FRIDAY APRIL 30, 2021 VOL. 186 No. 82 AMERICANBANKER.COM Follow us on Twitter @AmerBanker Early CRE payoffs drive 5 OZK into new specialties Spreading the wealth The bank is turning to asset-based lending and loans to venture capital and Since 2016, involved in mergers have pledged to invest nearly other investment groups to help fill a void $300 billion in community and small-business development. Here created by a shortage of new, big-ticket com- are the five largest commitments. mercial real estate deals. Page 6 See story on page 5 Petal offers alt-data 6 underwriting tech to banks. Do they want it? Bank Amount Date The fintech credit card provider is pitching to banks the same software it uses to determine PNC $88 billion April 2021 borrowers’ creditworthiness. But whether banks are ready for technology that em- Truist $60 billion July 2019 phasizes cash-flow analysis over traditional credit scoring is open to debate. Page 7

Fi h Third $30 billion November 2016 No bubble in housing 7 market, Fed’s Powell says Hunǎngton $20 billion September 2020 Federal Reserve Chair Jerome Powell is dismissing claims that loose monetary policy KeyBank $16.5 billion March 2016 has led to rising home values and shrink- ing inventory and insists that the market is buoyed by creditworthy borrowers and Source: National Community Reinvestment Coalition investors. Page 8 FHFA adds refi option 8 for low-income borrowers dailybriefing Banks play key role It would be available to homeowners making 3 in push to eliminate 80% or less of their area’s median income food deserts who weren’t eligible to tap into low rates last LendingClub says 2021 Loans and tax-subsidized investments by year. Page 9 1 losses will be lower financial institutions have helped fund food than expected markets and pantries in low-income com- CFPB gives lenders extra 15 The company, which recently acquired Radi- munities. But there is still more work to do to 9 months to meet QM standard us Bancorp, still expects to lose at least $142 close the grocery gap. Page 2 The Consumer Financial Protection million this year and CEO Scott Sanborn Bureau has moved ahead with an earlier did not provide a timeline for profitability. Behind PNC’s $88 billion proposal to postpone the full adoption of “We’re building this business for the long 4 commitment to invest the qualified-mortgage ability-to-repay term,” he said. Page 2 in communities rule, citing a need to maximize borrowers’ The investment, tied to PNC’s deal to acquire credit access. Page 9 First Horizon discloses BBVA USA, was always going to be large but 2 data security breach seemed to grow as CEO Bill Demchak got OCC ‘true lender’ rule is The Tennessee company said an unau- intimately involved in the discussions and 10 wrong path to small-dollar thorized party gained access to dozens of the needs of communities and businesses hit lending by banks accounts and obtained less than $1 million hard by the coronavirus pandemic became Banks could be a better option than payday from some of those accounts. Page 2 more apparent. (See chart above.) Page 5 lenders to meet consumers’ short-term cred- it needs. But all the OCC’s regulation does is enable partnerships that circumvent state usury laws, Alex Horowitz writes. Page 10 FRIDAY APRIL 30, 2021 AMERICANBANKER.COM PAGE 2

Loan originations of $1.5 billion exceeded passwords and is working with customers EARNINGS the guidance that the company gave three to close existing accounts and open new months earlier of $1.2 billion to $1.3 billion. ones. The company said it reimbursed Originations were down 41% from the first the customers for the stolen funds and LendingClub quarter of 2020, which largely preceded the notified the appropriate regulators and law pandemic, but were up 63% from the fourth enforcement authorities. says 2021 quarter of last year. First Horizon said that, based on its ongoing assessment of the incident, it does not believe the event will have a material losses will be CYBERSECURITY adverse effect on its business or financial lower than First Horizon results. expected discloses TAX CREDITS

By Kevin Wack Banks play April 28, 2021 data security LendingClub is projecting that its full- key role year losses will be smaller than previously breach expected after loan growth rebounded in the first quarter. By Paul Davis in push to The San Francisco company said April 28, 2021 Wednesday that it now expects a net loss in First Horizon in Memphis, Tenn., disclosed eliminate food 2021 of $142 million to $167 million, down that a number of online customer bank from its earlier guidance of $175 million to accounts were targeted by a data security $200 million. breach. deserts CEO Scott Sanborn did not provide a The $87.5 billion-asset company said in timeline for profitability, saying that the a regulatory filing Wednesday that it first By Joe Adler company is prioritizing higher long-term learned of the breach this month. April 28, 2021 profits over quick returns. “We’re building An unauthorized party obtained login A small Chicago grocery chain rehabilitates this business for the long term,” he said credentials from an unknown source and a vacant strip mall in an area lacking food during a call with analysts. exploited a vulnerability in third-party stores. In western Massachusetts, a popular LendingClub, which has long operated security software to gain access to less than food cooperative plans a second location in an online platform where consumers who 200 accounts, obtaining “less than $1 million” a rural town to reduce customer travel time. want to consolidate their credit card debt get from some of the accounts, the filing said. A twice-expanded food bank gives matched with lenders, now bills itself as the First Horizon said it has addressed the groceries away to needy families hit hard by nation’s first digital marketplace bank. The software vulnerability, reset the accounts’ this year’s devastating winter storms. company’s $185 million acquisition of Radius Bancorp closed earlier this year. In the past, LendingClub relied heavily Established 1836 One State Street Plaza, 27th floor, , NY 10004 on upfront revenue by collecting origination Phone 212-803-8200 AmericanBanker.com fees on the consumer loans that it facilitated. It is now putting 15% to 25% of those loans on Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 its balance sheet, a move it says will lead to Managing Editor Dean Anason 770.621.9935 longer-term profits. Reporters/Producers The company plans to sell the remaining Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 75% to 85% of its new loans in its online Washington Bureau Chief Joe Adler 571.403.3832 marketplace. Executive Editor, Technology Miriam Cross 571.403.3834 “For us there is obviously a trade-off Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 between the timing of the profits, versus the BankThink Editor Rachel Witkowski 571.403.3857 size of the eventual profits,” Sanborn said. John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 “And we’re going for the latter.” Hannah Lang 571.403.3855 LendingClub reported a first-quarter Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 net loss of $47.1 million, largely because of Digital Managing Editor accounting costs and expenses related to the Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 Radius acquisition.

