ICP Challenges FNB's Reach into the Carolinas for Yadkin Bank, Disparities in Baltimore & Ohio, Insiders

By Matthew R. Lee

NEW YORK, October 15 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks like Goldman Sachs - down to FNB / First National Bank of Pennsylvania now trying to buy Yadkin Bank in the Carolinas while barely lending to people of color in Baltimore, Cleveland or Akron.

 Inner City Press / Fair Finance Watch on October 15 challenged this application and FNB, as it did Bancorp South in 2014, which led to redlining charges by the Department of Justice and Consumer Financial Protection Bureau.

Using the just-released 2015 Home Mortgage Disclosure Act data, Inner City Press has commented to the Federal Reserve in Washington and Cleveland:

 "On behalf of Inner City Press/Fair Finance Watch (ICP), this is a timely first comment opposing and requesting an extension of the FRB's public comment period on the Application of F.N.B. Corporation to acquire Yadkin Financial and Yadkin Bank. This first comment is timely.

F.N.B. Corporation's lead bank, First National Bank of PA, has a disparate record of lending, for example in the Baltimore and Cleveland MSAs, below. Yadkin is an amalgam of banks slapped together by private equity investors, who would be the primary beneficiaries of this proposed deal. But what is the public benefit?

In the Baltimore MSA in 2015, the most recent year for which Home Mortgage Disclosure Act data is publicly available and not taken into account in any FNB CRA example, FNB made 86 home purchase loans to whites and only 3 to African Americans, only two to Latinos. This is inconsistent with the demographics of Baltimore, to put it mildly. FNB's denial rate for African Americans was 2.75 times higher than for whites; it was 3.13 times higher than for whites. This is redlining; this proposed acquisition could not legitimately be approved and FNB should be referred for prosecution for redlining by the Department of Justice and CFPB.

People's United record is scarcely better in the Cleveland MSA, another out-of-Pennsylvania market that would be a predictor of how FNB would (under) perform in the Carolinas. In the Cleveland MSA in 2015, FNB made 297 home purchase loans to whites and only 12 to Africans and only 3 to Latinos, applications from which it denied 4.13 times more frequently than whites.

In the Akron, Ohio MSA in 2015, FNB made 41 home purchase loans to whites, only one to an African American (in Table 4-1) and none to Latinos.

In this context, the comment period should be extended so that public evidentiary hearings can be held, and the application should be denied.

Please also note for the record: “Using Tuesday’s closing price on the NYSE, here’s how much more the top 10 individual backers’ stakes will be worth at close, according to FactSet Research:

Adam Abram, lead independent director: $14,298,826.15

Michael Patterson, director: $6,969,354.35

Scott Custer, CEO: $3,836,876.80

Harry Spell, board member: $3,453,074.25

Joseph Towell, chairman: $2,705,434.65

David Brody, board member: $1,645,403.35

Steven Lerner, board member: $1,311,405.15

Steven Jones, chief banking officer: $1,285,450.00

Barry Dodson, board member: $1,117,767.15

Terry Earley, CFO: $1,030,739.45

Insiders currently own about 12 percent of Yadkin, with the bulk, at 67 percent, owned by institutional investors.”

See also:

"The prominent level of private-equity ownership in the Raleigh bank had many analysts and financial experts convinced that it would be sold sooner than later, even though Yadkin just completed on March 1 its $456 million purchase of Greensboro-based NewBridge Bancorp. NewBridge went on a three-bank buying spree after securing $56 million in new private-equity capital in November 2012.

Meanwhile, Yadkin gained $45 million in private-equity capital in October 2012 and subsequently bought VantageSouth Bancshares Inc. of Raleigh and NewBridge. Those private-equity infused deals provided Yadkin with a sufficient branch coverage of North Carolina’s three urban areas to convince FNB Corp. executives to leapfrog over Virginia to make its $1.4 billion offer.

Stone Point Capital LLC, LY Holdings LLC and Lightyear Capital LLC each own 4.46 percent of Yadkin’s 50.84 million outstanding shares. Stone Point and Lightyear were provided with a representative on Yadkin’s board of directors. At $27.35 a share, the sale could be worth $61.2 million for each firm.”

This is a proposal driven by these private equity investors: but what is the public benefit? 

