Silicon Valley bank pledged $11 billion in community benefits. What now?

Community activists are urging First Citizens BancShares to support neighborhood reinvestment commitments to the failed Silicon Valley bank, much of which First Citizens obtained from the FDIC on March 26.

Elijah Novelge/Bloomberg

Two years ago, community activists were celebrating an $11.2 billion community benefit agreement with SVB Financial Group in conjunction with its purchase of Boston Private Financial Holdings.

After last month’s implosion of SVB’s banking unit, Silicon Valley Bank, advocates are concerned about the potential disruption and loss of the plan, which was due to run through December 2026. They are now putting significant pressure on acquirer First Citizens BancShares to honor commitments from Convention.

The question is, will it work?

Discussions between the Raleigh, North Carolina-based, and at least three community reinvestment groups began last week, shortly after First Citizens acquired large portions of Silicon Valley Bank from Federal Deposit Insurance Corp. , which operated a “bridge bank” to protect depositors in Silicon Valley Bank until A right buyer is found.

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, Calif., that helped negotiate the SVB’s community benefit agreement. .

The fact that First Citizens participates in its own five-year community benefit plan – a A $16 billion pledge Gore-Man said making it in 2021 as part of its acquisition of CIT — is a good sign.

“If you have [community benefits agreement] They sit at both banks and now they’re together, it makes sense [an agreement] She said, “I survived that process. Now, is it exactly going to be the SVB plan or is it going to be the ‘First Citizens Plus’ plan or is it going to be a new plan?”

However, the fact that the FDIC didn’t make implementation of the plan a condition of selling Silicon Valley Bank to First Citizens disappoints groups like the California Reinvestment Coalition. In late March, the organization filed a petition signed by more than 20,000 people urging the FDIC to require everyone who bought a Silicon Valley bank to honor the plan.

Maxine Waters, the top Democrat on the House Financial Services Committee, made a similar request. In a March 18 letter to FDIC Chairman Martin Gruenberg, Waters urged the agency to “ensure that the ultimate purchaser of SVB upholds the bank’s obligations to California communities, especially those who remain historically excluded from the American banking system.”

It’s a “missed opportunity for regulators to make sure the public benefits” from the SVB agreement, said Paulina Gonzalez-Prieto, executive director of the San Francisco-based California Reinvestment Coalition.

Because the sale was not a typical acquisition in which there is time to review and evaluate,” we end up with the situation where, after the fact, we have to figure out how to get [First Citizens] Out of respect for the agreement… I am not optimistic that we will get there easily,” said González Brito.

A First Citizens spokesperson did not return multiple phone calls seeking comment for this story.

Caroline Eisner, counsel in the financial services and products group at law firm Alston & Beard, said the bank, which has now doubled in size, will need time to see what it can offer.

She said the fact that First Citizens is already committed to serving communities’ credit needs and providing community development support through its own plan “bodes well” in this case. 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 the two banks are vastly different today.

“SVB … is now part of another organization,” said Eisner. I think it would be unwise to expect full compliance with an agreement I made with a failed institution.”

Recognizing that the SVB is “a different bank with different capabilities” today is key to knowing how to move forward, said Jesse Van Tull, president and CEO of the National Alliance for Community Reinvestment, a fairness lending group that helps negotiate community benefit plans.

He pointed to the sharp decline in deposits alone. At the end of December, SVB deposits amounted to $174.8 billion. First Citizens got all the remaining deposits – $56.5 billion.

“That being said… sure [First Citizens] Regulators should be committed to carrying out the spirit of commitment at least as far as they can with the capabilities they have,” Van Tol said.

There is also the issue of how much staff strength at SVB is still there to work on the plan, Van Tol said.

“The first citizens may not know who may be leaving, who may have already left and who may not be happy with the situation,” he said. “And when talent goes out the door, so do abilities.”

Announced in May 2021, SVB’s $11.2 billion community benefits agreement is small compared to other commitments made by banks that have sought recent mergers and acquisitions.

The biggest deal so far is $100 billion pledge which was signed in 2022 by US Bancorp of Minneapolis in conjunction with its acquisition of MUFG Union Bank of San Francisco. The previous year, Pittsburgh-based PNC Financial Services Group approved an $80 billion plan as part of an $11.6 billion plan. acquisition Most of the US operations of Spanish banking giant BBVA.

At the time the SVB agreement was negotiated, SVB had $96.9 billion in 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 SVB, headquartered in Santa Clara, California Leap years ahead of the schedule in its quest to become the leading provider of wealth management services.

About $9 billion of the $11.2 billion in pledges 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 mortgage loans for low- and middle-income and neighborhood borrowers, and $75 million in donations. charitable.

Gore-Mann said the SVB and community groups including Greenlining and the California Reinvestment Coalition met in December to discuss how well the bank was doing in the first year of the agreement.

In 2022, the agreement’s first year, SVB launched a flat-rate program for low- and middle-income applicants to buy or refinance a home and increase community development loans, with more than 60% going to affordable housing, according to a summary of SVB’s progress. Introduced by the Greenlining Institute to American Banker. Also in the first year, SVB also co-founded a “Job Opportunity Fund” to provide technical assistance and loan support to diversified immigrant and women-owned businesses, according to a Greenlining summary.

Gore-Mann said that the breakdown of this particular agreement is another reason why community benefit agreements should be a formal part of the bank takeover approval process.

For now, there is some optimism in working with First Citizens, which has previously shown a willingness to make commitments to the communities it serves, she said.

“My impression is that they really want to … understand the new role they’re stepping into,” said Gore-Mann. “We’ll see how that goes, but at least they’re open to conversation.”