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What these stores and pantries have in community that has a river. The grocery store therefore prioritized for program assistance. common is that they give their communities is within a mile as the crow flies, but it’s five Under the NMTC framework, small- a source of fresh, healthy food. to seven miles away by roadway. The only way bank loans combine with tax credit-based The other thing they have in common is to get there if you don’t have a car is public investments from larger banks to create a that they exist because of a multipronged, transportation, and public transportation capital pool to fund important projects that decadelong effort by the federal government, closes at 5 p.m. How do you get to the grocery might not otherwise be built in areas in community development financialstore?” the greatest need. And that framework has institutions, banks and others to expand funded projects across the country aimed healthy food access and reduce the footprint Creating food oases at expanding food access and strengthening of “food deserts” — areas all over the country In 2006, Mari Gallagher, a Chicago-based regional food systems. where the building blocks of a nutritionally researcher and consultant, partnered with For NMTC projects approved by the adequate diet are not easily accessible. LaSalle Bank (later acquired by Bank of CDFI Fund, a large bank is given a tax credit There is evidence that these efforts are America) to study the public health effects of for making an initial investment in a store making a durable impact on the dual issues food deserts in the Windy City. It measured project. That capital typically accompanies a of food insecurity — defined as inability the distance between every city block and direct loan from a smaller bank to help cover to afford the food one needs — and the both the nearest grocery store and nearest additional project costs. prevalence of food deserts. But the pandemic fast-food restaurant, and then compared National Cooperative Bank made a roughly has laid bare how serious these problems are. food choices available to health outcomes in $10 million loan under an NMTC structure Feeding America, a national trade group those neighborhoods. to help finance the $25 million purchase for food banks and pantries, estimated that Gallagher said rather than rely on the and renovation of a vacant grocery store in more than 35 million Americans experienced infrastructure of a government program, food Chicago’s South Shore neighborhood. Local food insecurity in 2019 — a 20-year low. But retailers and banks “could make their own Market opened in December 2019. in 2020 that number jumped to more than 42 rules and be more independent.” The city promised another $10 million million. “Nobody goes where no one is already,” through its Tax Increment Financing The problem was urgent enough for Gallagher said. “But people misunderstand. program, which allocates property tax President Biden to sign an executive order on They think, ‘Well, groceries would go into increases toward redevelopment. Helping to Jan. 22 increasing Supplemental Nutritional a market if there was money there. If there round out remaining costs was equity from Access Program benefits by 15% for families was no grocery there, there must not be PNC Financial Services Group through the with children, one of his first actions as any money to make.’ And that’s not always New Markets Tax Credit program. president. correct. The tax-credit investment typically funds “They are in this situation through no “It’s like the joke where two economists are 20% to 25% of project costs. fault of their own,” Biden said at the signing walking down the street and one says to the “The New Market Tax Credit program is ceremony. “It’s unconscionable.” other, ‘Hey, isn’t that a $20 bill we just passed meant to support and subsidize financing But in many communities hard hit by the on the sidewalk?’ and they keep walking and gaps such as those in real estate and pandemic, there are innumerable barriers the other guy says, ‘No, if that was a $20 bill, equipment financing,” said Kevin Goldsmith, to even accessing the kind of varied and somebody would have picked it up already.’ ” the managing director of community healthy diet — fruits, vegetables, fresh meats Starting about 15 years ago, states like development tax credits for JPMorgan Chase. and grains — that prevent chronic or acute Pennsylvania established healthy food Over the past five years, the bank has invested illnesses, such as diabetes, hypertension, financing initiatives, and then in 2010, in over $330 million of NMTC financing to stroke, heart disease and even cancer. the Obama administration announced a support food access through projects such as “You can give people resources to buy national Healthy Food Financing Initiative. grocery stores and food banks. fruits and vegetables, but if they can’t get These programs were designed to use various The predominantly Black neighborhood to a grocery store, I think your impact is public-private partnerships to foster the where Local Market is based, next to the going to be greatly diminished,” said Brian creation of new access points to healthy food University of Chicago and Hyde Park, had Lang, director of the Food Trust’s National options in places that don’t have them. been without a full-service grocery store Campaign for Healthy Food Access, based in The efforts include grants and financing for nearly seven years after the former Philadelphia. through state and local governments, as well Dominick’s chain closed, according to Eva One of the biggest barriers is the physical as federal incentives under the New Markets Jakubowski, an owner of the Chicago-based proximity to a grocery store, and the amount Tax Credit Program. That program, which Shop & Save chain that owns and operates of time and effort required to get to one. began in 2000, awards funds to community the store. “Due to socioeconomic issues in development entities to attract bank “Where we’re located within South Shore, certain underserved markets, people have financing and investment and spur projects there are still a lot of people who walk to transportation challenges,” said Brian in low-income areas. That program was grocery stores or use public transportation, Misenheimer, senior vice president of modified in 2011 to include areas considered which of course makes it that much more National Cooperative Bank, a $3 billion- by the Department of Agriculture to be food difficult to do your everyday grocery shopping asset, mission-based lender headquartered deserts as part of its criteria for designating if you don’t have a car and you’re dependent in Arlington, Va. “A prime example is there’s a which areas qualify as “highly distressed” and on other people to take you,” Jakubowski said.

