November 6, 2017; American Banker
IberiaBank—founded in New Iberia, Louisiana, and now based in nearby Lafayette—announced it would direct $6.72 billion over the next five years to provide loans and services for low- and moderate-income communities. Specifically, this includes “$2 billion in mortgages in low- to moderate-income areas and communities [of color]; $3.2 billion in small business lending; $1.5 billion in community development, including areas affected by hurricanes; and $20 million in grants and philanthropy such as workforce development and housing counseling.”
The accord was negotiated by a collation of 37 community groups located throughout the service area of IberiaBank, backed by the national advocacy nonprofit, the National Community Reinvestment Coalition, or NCRC. According to NCRC, the commitment amount is the equivalent of 24 percent of post-merger bank assets and 33 percent of total bank deposits.
Since 2009, Iberia has acquired more than a dozen banks, including Sabadell United Bank in Miami this year. IberiaBank operates branches in many southern US southern states—with most in Arkansas, Louisiana, Texas, Florida and Tennessee.
When acquiring other financial institutions, banks often make similar commitments—if prodded to do so. Why banks make these commitments has a lot to do with the federal Community Reinvestment Act (CRA), which became law in 1977 after community activists organized to push through legislation that said banks had an “affirmative obligation” to make financial services and loans available to low- and moderate-income residents, especially in communities of color, which had previously been denied loans due to redlining. (From 1934 to 1968, neighborhoods where people of color resided were literally colored red on federal mortgage lending maps, a designation that blocked resident access to federally subsidized loans).
Back in 2008, NPQ’s Rick Cohen called the Community Reinvestment Act, which began to reverse this practice, “one of the nonprofit sector’s biggest advocacy triumphs.” Of course, enforcement has gone up and down over the years, and the Community Reinvestment Act is regularly attacked. Back during the 2008 financial collapse, a few absurdly blamed the law for causing the financial crisis. (The real culprits were deregulation and high-risk bank practices like collateralized debt obligations, as a wide range of sources, including the pro-business Economist, have repeatedly explained.)
Mergers and acquisitions provide an opportunity for community groups to intervene formally in regulatory hearings, which is why bank announcements of large community investment commitments typically come at this time. The IberiaBank case is no exception in this regard.
As NCRC reports, some specific commitments of IberiaBank include:
Mortgage Lending to Low- and Moderate-Income Borrowers & Communities
Community Benefits Commitment: $2 billion over 5 years
IberiaBank will adopt a mortgage lending goal for LMI borrowers and neighborhoods of $2 billion. IberiaBank will create a portfolio loan product, and retain Sabadell United’s key Latino loan originators in Miami. IberiaBank will also create a marketing budget to fund partnerships with CDCs/non-profits/credit counseling groups to support counseling efforts in bank assessment areas to low- and moderate-income borrowers.
Small Business Lending to Small Businesses & Low- and Moderate-Income Communities
Community Benefits Commitment: $3.2 billion over 5 years
IberiaBank’s lending goal for small businesses and businesses in LMI neighborhoods is $3.2 billion. IberiaBank will form a strategic plan to reach underserved small business communities in Miami Dade market. Subsequent to the implementation of the Miami small business plan, IberiaBank will develop a statewide Florida small business plan as well.
Community Development Lending and Investment (CDLI)
Community Benefits Commitment: $1.5 billion over 5 years
IberiaBank will devote $1.5 billion to community development investments and lending. Included in this, IberiaBank will explore opportunities to support non-profit housing developers, especially in hurricane-impacted areas. IberiaBank will also look for opportunities to invest in more creative options such as Small Business Investment Companies (SBICs).
Community Benefits Commitment: $20 million over 5 years
IberiaBank will disseminate $20 million in grants over the next five years, a 97 percent increase. Philanthropic giving will focus funding on low- and moderate-income children, workforce development, pre-purchase housing counseling, CDCs, CDFIs, and commercial corridors with a focus on smal