David Nicklaus
David Nicklaus is a business columnist for the St. Louis Post-Dispatch.
Jefferson Bank, the target of a pivotal St. Louis civil rights protest, is again at the center of a fight involving the rights of minority groups.
In 1963, demonstrators demanded that the bank hire more Black employees. In 2021, community groups allege that First Mid Bancshares, a Mattoon, Illinois, institution that wants to buy Jefferson, doesn’t make enough loans in majority-Black neighborhoods.
The groups sent letters Monday urging the Chicago Federal Reserve Bank to block the merger. The letter from the St. Louis Equal Housing and Community Reinvestment Alliance and the National Community Reinvestment Coalition cites “significant redlining concerns and a failure to adequately serve Black individuals and Black communities in multiple markets.”
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The groups say Black borrowers got just 1.2% of mortgages made by First Mid in the St. Louis area, far below the 6.8% figure for peer banks. They cite similarly low numbers for First Mid in Champaign, Decatur and Peoria.
Horacio Mendez, president of the Woodstock Institute in Chicago, called the data “prima facie evidence” of “egregious redlining.” Woodstock, which does research on economic justice, joined the coalition seeking to block the merger.
Complicating the groups’ case is the fact that First Mid was rated “satisfactory” on its most recent Community Reinvestment Act evaluation. It got a “high satisfactory” mark for lending.
The exam was done by the Office of the Comptroller of the Currency, which regulates national banks. The Federal Reserve, which must approve the merger, may give credence to its fellow regulator’s opinion, but Mendez doesn’t think it should.
“This is a little bit of egg on the comptroller’s face,” he said. “The Fed has to take this seriously.”
The community groups met Oct. 1 with executives of both banks. “There was a lot of deflection,” Mendez said. “They didn’t have good answers about why the data is as bad as it is.”
Jackie Hutchinson, executive director of the Consumers Council of Missouri, said First Mid offered to commit $5 million to loans in minority neighborhoods in Missouri, but the groups rejected that as inadequate.
“They really didn’t come to discuss their history of lending in Illinois, or make a commitment to fixing the problems in the system,” she said. “The fact that they began to think about doing something is good, but we need a more comprehensive plan.”
Joe Dively, First Mid’s chief executive, issued a statement saying that the bank disagrees with the community groups’ comments. “We work closely with our regulators and community partners to make sure we are doing the right things for all our stakeholders,” he added.
While regulators rarely reject a merger based on fair-lending concerns, such protests have forced banks to make significant minority-lending commitments. Clayton-based Enterprise Bank cleared the way for a 2017 acquisition by promising to lend $90 million a year in underserved neighborhoods.
Elisabeth Risch, co-chair of the Equal Housing Alliance, said the groups are still willing to discuss such an agreement with First Mid. She added that outright rejection of the merger would also be “a positive outcome. This would send a pretty significant signal that banks need to take their community lending obligations seriously.”
The merger won’t change the balance of power in St. Louis banking. First Mid is the 18th-largest bank in the market and Jefferson ranks 36th.
The community groups, however, argue that Jefferson Bank’s history with the civil rights movement gives it importance beyond its size. “For a bank with redlining concerns to acquire this legacy adds insult to injury,” their letter says.