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“What our store makes the biggest impact River Valley Co-op is a community-owned store, the co-op collected $5 million in on is the local community members that truly nonprofit that operates a full-service grocery personal loans from about 300 of its member- depend on a local neighborhood store for store in Northampton, Mass., about 100 miles owners. their everyday shopping,” she said. “There are west of Boston. It broke ground last year on a “It’s food and the vision for an alternative, a lot of senior citizens within this community; new store in adjacent Easthampton, a former more locally based food system and more there are a lot of young families as well.” mill town. people-based local economy,” said Prunty. Projects like the Local Market often involve “It’s a changing and dynamic community,” “For some people, the co-op is about access multiple lenders and sources of capital. That Dorian Gregory, who is president of the co- to the kind of healthy food that they need is partly because grocery stores are a low- op board, said of the new store location. But for them and their families at a fair cost. For margin business. One bank often is unable Easthampton is still overshadowed by larger others it’s about the fact that we buy food to finance the full amount particularly communities nearby and has few grocery from their neighbors and we’re supporting in communities without much retail options for residents, forcing them to shop their families.” development. elsewhere. “With financing for a startup grocery store Co-ops like River Valley view their mission ‘Doing God’s work’ in these underserved markets, the capital both as providing an affordable fresh food The Reinvestment Fund in 2010 began stacks are complex with many stakeholders,” option and promoting the regional food researching a way to define and delineate said Misenheimer. “They’re heavilyeconomy by utilizing local food producers. food deserts — or what it terms Limited negotiated between all parties involved. You “The co-op is trying to do grocery better. A Supermarket Access, or LSA, areas — the have to have people who know what they’re lot of that has natural and organic elements USDA has a similar definition that also doing to come together to put these deals to it,” said Matthew Sosik, CEO of Hometown incorporates income levels in its analysis. together. There’s often a lack of tangible Financial Group, which owns the $1.6 billion- The Reinvestment Fund found in 2011 that collateral available in the project.” asset Easthampton Savings Bank. He has 8% of Americans — some 24.6 million people And there is evidence that these efforts are shopped at the Northampton store. “They’re — lived in LSA areas. But in their most recent making a difference. In 2019, $600 million trying to raise the standard. You’re not going 2018 analysis, that number had dropped in funds allocated through the NMTC went to go to River Valley Co-op and buy processed to 5.6% of the population — or 17.6 million to projects with a healthy food component, foods.” Americans. That means 7 million people making up 22% of the total funds awarded by A direct loan from Easthampton Savings have access to healthy food that wasn’t there the tax-credit program. That was up from just Bank, help from a consortium of local a decade ago. 3% in 2008 and 7% in 2010. community development entities, and an And the NMTC program is not limited to “As the federal government put their NMTC investment by Capital One financed retail grocery stores. Many projects include thumb on the scale and tried to support the roughly $20 million project for the community centers that offer area residents efforts to expand access to healthy foods, the Easthampton store, which is slated to open healthy food, and about 20% of all food- community development industry generally in June. related NMTC projects through 2019 were for reacted and there was more grant funding “By opening the store in Easthampton, food pantries or community food nonprofits. available for these projects,” said Paul we’ll make the store closer to people who Two such projects were related to an Anderson, who helps oversee research efforts were already shopping with us and make it expansion of the Houston Food Bank — the for the New Markets Tax Credit Coalition. much easier for many more people to shop largest food bank in the country, serving “That really moved the needle in terms with us, and make it possible for our local 159 million meals over the past year. The of pushing more organizations to finance vendors that we work with, to grow their food bank was put through a particularly grocery stores, food banks and other things business,” said Rochelle Prunty, the co-op’s critical test in February, when a brutal winter that expand access to healthy foods.” general manager. storm left millions of people without water But advocates like Lang say that while The effort to expand retail options in food and power across and left many more NMTC-funded projects and other initiatives deserts has coincided with a trend in several families in need of food. have undoubtedly made progress, he communities to localize the food supply On a visit to the state, President Biden says there is still more work to be done — chain. visited the food bank to highlight its disaster particularly to expand healthy food access in “There is this process now of creating relief efforts. communities of color. stronger local food systems that are “They’re doing God’s work,” Biden said, “I don’t think we can quite say that every decentralized from the larger national food according to press reports. American has access to affordable and system,” said Donna Leuchten Nuccio, And regulators have found other ways nutritious food,” Lang said. senior director for healthy food access at to incentivize banks to finance that work. the Reinvestment Fund, a CDFI based in In 2020, the Office of the Comptroller of Urban versus rural access Philadelphia. “There’s more opportunity for the Currency published a rule revising Food deserts may be thought of as an urban food systems investment that we’ll probably how the agency enforces the Community issue, but more rural communities also lack see pop up in small-business lending activity Reinvestment Act, a 1977 law that requires access to healthy food, and the public-private at both banks and CDFIs.” banks to make investments in low- and partnership model has been making progress River Valley Co-op works with about 240 moderate –income areas they serve. in those places as well. local food vendors. In financing the second That new rule included a non-exclusive

For up to date and complete coverage go to AmericanBanker.com FRIDAY APRIL 30, 2021 AMERICANBANKER.COM PAGE 5 list of specific activities that can earn a bank an underserved area, and the grocery gap and other banks, the $468 billion-asset PNC credit, including investing in an opportunity has been magnified by the pandemic and the worked closely with the nonprofit National fund financing a grocery store in a low-to- national dialogue on racial equity. Community Reinvestment Coalition to draw moderate-income “opportunity zone.” A “With the protests over racial injustice up its community benefits plan. The amount bank can also receive credit for lending to a over the summer, people started to dig into was always going to be in the tens of billions farm “to construct a building from which to what issues besides police brutality were but seemed to grow as PNC Chairman sell produce.” impacting quality of life in urban areas, and CEO Bill emchak became intimately That small change can make it clearer to people once again came across grocery store involved in the discussions and the needs banks that financing these kinds of projects access as being one of these quality-of-life of communities and businesses hit hard by can benefit their business even if it isn’t issues,” he said. the coronavirus pandemic became more routed through the New Market Tax Credit. “Everybody needs to eat. Everybody needs apparent. “I believe that our new rule is more explicit a grocery store. Certainly the challenges that NCRC Chief Executive Jesse Van Tol said about these activities being eligible for CRA everybody had getting groceries at the dawn PNC recognized that $88 billion was the even if they didn’t have a New Market Tax of the pandemic hammered a lot of this home “right response” to the pandemic’s impact on Credit attached to them,” said Barry Wides, for people — why it was important to have a communities. the OCC’s deputy comptroller for community grocery store in your community.” “This is an uncertain time,” he said. affairs. “Everybody recognizes this is a need.” Bryan Toft, the chief revenue officer at Including PNC’s pledge, the NCRC has now the $1.6 billion-asset Sunrise Banks, said the SMALL BUSINESS LENDING secured nearly $300 billion of community St. Paul, Minn., institution, which is also a development commitments from large and CDFI, has financed projects in food deserts regional banks since 2016. primarily through the NMTC. But there are Behind PNC’s Banks often reach these agreements also other avenues, he said. For example, with the goal of avoiding any roadblocks the bank helped put together a non-NMTC $88 billion advocacy groups can throw up for regulators deal to finance the construction of a market as new deals are considered for approval. The serving St. Paul’s Hmong community with agreement with PNC was reached over seven 250 vendors. commitment or eight meetings with advocacy groups, and “As the type of bank we are, given our Demchak attended each one and was active social mission, even without New Markets to invest in in asking questions, Van Tol said. we put together deals using [Small Business Demchak “was highly engaged,” Van Tol Administration] programs or other nonprofit said. “He wanted to make a mark.” gap finance lenders,” Toft said. communities The plan comes after PNC unveiled a new product designed to help customers monitor ‘Everybody needs to eat’ By Jon Prior their checking account balances and avoid The Food Trust’s founder, Duane Perry, April 28, 2021 overdraft fees, a move Van Tol said was an was formerly the head of the merchants’ By now, it’s become standard practice for encouraging step away from the industry’s association at Philadelphia’s Reading merging banks to commit to lending billions typical practice of racking up fees from Terminal Market. He became familiar of dollars in low-income neighborhoods overdrafts. with shoppers from Black neighborhoods as a way of winning community advocates’ PNC has earmarked $47 billion for who came to the market “because their support for their deals. The largest such mortgages home equity loans to borrowers of neighborhoods had no grocery stores,” Lang pledge came in 2019, when Truist Financial color or those with low to moderate incomes said. — the company created through the merger and another $26.5 billion for small businesses The Food Trust, Reinvestment Fund, of BB&T and SunTrust Banks — committed in lower-income neighborhoods and areas then-state Rep. Dwight Evans (who is to making $60 billion in mortgages, small- where a majority of business owners are of now in Congress) and other stakeholders business loans and other investments within color. helped create the Pennsylvania Fresh Food its markets over a three-year period. PNC will put a high priority on small Financing Initiative in 2004. It helped support Then came Tuesday’s announcement from businesses earning annual revenues of less 88 projects before ending six years later. PNC Financial Services Group. than $1 million, including many small farms. As part of the program, the Reinvestment The Pittsburgh company, which is Van Tol said a commitment to farmers was Fund used a portion of grant money from acquiring the U.S. operations of the Spanish particularly in negotiations with PNC because the state to reduce credit loss reserves for banking giant BBVA, pledged to invest an the acquisition of the $102 billion-asset BBVA banks willing to invest in grocery projects. eye-popping $88 billion in its communities USA would substantially increase PNC’s Other states created their own food financing over four years. The commitment includes presence in rural markets. BBVA has about initiatives, including , New Jersey $47 billion of mortgages, $26.5 billion of 640 offices in Alabama, Arizona, California, and New York. small-business loans and $14.5 billion of Colorado, , New Mexico and Texas. But Lang said several communities are still community development investments. “It’s a big geography in this merger,” Van working out how to bring a grocery store to Like Truist, KeyCorp, Fifth Third Bancorp Tol said. “There is a lot of rural area.”