 In April 2014, Inner City Press submitted a protest to the Federal Reserve of the "Applications of BancorpSouth to merge with Ouachita Bancshares Corporation and thereby indirectly acquire Ouachita Independent Bank, and with Central Community Corporation, and thereby indirectly acquire First State Bank Central Texas, Austin, Texas - Round Two."

Fair Finance Watch's analysis to the Fed showed that "in the Jackson MS MSA for conventional home purchase loans, BancorpSouth made 258 loans to whites, only 17 to African Americans and five to Latinos. BancorpSouth's denial rate for whites was 7.4% while for African Americans it was 25.8% -- 3.49 times higher. This was troubling.

NOW, more troubling: in 2013 for conventional home purchase loans in the Jackson MS, BancorpSouth's denial rate for whites was 4.5% while for African Americans it was 26.4% -- now 5.87 times higher.

  In 2012 in the Baton Rouge LA MSA for conventional home purchase loans in 2012, BancorpSouth made 60 such loans to whites; only three to African Americans and one to a Latino.
NOW, more troubling: in 2013 for conventional home purchase loans in the Baton Rouge MSA, BancorpSouth was up to 72 loans to whites - but NONE to African Americans."

BancorpSouth was then changed by the government with "redlining by placing its branches in the Memphis area outside of minority neighborhoods and directing nearly all its marketing away from such neighborhoods." That should happen here.

  There's also those in the middle, seeking to become a Systemically Important Financial Institution like New York Community Bancorp is, applying to buy Astoria Bank.

 After Inner City Press / Fair Finance Watch filed a timely protest, the Federal Reserve On January 8 asked NYCB 14 questions. Inner City Press has put the Additional Information letter online here, including a request to know which branches NYCB would close, how it would try to sell of Astoria's loans, etc. Inner City Press said, there should now be more fair lending questions, and the comment period should be extended.

 On January 21, the Federal Reserve informed Inner City Press / Fair Finance Watch that the Fed is re-opening and extending its comment period on NYCB - Astoria until Tuesday, February 16. We'll have more on this (see here).

Back on January 15, after Inner City Press / Fair Finance Watch also filed comments with the FDIC, that agency has written to NYCB's Joseph Ficalora asking for a response, and stating that

"We are writing in reference to the enclosed e-mail that we received from Executive Director Matthew Lee, of Inner City Press/Fair Finance Watch concerning your institution's application to acquire Astoria Bank. We reviewed the subject e-mail in accordance with the guidelines of 12 C.F.R. Section 303, and deemed it a Community Reinvestment Act (CRA) protest for the purpose of your application. The subject e-mail raises issues regarding your institution's record of lending to African American and Latino persons. The anticipated time and research required to investigate these issues has contributed to the removal of your institution's application from expedited processing."

 NYCB's home mortgage lending is extremely disparate; its multi-family lending, some to slumlords, is no defense. Inner City Press / Fair Finance Watch has filed this with the Fed:

  “On behalf of Inner City Press / Fair Finance Watch, this is a timely first comment opposing and requesting a complete copy of an and an extension of the FRB's public comment period on the Application by New York Community Bancorp ('NYCB') to acquire 100% of the voting shares of Astoria Financial Corp and indirectly acquire Astoria Bank.

  The applicant NYCB in the New York City MSA in 2014 made 109 home purchase loans to whites -- and only THREE to African Americans. For refinance loans, NYBC in the the NYC MSA in 2014 made 27 loans to whites and only ONE to an African American.

  While NYCB may attempt to minimize these severe disparities by pointing to multi-family loans, there are significant complaints about that lending; note also this account of the CFPB which lists the ostensibly mostly multi-family NYCB with more complaints against it than banks that are both larger and more “retail."

  In the Nassau Suffolk (Long Island) MSA in 2014 NYCB made 107 home purchase loans to whites -- and only ONE to an African American, while denying African Americans 4.7 times more frequently than whites. For refinance loans, NYBC in the the Long Island MSA in 2014 made 52 loans to whites and only three to African Americans and only TWO to Latinos, while denying Latinos 2.32 times more frequently than whites.
 
  In the Cleveland, Ohio MSA (where NYCB bought Ohio Savings), NYCB in 2014 made 17 refinance loans to whites in 2014 and only one to an African American, while denying African Americans, while denying African Americans three times more frequently than whites. Similar disparities exist for NYCB in New Jersey, Arizona and Florida -- ICP is requesting public hearings on this ill-conceived proposed merger.
 
