By Crain’s Chicago Business 

 

Nearly a year ago, advocates applauded PrivateBancorp and its Canadian acquirer, CIBC, for striking a deal with them to better serve low-income parts of the Chicago area, including a commitment to open two branches in underserved neighborhoods or suburbs. CIBC on June 12 announced the location of the first of the two—Bronzeville on Chicago’s South Side.

There is no question that in some respects Bronzeville is underprivileged. More than a third of the inhabitants of ZIP code 60653, where the CIBC branch is going, have incomes below poverty level, according to the U.S. Census Bureau. Median income is just over $28,000 a year.

One thing the overwhelmingly African-American neighborhood isn’t lacking, though, is banks. CIBC will be the sixth, joining banks ranging from JPMorgan Chase, the largest retail lender in Chicago, to Illinois Service Federal, Chicago’s sole black-owned bank. Urban Partnership Bank, which focuses on underprivileged neighborhoods, has a branch there, too.

There’s even a newcomer: Associated Bank of Green Bay opened a Bronzeville location in late 2016.

So just how “underserved” is ​ Bronzeville? And how well is Toronto-based CIBC’s decision fulfilling the goals of the Community Reinvestment Act, the 1977 federal law that requires banks to serve economically disadvantaged areas in addition to the well-heeled towns and neighborhoods banks always have favored? The $3 billion community deal negotiated with CIBC by Chicago’s Woodstock Institute was done under the auspices of the CRA.

It’s not as if Chicago is without areas that truly are lacking in terms of affordable financial services. Austin, the largest city neighborhood geographically, has a single branch, a U.S. Bank location on West Madison Street. Urban Partnership Bank pulled out of Austin in 2016, just four years after opening the branch. Englewood, a neighborhood known for violent crime but also home to a new Whole Foods store, also has just one bank—again a U.S. Bank branch. And Woodlawn, just south of the University of Chicago and host to the forthcoming Barack Obama Presidential Center, also is served by a single bank, JPMorgan Chase.

Just to put those numbers in context, 13 banks have 30 branches in 60614, the main ZIP code for Lincoln Park in Chicago. Chase alone has six there, according to Federal Deposit Insurance Corp. data.

“We chose this Bronzeville location with input from our community partners who help us ensure we are meeting the needs of those we serve,” Brant Ahrens, president of retail and digital banking at CIBC U.S., says in an email. “We believe our range of banking solutions will allow us to provide a strong banking service to all those in the neighborhood, from first-time homebuyers to startup small businesses to families looking for a quality banking relationship.”

CIBC isn’t the only out-of-town bank that has negotiated CRA deals with Woodstock Institute and other nonprofits. Cincinnati-based Fifth Third Bank in November 2016 struck a $30 billion deal affecting all of the states it serves, including Illinois. That included the opening of two branches in the Chicago area. Fifth Third opened the first of those in southwest suburban Summit in late 2016 and on June 25 said the second would go in nearby Bridgeview.

Summit arguably could have used another bank, with just two—BMO Harris Bank and Chicago-based Marquette Bank—serving the suburb before Fifth Third opened. Bridgeview has no shortage of lenders, with five companies (including the headquarters of Bridgeview Bank Group) and six branches.

The Fifth Third executive in charge of branch building in underserved areas wasn’t available for an interview.

Likewise, Columbus, Ohio-based Huntington Bank, which entered the Chicago market via the 2016 acquisition of FirstMerit, has committed to opening two branches in low- to moderate-income areas. But it has until 2021 to do so under its agreement and hasn’t yet.

That banks per their CRA commitments frequently are putting branches where other banks already are clustered doesn’t bother Dory Rand, president of Woodstock Institute. Austin and Englewood, for example, suffer from very high unemployment, she says. That raises questions about whether there’s a strong enough deposit base in those neighborhoods. “Nobody wants them to open a branch in an area that won’t be successful,” she says. “That doesn’t help anybody.”

‘STILL VERY USEFUL’

At any rate, groups like Woodstock don’t have the power under the CRA to tell a bank where to locate within the many low- to moderate-income areas available to them, she says. “CRA is still very useful because without it . . . we wouldn’t have much leverage at all.”

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