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PNC will also provide $14.5 billion in lenders is the pandemic-driven economic prepayments and a lack of sizable deals community development loans under the slump is limiting opportunities to reinvest means Bank OZK’s loan officers are booking deal, including $400 million for community those funds. Mixed-use development smaller CRE loans than they have in past development financial institutions that focus projects in urban markets like New York, San years. That in turn has made maintaining on underserved areas. PNC will also increase Francisco and Chicago are fewer and farther loan balances in some markets challenging. its grants and charitable giving by $500 between. In New York, for instance, Bank OZK’s million over the four-year period under the “With the pandemic and the fact New CRE commitments totaled $4.9 billion at agreement. York got a little overbuilt … there haven’t March 31, down 30% from two years earlier. There will be 20 new branches and 25 been as many new products to finance,” Similarly, Chicago’s loan balance dropped remote automated teller machines set up in Chairman and CEO George Gleason told to $1.1 billion on March 31, down 3% from lower-income areas under the merger, along analysts last week. year-end 2020; Los Angeles’s fell by 11.5% in with 10 mobile banking units. The bank is also Bank OZK’s forecast calls for record levels the same span. planning to increase spending with diverse of repayments in the second quarter — Bank OZK manages national CRE lending suppliers by 20% over the four-year plan. PNC nearly $1.7 billion. It’s expecting payoffs to out of its Real Estate Specialties Group, also committed to increase recruitment from moderate in the second half of the year, but whose lenders “closed about twice as many historically Black colleges and explore how to they will “remain a meaningful headwind loans in the first quarter of this year as they reach out to higher-education campuses that to loan growth,” Brian Martin, an analyst did in the first quarter of 2020,” Gleason said primarily serve Hispanic students looking for at Janney Montgomery Scott, wrote in a on Friday’s call. job opportunities. research note. “They were just 60% smaller, more or less,” “As a Main Street bank, we believe that our The solution, at least in part, Bank OZK Gleason added. success will be proportional to the prosperity executives say, lies in expanding other Bank OZK tapped Michael Sheff, who we help create for our stakeholders,” commercial business lines. To that end, Bank led asset-based lending for BBVA USA for a Demchak said in a release announcing the OZK recently announced that it had hired decade, to lead its new business line. Sheff commitment. a seasoned banker to launch a new asset- “has considerable expertise in managing PNC’s deal for BBVA USAA was announced based lending unit that will focus on serving and directing national lending teams,” in November and is expected to close by midsize businesses in the Southeast and in spokeswoman Susan Blair said Tuesday. midyear. Texas. Bank OZK said it also expects bigger It’s clear the bank is counting on Sheff’s production from an existing subscription- group to generate measurable results in finance team. relatively short order. “We’ll hopefully have COMMERCIAL LENDING The added growth can’t come soon some wins here in 2021, but I would expect enough. it will be 2022 before we see material moves The $27.3 billion-asset Bank OZK reported there,” RESG President Brannon Hamblen Early CRE record first-quarter net income of $148.4 said during Friday’s call. million. However, behind that gaudy top Asset-based lending typically involves payoffs drive line, Bank OZK, like much of the rest of the revolving lines of credit collateralized by banking industry, is straining to originate business assets such as accounts receivable, loans. inventory and equipment. Subhrojyoti Bank OZK Balances in the national CRE portfolio — Mandal, director of commercial lending which was 63% of Bank OZK’s overall loan at Acuity Knowledge Partners in London, into new book — fell to $11.4 billion. Bank OZK’s said demand for asset-backed loans should second-biggest loan category, recreational increase as the economy recovers. vehicle and marine loans, shrank by 5% to “From a lender’s perspective, to make the specialties about $2.1 billion. asset-backed business profitable and drive Bank OZK’s new commercial lending return on investment, some of the key factors By John Reosti initiatives “are expected to contribute to focus on are faster response time for new April 28, 2021 meaningfully to future growth,” Martin said, deal requests and robust risk management Commercial real estate lending is Bank adding that he expects the new new asset- practices to underwrite good-quality loans,” OZK’s bread and butter, so a red flag went based lending team to begin making an Mandal added in an email Tuesday. up when the Little Rock, Ark., bank reported impact in the third quarter “with growth The sector offers significant opportunities, that its national CRE portfolio shrank 1.5% accelerating to a more meaningful level in but it’s not without challenges, according to in the first quarter since year-end. 2022.” Pat True, a senior risk analyst at Jack Henry The culprit? Early loan payoffs, totaling CRE repayments have proved a thorn in & Associates. $1.5 billion. Bank OZK’s side in the past. They totaled $5.7 “Because of the effects of 2020 and early Prepayments aren’t especially unusual billion in 2019. Yet in prior years repayment 2021, we’re also seeing weaker balance in the CRE market, even in a pandemic, but woes were never compounded by a scarcity sheets and income statements,” True said. the problem facing the $27.3 billion-asset in origination opportunities, Gleason said. “A line of credit that in 2019 might have gone Bank OZK and other commercial real estate Now, the combination of elevated unsecured or loosely monitored is going to

