to get [First Citizens] to honor the agreement … and I'm not optimistic we'll get there easily," Gonzalez-Brito said.
A First Citizens spokesperson did not return several phone calls seeking comment for this story.
The bank, which has now doubled in size, will need time to figure out what it can provide, said Caroline Eisner, counsel in the financial services and products group at the Alston & Bird law firm.
The fact that First Citizens has already committed to serving communities' credit needs and providing community development support through its own plan "bodes well" in this case, she said. But it's important to note that both agreements were based on the capabilities of SVB and First Citizens at the time the plans were negotiated, and both banks are vastly different today.
"SVB … is now part of another institution," Eisner said. "I think expecting full compliance with an agreement entered into with an institution that failed would be imprudent."
Acknowledging that SVB is "a different bank with different capabilities" today is central to figuring out how to move forward, said Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, a fair-lending group that helps negotiate community benefits plans.
He pointed to the drastic decrease in deposits alone. At the end of December, SVB's deposits were $174.8 billion. First Citizens acquired all the deposits that remained — $56.5 billion.
"That being said … certainly [First Citizens] should be obligated by regulators to at least carry out the spirit of the commitment, as much as they can with the capabilities they have," Van Tol said.
There's also the question of how much staff power at SVB is still around to work on the plan, Van Tol said.
"First Citizens probably doesn't know who might be leaving, who might have already left and who might not be thrilled with the situation," he said. "And when talent walks out the door, so too do capabilities."
Announced in May 2021, SVB's $11.2 billion community benefits agreement is small compared with other commitments made by banks that have pursued recent mergers and acquisitions.
The largest agreement to date is the
At the time that SVB's agreement was negotiated, SVB had $96.9 billion of assets and was seeking regulatory approval to buy Boston Private, a Boston-based private bank and wealth manager. The deal was touted as a way for Santa Clara, California-based SVB to
About $9 billion of the $11.2 billion pledge was expected to be invested in California. The agreement includes $5 billion in small-business loans of $1 million or less, $4.8 billion in community development loans, $1.3 billion in residential mortgages to low- and moderate-income borrowers and neighborhoods and $75 million in charitable donations.
SVB and community groups including Greenlining and the California Reinvestment Coalition met in December to go over how well the bank did in the first year of the agreement, Gore-Mann said.
In 2022, the first year of the agreement, SVB launched a fixed-rate program for low- and moderate-income applicants to buy or refinance a home and increased its community development lending, with more than 60% going to affordable housing, according to a summary of SVB's progress provided to American Banker by the Greenlining Institute. Also in the first year, SVB also co-founded an "action opportunity fund" to provide technical assistance and loan support to diverse, immigrant and women-owned businesses, Greenlining's summary said.
The disruption of this particular agreement is another reason why community benefits agreements should be a formal part of the bank acquisition approval process, Gore-Mann said.
For now, there is some optimism in working with First Citizens, which has previously demonstrated a willingness to make commitments to the communities it serves, she said.
"My impression is they really want to … understand the new role they're stepping into," Gore-Mann said. "We'll see how it goes, but at least they're open to the conversation."
