AGREEMENT IS PART OF MECHANIC BANK’S PURCHASE OF RABOBANK
San Francisco, June 26, 2019 – Today, the California Reinvestment Coalition announced that it has negotiated a five-year Community Reinvestment Act (CRA) commitment with Mechanics Bank (OTCBB: MCHB) as part of its acquisition of Rabobank, N.A. The agreement goes into effect in January 2020 and represents billions of dollars in community investment by the bank.
“At a time when the CRA is under attack in Washington, we applaud Mechanics Bank for making a strong commitment to the California communities where it does business,” explains Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition. “When a bank merger takes place, the CRA gives the public the opportunity to weigh in with regulators on how well the merging banks are meeting the needs low- and moderate- income communities, as measured by everything from the financing of more affordable housing to lending to small businesses. CRA commitments like this are a win-win for the banks and for our communities.”
“Access to bank branches and services is a critical challenge facing rural California, and we appreciate Mechanics Bank’s focus on better serving these communities,” comments Alicia Sebastian, associate director at the California Coalition for Rural Housing. “One of the significant parts of this CRA plan is the bank’s commitment to providing Individual Development Accounts, which help low-income people save for long-term goals and build household wealth.”
“We commend Mechanics Bank for its commitment to integrate the Home Ready mortgage loan to help more first-time homebuyers,” comments Nikki Beasley, executive director of Richmond Neighborhood Housing Services and a board member at CRC. “In combination with its philanthropy and tax credits focused on affordable housing and community developments, the bank is helping to address California’s housing crisis.”
“We look forward to getting to know Mechanics Bank,” says Julie Bornstein, executive director of Coachella Valley Housing Coalition. “We have had a very positive long-term relationship with Rabobank in Imperial County and the Eastern Coachella Valley. Under this new CRA plan, the bank is working to keep Rabobank’s rural branches open, will place an ATM in Eastern Coachella Valley, and will continue to seek community input as it expands in rural areas.”
The CRA is a federal law enacted in 1977 that encourages depository institutions to help meet the credit needs of low- and moderate-income neighborhoods. The CRA requires federal regulators to assess how well each bank fulfills its obligations to these communities, including soliciting public input on banks’ CRA performance. This information is used in evaluating applications for approval of bank mergers, charters, acquisitions, branch openings, and deposit facilities.
Mechanics Bank CRA Commitment
The Mechanics Bank CRA commitment represents a significant increase in CRA activities and investments, expanding Rabobank’s previous CRA activities. Mechanics Bank is a 114-year-old bank based in Walnut Creek, California, with 44 branches and $4.8 billion in deposits in California. Rabobank, N.A. is a nationally chartered bank with 108 branches throughout California and approximately $10 billion in deposits. The combined entity will operate under the Mechanics Bank name with 144 branches and in excess of $17 billion in total assets. The acquisition is expected to be finalized in the third quarter of 2019.
Starting on Jan 1, 2020 and continuing until Dec 31, 2024, Mechanics Bank’s new CRA plan includes:
- CRA activities: Mechanics Bank will work toward an annual level of CRA qualified loans, investments, and services equal to 15% of the bank’s California deposits.
- Community Development: The bank will devote .25% of deposits annually towards community development investments, with at least 50% in affordable housing development, small business lending, Community Development Financial Institutions (CDFIs) and CDCs, and other nonprofit development funds.
- Small business lending: The bank will focus on making more loans to smaller businesses (with annual revenues of less than $1 million), and partnering with nonprofit lenders, including CDFIs, to make referrals for denied loan applications. It will also provide the Small Business Administration’s 7A and 504 programs.
- Home Ownership: Mechanics Bank will integrate Fannie Mae’s Home Ready mortgage product to offer to credit-worthy, low-income homebuyers.
- Bank accounts: Mechanics Bank will continue Rabobank’s previous commitment to making banking services available to as many Californians as possible.
- Supplier diversity: By December 2020, Mechanics will adopt and implement a formal corporate supplier diversity program with a goal that by 2025 at least 15% of its annual corporate spending will be with locally-owned businesses owned by historically under-served communities and women.
- Philanthropy: Mechanics Bank will devote an amount equal to .025% of deposits annually towards philanthropy, with at least 50% of contributions focused on affordable housing, economic development, small business technical assistance, and financial literacy.
CRA Agreements: CRA agreements with Mechanics Bank, City National Bank, Flagstar Bank, Cathay Bank, Bank of Hope, and Banc of California are on CRC’s website.
CRA Research: Banks reported more than $30 billion in CRA activity in California in 2016. A 2018 analysis and report by CRC found that banks that committed to CRA agreements reinvested roughly two times as much in communities as banks who had not. Read the report here: Harnessing the Power of Banks: The Community Reinvestment Act and Building an Inclusive Economy.