For up to date and complete coverage go to AmericanBanker.com FRIDAY APRIL 30, 2021 AMERICANBANKER.COM PAGE 7 be more structured with more guardrails in overtaking the traditional system,” said Peter place in 2021 and 2022.” FINTECH Wannemacher, principal analyst for digital Bank OZK’s long experience with national banking at Forrester. CRE and other specialty lending lines have “Executives at banks have been using already given it a strong credit culture on Petal offers roughly the same methods for a really, really which to build an asset-based lending long time, so a new solution will need to platform, Hamblen said. He added that he alt-data be clearly better,” he continued. “It doesn’t and Sheff see eye to eye on credit. just need to be provable that these models “We’re very excited about ... finding an work, it needs to be proven. I think a lot of individual to lead that group that really has underwriting traditional providers will hold off to see how the same sort of credit DNA and thought this plays out. But I do think a number of processes around how to originate, close tech to banks. financial services companies will take a hard and manage those credits that really mirror look at this, including fintech players and the way we think in RESG,” Hamblen said. neobanks.” The RESG team reported zero charge- Do they want In offering its underwriting software to offs in 2019 and 2020, as well as for the first others, a step it announced this week, the New quarter of 2021. Throughout its 18-year it? York-based Petal is following in the footsteps history, RESG’s weighted average of net of Upstart, Zest, Numerated and other charge-offs is 0.11%, according to Bank OZK. By Penny Crosman fintechs that started out as direct lenders By contrast, Bank OZK’s subscription- April 28, 2021 and pivoted to become technology providers finance team has made only a limited Petal, an online credit card provider, to banks. But Petal will also continue to offer contribution to its loan book, but the team has started offering its cash-flow-based its own credit card, according to CEO Jason has been responsible for servicing a portfolio underwriting technology to banks and Gross. As of February it had issued 100,000 of shared national credits. Bank OZK has fintechs. It’s also providing to other lenders cards and it will have hundreds of thousands been systematically reducing exposure to its own version of a credit score, CashScore, of cardholders by the end of the year, he said. shared national credits, allowing those loans which is based largely on customers’ cash- WebBank, which is based in Salt Lake City, is to decline from a peak of $484 million in flow data and bill-paying habits. the lender behind Petal. 2018 to $98 million at March 31. The software, called Prism Data, will Gross said he’s gotten calls from several Subscription finance involves lending to be available through an application fintechs and banks over the past year asking investment or venture capital groups. Now, programming interface. It takes raw bank how they could use consumer-permissioned, Bank OZK is transferring supervision of that account data and translates it into a picture transactional data in their underwriting, team to the Real Estate Specialties Group, in of potential borrower’s credit risk, identity, because they have been looking for reliable a move intended to juice originations going financial status and more. It does use sources of signal during the pandemic. forward. credit report data where it’s available. Petal “In the first few conversations, we were The subscription-finance team “had a does not share default statistics, but says very flattered, but didn’t have any way to positive year last year, but we think we’ll consumers with no credit file underwritten work with another business in that capacity,” beat [those results] in 2021 and go from using the CashScore perform like consumers Gross said. “But as we started to see more and there,” Hamblen said. “They’re ahead of the with prime credit scores. Petal was one of more demand for this, we began thinking game and moving.” the fintechs FinRegLab studied for a report about how we could create a whole new line The emphasis on asset-based and that showed cash flow data can predict of business that’s focused on making bank subscription lines represents a departure creditworthiness. account transaction data work for more for a bank that has done limited amounts Petal’s technology could help banks complex and higher-level use cases.” of commercial and industrial lending — its provide credit cards to people who may be The maturity of the data aggregation C&I portfolio totaled just under $791 million creditworthy but who lack a credit history, technology platforms like Plaid and Finicity, at Sept. 30. Still, Bank OZK has no plans to perhaps because they’re young or recently which make consumers’ bank account data move away from CRE lending. moved to this country. It could help banks easy to obtain, and the bank regulators’ Hamblen said the RESG team is adding compete with finechs like Petal and like acceptance of the use of alternative data lenders and support staff, while Gleason TomoCredit, which recently launched a in underwriting have softened banks’ said the bank will remain active in CRE even FICO-free credit card. But whether or not resistance to the idea of using cash-flow data in New York and other slow-growth urban banks are ready and able to disrupt the way in credit decisions, Gross said. markets. their credit card underwriting technology “Maybe the most powerful factor here is “When construction and development and processes is open to debate. that COVID created a strong business need opportunities resume in New York in “For decades, companies and for more real-time, holistic underwriting meaningful ways, we’re going to be there, entrepreneurs have tried to build and sell data, because traditional credit scores looking for the same quality projects to a better tool for measuring and scoring became unreliable through the course of last originate going forward that we’ve originated creditworthiness, and there are lots of year,” he said. in the past,” Gleason said. reasons that none have come close to

