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With five large mergers involving banks with major operations in Massachusetts, 2021 could result in a boost to Community Reinvestment Act lending.
The mergers and acquisitions transforming the Massachusetts banking industry this year will also have a significant effect on another group: the community development organizations that partner with banks on affordable housing and lending programs.
“It’s of huge importance to the community development field, the affordable housing field and for low- and moderate-income communities throughout the state because we know that the banking industry has a big impact on the lives of a lot of people and a lot of our small businesses,” said Joe Kriesberg, president and CEO of the Massachusetts Association of Community Development Corporations (MACDC). “I think these mergers can be a step forward or a step backward, depending on how they play out.”
Because the Community Reinvestment Act requires regulators to examine banks’ lending activities in low- and moderate-income communities every few years, partnerships with community organizations provide a path for many institutions to find CRA-related lending opportunities.
Some of 2021’s acquisitions will bring new ownership to the region, while others reduce the number of local lenders. With at least one of the banks involved in each deal recently received the highest CRA rating, community groups are hopeful that the spate of mergers will boost their work producing affordable housing, aiding homeownership and increasing small business lending.
Recent events have also raised the stakes for banks’ community contributions. The COVID-19 pandemic and a national grappling with racism have raised awareness of income inequalities and the challenges people of color face in accessing capital to buy homes and grow small businesses.
Bi
g Boost to Lending
Combined institutions bring increased lending capacity. The acquisition of Boston Private by the parent company of California-based Silicon Valley Bank, which was announced in early January, suggests this financial firepower could generate a burst of new loans.
As part of the acquisition, Silicon Valley Bank has proposed a five-year, $11.2 billion community benefits plan that was developed in collaboration with the MACDC, the Massachusetts Affordable Housing Alliance (MAHA) and community organizations based in California. The plan includes small business, community development and residential mortgage lending in low- and moderate-income communities, including the ONE Mortgage and the ONE+Boston programs for first-time homebuyers.
To Symone Crawford, MAHA’s director of homeownership education, the community benefits plan means one of the area’s top lenders to first-time homebuyers could grow even more. Boston Private has received the highest rating – outstanding – on five of its six CRA exams since 2002, according to federal data.
“We find that working with Silicon Valley Bank and Boston Private to continue this great legacy that Boston Private has – and to even increase or to build on in it so that we can have an impact on more people that need these types of mortgages – is just amazing,” Crawford said. “The fact that Silicon Valley Bank agreed to meet with the community at large and to work with the community to have the positive impact on the constituents that Boston Private has served for so many years … is a good thing for the community.”
A community benefits plan is also in the works for another merger that will bring outside ownership to the industry. Kriesberg said the National Community Reinvestment Coalition is working with M&T Bank on a plan for its acquisition of Connecticut-based People’s United Bank, which has 64 branches across Massachusetts.
And decades-old law will generate another windfall for community development. The 1990 state statute that first allowed out-of-state banks to operate in Massachusetts requires a bank acquiring a Massachusetts-based bank to provide a line of credit to the Massachusetts Housing Partnership equal to 0.9 percent of the assets of the institution being acquired. Those funds help finance multifamily affordable rental housing.
Silicon Valley Bank formed a community advisory council to monitor the implementation of its $11.2 billion plan for small business, community development and residential mortgage lending in low- and moderate-income communities.
SVB Looks to Build Relationships
Silicon Valley Bank’s community benefits plan also establishes a community advisory council that will meet to review the progress of the plan. Crawford would like to see more lending institutions establish similar groups.
“If you’re trying to address an issue, you have the people that you’re trying to help at the table helping plan a resolution around those issues,” Crawford said.
Clark Ziegler, executive director of the Massachusetts Housing Partnership, said that establishing expectations with community organizations ahead of a merger helps alleviate concerns.
“There’s a lot of good will that develops and a lot of trust that develops over time, and whenever you reshuffle the deck a little bit with institutional ownership, there’s always some concern about that,” Ziegler said. “I think it’s a very positive thing to go into a merger with a mutual understanding about how to move forward – I think that’s the system at its best.”
Not Always a Boon
Mergers can also have downsides.
Two of this year’s deals – Eastern Bank acquiring Century Bank and Rockland Trust buying East Boston Savings Bank – involve overlapping geographies, reducing the number of lenders in Greater Boston.
Less competition within a market, Kriesberg said, means that consumers who usually benefit from having more lenders competing with one another lose that advantage.
Bank mergers also can involve efforts to reduce costs, which Kriesberg said can lead to products that are less flexible for consumers or not customized for local communities.
Mergers can also cause problems if a bank doesn’t reset its future lending activities based on what the two banks did separately before the merger, he said.
Kriesberg pointed out that Eastern Bank and Rockland Trust have solid records working with community development organizations. Eastern Bank has been rated “outstanding” in its six CRA exams since 2002, and Rockland Trust has received an outstanding rating for five of its last six exams, including one last year.
Leonard Bolton, Rockland Trust’s CRA officer, said he is working on setting up a meeting with MAHA, MACDC and Quincy-based NeighborWorks Housing Solutions in early June to discuss the merger.
Rockland Trust, which has undertaken a series of acquisitions over the past decade, has a CRA assessment area that overlaps with East Boston Savings Bank. Bolton, who is also the bank’s director of compliance and a senior vice president, said unlike some of its other acquisitions, Rockland Trust is already familiar with the communities and organizations within East Boston Savings Bank’s footprint.
Diane McLaughlin
The merger will give Rockland Trust opportunities to further its already strong performance within its market, Bolton said.
Eastern Bank, known as a leader in community development initiatives and philanthropy, remains to committed to continuing its longstanding community partnerships, said Andrea Goodman, a spokesperson for Eastern Bank.
Both Rockland and Eastern announced their deals in April and remain in the early stages of the acquisition process.
“I think the stakes are really high with Eastern and Rockland,” Kriesberg said. “We hope and certainly expect that they will take a similar approach of engagement with organizations and community groups and see this as an opportunity to take their efforts to the next level.”