  As the Federal Reserve surely knows, this proposal was driving by activist investor pressure on Astoria (by Basswood Capital Management LLC); both institutions' securities fell significantly in price when it was announced. The price to consumers would include the closure of branches, disclosure of which should be demanded during the extended comment period and at the requested public hearing(s).

 The comment period should be extended; evidentiary hearings should be held; and on the current record, the application should not be approved.”

  Inner City Press / Fair Finance Watch, which also opposes NYCB's requests for approvals from the FDIC, New York and other regulators, has prepared this comparison of NYCB to other lenders:

  “In the Nassau Suffolk (Long Island) MSA in 2014 NYCB made 107 home purchase loans to whites -- and only ONE to an African American, while denying African Americans 4.7 times more frequently than whites.”
  
   While NYCB made 107 home purchase loans to whites for one to an African Americans (ratio of 107-to-1), the aggregated in 2014 for home purchase loans on Long Island had a ratio of 13.41 loans to whites for every loan to an African American (15,081 loans to whites, 1125 loans to African Americans).  NYCB is eight times more disparate than other lenders.

  Also on Long Island, compared to NYCB's 4.7 denial rate disparity between African Americans and whites, the aggregate denied African Americans 1.66 times more frequently than whites. NYCB is 2.83 times more disparate than other lenders.

  NYCB in the New York City MSA in 2014 made 109 home purchase loans to whites -- and only THREE to African Americans.

  While NYCB made 109 home purchase loans to whites and three to African Americans in NYC (ratio of 36.3-to-1), the aggregated in 2014 for home purchase loans in the New York City MSA had a ratio of 11.39 loans to whites for every loan to an African American (47,166 loans to whites, 4,140 loans to African Americans).  NYCB is 3.19 times more disparate than other lenders in the New York City MSA.

 Meanwhile Goldman Sachs is trying to speed through Federal Reserve approval to buy $16 billion in insured deposits from GE Capital, and the Fed, documents  released to Inner City Press under the Freedom of Information Act (FOIA) show, is inappropriately bent on helping, including by closing its comment period...  The Federal Reserve has belatedly responded to Inner City Press / Fair Finance Watch's September 2 FOIA request, with some of its internal documents, many heavily redacted. FOIA letter here; FOIA documents released to ICP here, and embedded below.

 While Inner City Press is appealing, even as released the documents show that Goldman Sachs through its law firm Sullivan & Cromwell reached out to Fed General Counsel Scott Alvarez in May 2015 about the transaction, and was largely able to vet it with the Fed's staff by July, even receiving an "additional information" request before any application was filed.

  Since the public cannot comment or ask questions before a transaction is announced, this "pre-review" by the Fed in essence cuts public review and transparency out of the process. The Fed's rules against ex-parte communications can't be triggered before there is an application. But should Fed review be held, and apparently completed, before there is any public notice?

 The deal was publicly announced on August 13 and Goldman Sachs on August 18 submitted the apparently pre-approved application. Inner City Press / Fair Finance Watch submitted a comment and FOIA request (delayed until now); the end of the FOIA response has a redacted reaction to the "public comment." Now others have commented and a campaign has begun. But has the Fed already made up its mind?

On Goldman Sachs, Federal Reserve's Initial FOIA Response to Inner City Press on GE Capital Bank by Matthew Russell Lee

 On October 20, the Federal Reserve asked Goldman Sachs five questions, but not on the predatory lending issues raised... Only this from Goldman Sachs, only snail-mailed by its counsel:

Goldman Sachs' 2d Reply to Inner City Press, As Fed Withholds FOIA Documents by Matthew Russell Lee

 On October 13 Inner City Press published the Federal Reserve's communications with the CIT Group's outside counsel, which shows how the release of public documents is allowed by the Fed to be delayed. CIT made disingenuous requests for confidential treatment of information that could not be withheld, without any repercussion. They were rewarded with FOIA appeal denials by Fed Governor Jay Powell; now Goldman is trying to withhold information that should be public. Will there be any repercussion or accountability? Watch this site.

Revealed: Federal Reserve Asking CIT Group About Inner City Press FOIA Request: Now Goldman Sachs? by Matthew Russell Lee

 

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