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Will banks go for it? Gross said. “We do it using machine learning for entry-level borrowers to obtain mortgage Industry observers have mixed views on and artificial intelligence.” Other tech loans. whether traditional banks are ready and companies, including MX and Personetics, The Fed has drawn some criticism for loose willing to use Petal’s alternative methods of also provide categorization. monetary policy, which some critics say has scoring and determining creditworthiness. Prism Data also handles income fueled the boom in the housing market as “Petal was already making a strong verification and offers “insights” into a more borrowers compete for fewer available business case for the use of cash-flow potential borrower’s financial life. One homes. underwriting and got a major assist from the insight, for example, is a person’s cash inflows But Powell said Wednesday at a press economic volatility we experienced this past and outflows over the past three months. conference after a meeting of the Federal year,” said Leslie Parrish, senior analyst at The CashScore is based on the sum of all Open Market Committee that he doesn’t Aite Group. “It makes sense that other lenders those parts, Gross said. Banks could use it the have any financial stability concerns about would want to benefit from an already tested same way they use FICO and VantageScore such a competitive real estate market. model rather than trying to create one on numbers. It relies on bank account “It’s part of a strong economy with people their own.” transaction history, so a CashScore can be having money to spend and wanting to invest Parrish agreed with Gross that the generated for people who have no credit file, in housing, so in that sense it’s good,” he said. joint statement bank regulators issued in Gross said, and it can provide more insight “It’s clearly the strongest housing market that 2019 about the use of alternative data in into the behavior of people who have a credit we’ve seen since the global financial crisis. underwriting provided a green light for score. My hope would be that over time, housing banks. “A traditional credit score is based on the builders can react to this demand and come “Most banks are thinking about using liability side of a consumer’s balance sheet,” up with more supply and workers will come account transaction data as a supplement Gross said. “It’s their use of debt over time.” back to work in that industry.” to — rather than a substitution for — CashScore is based on money that a In March 2020 the Fed started purchasing traditional credit scores,” Parrish said. “While consumer makes, saves and spends on a mortgage-backed securities and Treasury those scores are highly predictive based on monthly basis and is a real-time assessment securities to keep borrowing costs down. The historical data, many lenders now want to of risk, whereas a traditional score lags central bank is currently buying $40 billion pair that with data that provides a more real- behind real-time events by 90 days or more, worth of agency MBS each month, with no time look at income and expenses.” he said. sign of slowing. However, Powell said he The most established lenders are not ready “We believe the credit underwriting of doesn’t believe those purchases are fueling for this new approach, Wannemacher said. the future must look at the holistic financial any kind of housing bubble. “But for this to be successful, Petal doesn’t picture of the consumer when we make these “It’s not meant to provide direct assistance need the majority of traditional banks to sign decisions,” Gross said. “And we can no longer to the housing market. That was never the up right away,” he said. “It needs to make and exclude the tens of millions of people in the intent,” Powell said. “It’s a situation where strengthen the business case for modeling that have a bank account and we will taper asset purchases when the time and predicting creditworthiness in a new have income, but do not have credit history. comes to do that and those purchases will w a y .” This score solves for that inequality in access come to zero over time, and that time is not directly.” y e t .” What Petal’s software can do Unlike in the 2008 financial crisis, Powell One of the things Petal’s Prism Data can added, borrowers looking to buy homes are do is make the bank account data gathered HOME PRICES “in very good shape financially.” by account aggregators like Plaid and Finicity “We don’t have that kind of thing where readable by banks’ underwriting systems. we have a housing bubble where people are The data Plaid makes available is raw, No bubble overlevered and owning a lot of houses,” messy and unstructured, Gross said, and he said. “There’s no question, though, that therefore unsuited to cash-flow-based in housing housing prices are going up and so we’re underwriting. watching that carefully.” “We know this better than most because Powell also reiterated separately that these have been the challenges that we have market, Fed’s he wants the Fed to carefully explore the faced in building our business over the last idea of a central bank digital currency in five years,” Gross said. “We’ve had to invest Powell says the U.S. without worrying about the pace at years and years and tens of millions of dollars which other countries are adopting digital in building these capabilities. We think we By Hannah Lang currencies. China, for one, has moved quickly can save others a lot of time, a lot of money, April 28, 2021 on its “digital yuan,” raising concern from a lot of effort in providing these capabilities WASHINGTON — Federal Reserve some officials that the country is looking off the shelf.” Chairman Jerome Powell said that concerns to oust the dollar as the world’s reserve The Prism Data software also categorizes of a housing bubble are overblown, but that currency. bank account transactions. the central bank is closely monitoring surging Yet that potential is overstated, Powell said. “That’s a challenging problem to solve,” home prices that could make it more difficult “The currency that’s being used in China

For up to date and complete coverage go to AmericanBanker.com FRIDAY APRIL 30, 2021 AMERICANBANKER.COM PAGE 9 is not one that [would] work here,” he said. “Last year saw a spike in refinances, but ... [the program] as soon as possible to “It’s one that really allows the government more than 2 million low-income families did ensure all eligible homeowners are able to see every payment for which it is used in not take advantage of the record low mortgage to avail themselves of this money saving real time. It’s much more to do with things rates by refinancing,” FHFA Director Mark opportunity,” Fannie CEO said Hugh Frater that are happening within their own financial Calabria said in a news release. “This new in a news release. system than it is, I think, to deal with a global refinance option is designed to help eligible Freddie Mac said in a news release it is competition.” borrowers who have not already refinanced branding the new program as Refi Possible. The Federal Reserve Bank of Boston is save between $1,200 and $3,000 a year on “Refi Possible reaches many homeowners working with the Massachusetts Institute of their mortgage payment.” who can benefit from refinancing and Technology to develop and test a hypothetical The refinance program will require lenders provides flexibilities that incentivize our central bank digital currency that would to offer at least $50 in savings to borrowers clients to serve these eligible borrowers inform the central bank’s work around the on their monthly mortgage payments and a moving forward,” Donna Corley, the head of concept. Powell has also previously said that reduction of at least 0.5% in the loan’s interest single-family business at Freddie Mac, said the Fed would not move forward on a digital rate. Lenders will also be able to provide a in the release. “Our goal is to expand access currency without a blessing from Congress. $500 credit for an appraisal. to credit responsibly and make sure we are “Central bank digital currencies are now Through the new option, lenders can also supporting sustainable homeownership.” possible, and we’re going to see some of them skip a 50-basis-point fee required by the FHFA around the world, and we need to understand that is designed to protect Fannie and Freddie whether that’s something that would be a from crisis-related losses. In the program CFPB good thing for the people that we serve [and] announced Wednesday, that fee is waived for how would it work in our system,” he said. borrowers wanting to refinance if their loan balance is below $300,000. The government- CFPB gives sponsored enterprises began charging the REFINANCE adverse market refinance fee in December in lenders extra light of the economic uncertainty caused by the coronavirus pandemic. FHFA adds In 2020, the 30-year fixed mortgage rate 15 months averaged about 3.1% according to Freddie refi option for Mac, a 90-basis-point drop from the previous to meet QM year. That ignited a wave of refinancing as borrowers looked to lower their monthly low-income mortgage payments. standard But many borrowers didn’t meet the borrowers qualifications to refinance, which include By Bonnie Sinnock a minimum 720 credit score or at least 20% April 28, 2021 By Hannah Lang equity in a home, according to Black Knight, The Consumer Financial Protection April 28, 2021 a mortgage and real estate data and analytics Bureau on Tuesday officially moved ahead WASHINGTON — The Federal Housing firm. with an earlier proposal to postpone the Finance Agency is launching a new program Still, mortgage rates are expected to tick full adoption of the new qualified-mortgage to help lower-income homeowners with up this year, and refi applications are already ability-to-repay rule until October 2022, Fannie Mae- or Freddie Mac-backed 20% lower than they were last year, meaning citing a need to maximize borrower credit mortgages take advantage of rock-bottom lower-income borrowers may not be able to access. rates. benefit from the program as much as they The term “qualified mortgage” is an The new refinancing option could save could have last year. indication that a loan satisfies the legal qualifying borrowers an average of between The Mortgage Bankers Association this mandates of the ability-to-repay rule, a $100 and $250 a month, the FHFA said. month reported a rebound in refi activity as regulation within the Dodd-Frank Act that The program will be available to single- mortgage rates dipped, but most industry requires lenders to assess a borrower’s family borrowers who only make 80% of their observers are expecting a slowdown. income, assets, employment status, liabilities, area’s median income or less. To qualify, The FHFA said the refi program for lower- credit history, and the debt-to-income ratio borrowers must not have missed a mortgage income homeowners will be offered starting in order to establish that the borrower can payment in the last six months or missed this summer. repay the loan. more than one payment in the last year. Fannie Mae, which is calling the program For example, the original QM rule requires Qualifying homeowners must also have a RefiNow, said it hopes the new option can loans to maintain a debt-to-income ratio credit score of at least 620. They cannot have a help close the gap in racial and income of no more than 43% to indicate an ability debt-to-income ratio that is higher than 65% disparities among those who seek to to repay. But mortgages backed by Fannie or a loan-to-value ratio that is higher than refinance. Mae and Freddie Mac are exempt from 97%. “We look forward to implementing that requirement under a temporary 2014

For up to date and complete coverage go to AmericanBanker.com FRIDAY APRIL 30, 2021 AMERICANBANKER.COM PAGE 10 provision commonly referred to as the “QM borrowers must still demonstrate an ability use the customer’s cash flow to automate an patch,” which, after multiple extensions, will to repay, whether or not they have QM status. assessment of the customer’s ability to repay; expire when the new QM rule takes effect. and can deduct payments only when there is The new definition, which most notably a sufficient balance. removes that maximum 43% debt-to-income BANKTHINK Banks faced too much regulatory ratio and certain income requirements, uncertainty to make small-dollar loans on a was expanded in part to minimize changes large scale until May 2020, when they received to the government-sponsored enterprises’ OCC ‘true clear joint guidance from the OCC, Federal underwriting related to the expiration of the Reserve, Federal Deposit Insurance Corp., QM patch. Instead of imposing the debt-to- lender’ rule is and National Credit Union Administration. income limit and other requirements in the That guidance was compatible with the old definition, the new QM rule requires CFPB’s 2017 payday lending rule, which lenders to use standards that include a new wrong path to encouraged loans to be repayable in one based on the loan’s price. installments with terms of more than 45 The 15-month delay in mandating use small-dollar days. This meant that banks could now offer of the new QM rule could make mortgage installment loans and lines of credit to their companies more comfortable selling loans customers who had previously been using in the QM category to either the GSEs or the lending by payday and other high-cost loans. Two of the private market for a longer period of time. country’s five largest banks — U.S. Bank and The new QM rule retains a lot of flexibility banks Bank of America — are now offering loans for the GSEs, but there are some rare consistent with that guidance. exceptions. The small market for short reset By Alex Horowitz Problem solved? Not exactly, because just adjustable-rate mortgages with a fixed April 28, 2021 as banks can offer consumer loans at a much rate period that lasts for five years or less, Research shows that payday and similar lower cost than payday lenders, they can also for example, will not meet the new QM loans damage millions of Americans’ financial help payday lenders evade state laws that definition. health every year. The Pew Charitable Trusts protect consumers. In fact, a small number “So many consumers have been hit hard by found that the average payday loan borrower of banks are now originating loans for payday the pandemic and the economic downturn, has $375 in outstanding borrowings five lenders that would otherwise be illegal under and we want to ensure that responsible, months of the year — and pays $520 in fees the payday lender’s state’s laws. The banks, affordable mortgages remain available,” Dave alone for that credit. The Consumer Financial which under their charters are exempt from Uejio, the CFPB’s acting director, said in a Protection Bureau has jurisdiction over such laws, make the loans and sell them to press release. these loans. By all means, the bureau should payday lenders that in turn market, service Several consumer protections in the immediately reinstate its 2017 payday lending and absorb any losses from the loans. The ability-to-repay rule still apply under both rule, which before being rescinded in 2020 arrangement allows companies to charge the new and old QM definitions, both of provided necessary consumer safeguards more than the state laws allow. which remain available for voluntary use. for single-payment loans without restricting Although these arrangements aren’t For example, there’s still a requirement installment loans or lines of credit. widespread, they’ve increased in the past few that the annual percentage rate can’t exceed But bank regulators such as the Office years. And a new OCC regulation could make 150 basis points over the annual prime offer of the Comptroller of the Currency make this problem much worse by declaring that rate for QM Safe Harbor status. Safe Harbor decisions that are just as important as the bank should always be considered the status offers the most assurance that a loan anything the CFPB could do in determining “true lender” if it originates or funds a loan, meets ability-to-repay requirements. the financial fate of millions of households even if that loan is quickly sold to a high-cost In addition, QM loans still forbid the that have no margin for error. lender. This regulation does nothing to aid a kind of features that gave rise to ability-to- Banks are an obvious source of small- bank in serving its own customers or enlisting repay issues during the Great Recession’s dollar credit. Every one of the 12 million technology providers; instead, it strengthens housing crash, such as no-documentation Americans who use payday loans each year the hand of high-cost lenders who use bank underwriting, negative amortization or has a checking account, which is one of two partners as a rationale for ignoring state laws. interest only structures. requirements — along with earning income Regulators may have hoped that bank “The new rule does not replace any of the — for taking out a payday loan. But if banks partnerships with payday lenders would safe product features, which are embedded chose to have a more direct impact by making lead to lower prices for consumers, but in the law,” said Meg Burns, executive vice loans to their checking-account customers, experience shows that the result has instead president of the Housing Policy Council. the advantages would be numerous. A been lending on terms so expensive that it’s There also are new consumer protections bank has an existing relationship with the often illegal under state laws. For example, in the revised QM including a 225-basis- customer; has no customer acquisition costs; following a 2018 bipartisan reform in Ohio, point maximum annual percentage rate over can spread its overhead costs across a full a few banks have partnered with payday average prime offer rate limit for other QM suite of products; can borrow money at a lenders that are unlicensed in Ohio to issue loans outside the safe harbor. All mortgage much lower rate than payday lenders do; can loans at prices nearly double those charged

For up to date and complete coverage go to AmericanBanker.com FRIDAY APRIL 30, 2021 AMERICANBANKER.COM PAGE 11 by state-licensed payday lenders. These The $1.6 billion-asset Southern California “almost all climate-related impacts and loans are purportedly exempt from state laws Bancorp said in a press release Tuesday that risks of global financial institutions come because they are originated by banks — the it will pay $56.2 million in stock for the $373 from financing the wider economy,” CDP said “true lender” — before being transferred to million-asset Bank of Santa Clarita. The deal in a statement. high-cost lenders, and they have been the is expected to close in the third quarter. Wall Street dollars can either be an enabler subject of legal disputes. The OCC’s rule The deal will push Southern California for polluting industries, providing the world’s would have the effect of encouraging these Bancorp’s footprint north of Los Angeles. biggest emitters with funding for extraction nominal partnerships, the primary purpose The acquisition “marks an important and drilling, or a powerful lever used to push of which is avoiding state laws. step in our strategy to grow our commercial companies to cut emissions and prepare for A better, safer and much less expensive banking model by expanding the bank’s a low-carbon future. Several major banks, solution would be for banks to issue footprint north of Los Angeles to the attractive including Bank of America, Barclays and affordable installment loans and lines of banking communities of the Santa Clarita Morgan Stanley, have committed in the past credit to their existing customers. They can area,” David Rainer, Southern California year to measuring and reporting the carbon engage financial technology companies to Bancorp’s executive chairman, said in the emissions resulting from their lending and help them automate the underwriting and release. investments. lending process without selling the loans to Frank Di Tomaso, Bank of Santa Clarita’s “The financial services sector is critical to payday lenders. chairman and CEO, will join Southern achieving a net-zero carbon future,” Emily There’s a wrong way and a right way for California Bancorp’s board. Kreps, global director of capital markets banks to get involved in small-dollar lending. Duane Morris and Raymond James at CDP, said in the statement. “The real The OCC got it right in its joint May 2020 advised Southern California Bancorp. MJC economy transition will require a massive guidance with the FDIC, Fed and NCUA, Partners and Sheppard, Mullin, Richter & amount of capital directed at decarbonizing creating a strong foundation for promoting Hampton advised Bank of Santa Clarita. the economy and enhancing resilience, small installment loans and lines of credit which only the finance sector can facilitate that banks issue to their checking-account and provide.” customers. These loans and lines of credit CLIMATE CHANGE CDP said its report is the first-ever analysis could save millions of borrowers billions of of so-called financed emissions, which are dollars annually. The OCC’s “true lender” the indirect, or so-called scope 3, emissions rule, instead, sets up borrowers for failure. Banks generated from lending and investing. The It has the effect of raising prices rather than nonprofit analyzed the financed emissions of lowering them, undermining hard-won state produce 700 322 financial institutions with $109 trillion of consumer protections. assets, using data that asset managers, asset owners, insurers and banks had reported Alex Horowitz is a senior research officer times more themselves to CDP. with The Pew Charitable Trusts’ consumer finance project. emissions Striking yet incomplete The results were striking yet incomplete. Only 25% of the companies reported financed M&A from loans emissions, and among those that did, most reported on less than 50% of their portfolios, than offices thereby obscuring the true impact of their Southern financing activities. By Bloomberg News Reported financed emissions totaled California April 28, 2021 1.04 gigatons of CO2, or about 3% of global It’s through their loan books and emissions in 2020. The true figure is likely investment portfolios that banks and asset significantly higher. Bancorp to managers make their biggest contribution to Many banks and asset managers are climate change. underestimating climate-related risks, CDP buy Bank of The greenhouse gas emissions associated said. While 41% of firms said they identify with financial institutions’ investing, lending direct operational climate-related risks, and underwriting activities are more than such as physical damage to their operations, Santa Clarita 700 times higher, on average, than their direct 65% don’t report climate credit risks, such emissions, according to a report published as borrowers’ defaults on loan repayments. By Paul Davis Wednesday by the climate nonprofit CDP. Meanwhile, 74% don’t identify market risks, April 28, 2021 While banks generate emissions from including stranded assets and financial asset Southern California Bancorp in San Diego heating their buildings and flying executives price devaluation, as the economy transitions has agreed to buy Bank of Santa Clarita in to meetings — when pandemic restrictions to net zero. California. allow — Financial firms face growing scrutiny

For up to date and complete coverage go to AmericanBanker.com FRIDAY APRIL 30, 2021 AMERICANBANKER.COM PAGE 12 about their contribution to climate change, sized branch network that will ensure that as environmental activists, shareholders and we continue to offer convenient in-person regulators better understand their role as banking services and have a strong presence enablers of the high-carbon economy: Banks in our communities,” Drake added. have offered more than $3.8 trillion of fossil- The $16.9 billion-asset Trustmark said in fuel financing since the signing of the Paris a Tuesday press release that it closed seven Agreement, according to Rainforest Action branches during the first quarter, while Network, which used data from Bloomberg opening two locations. The company closed LP, the parent of Bloomberg News, for its six branches in 2020. calculations. Trustmark plans to close 10 to 13 branches Mobilizing financial markets to support this year, Thomas Owens, the company’s the transition away from fossil fuels was treasurer, said during a Tuesday conference among the key goals of the 2015 Paris climate call to discuss quarterly results. accord, and expectations are growing ahead “We are very focused on our branch system of the follow-up climate summit scheduled and how we serve customers,” Owens said. for later this year in Glasgow. “We have a number of markets where we’re doing two-for-ones, where we’re closing two, opening one in a better location to better BRANCH NETWORK serve our customers,” Owens added. “We’re are investing in technology … to become more efficient across the core company.” HBT Financial, Several banks have announced plans to close locations during their first-quarter Trustmark earnings calls. KeyCorp in Cleveland plans to close about 70 branches, or 7% of its network. Sierra share plans Bancorp in Porterville, Calif., said it would to close close six branches. q © 2021 Arizent and American Banker. branches All rights reserved.

By Paul Davis April 28, 2021 HBT Financial in Bloomington, Ill., and Trustmark in Jackson, Miss., have announced permanent branch closures as customer preferences shift to digital channels. The $3.9 billion-asset HBT said in a press release Monday that it will close six branches during the third quarter. The moves, which followed a review process, should save HBT about $1.1 million annually. The company said it will incur $800,000 in one-time expenses, which will largely consist of asset impairment charges and severance payments, tied to the closures. The closures “will better position our bank for the evolving way that customers access banking services and will drive improved operating efficiencies,” Fred Drake, HBT’s chairman and CEO, said in the release. “We plan to continue investing in technology to offer our customers a superior experience through our digital banking platform, while maintaining an appropriately

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