Midwest BankCentre, a St. Louis-based bank that recently became active in the black community in North St. Louis County, completed its $74.5 million acquisition of Southern Commercial Bank effective Friday, April 24. The merger of two community banks creates a financial institution with 17 locations and combined assets exceeding $1.6 billion.
Continuing to operate as Midwest BankCentre, the bank now ranks among the top three locally-owned banks serving the St. Louis region. Its geographic footprint has doubled, growing from seven locations in St. Louis, St. Charles and Jefferson counties to include 10 additional branches in St. Louis city, South St. Louis County and Jefferson County.
Midwest bank has gone through a series of twists and turns since 2009 – all of which the bank’s leaders now consider “blessings,” though they didn’t seem that way at the start.
In 2009, the St. Louis Equal Housing and Community Reinvestment Alliance (SLEHCRA) accused Midwest BankCentre of “redlining,” or withholding home loans from neighborhoods often considered poor, economic risks. The alliance took the allegation to the U.S. Department of Justice (DOJ), which ordered the bank in 2011 to invest $1.45 million in a majority African-American area.
In an interview with The St. Louis American, Midwest BankCentre Chairman and President James A. Watson said that it was a considerable investment that they probably wouldn’t have made as quickly if it had not been for the settlement.
As part of the settlement, the bank opened the Pagedale location at 6810 Page Ave. in November 2012 to “resolve allegations that the bank was engaging in a pattern or practice of discrimination on the basis of race or color,” according to the DOJ. It was the first bank established in the City of Pagedale, a majority African-American community, Watson said.
Rather than approach the project as a “series of boxes” that they had to check, MBC Senior Vice President and Director of Community Development Alex Fennoy said they treated it as any business venture at which they wanted to succeed.
“We are all in with this,” said Fennoy, who also serves as co-chair of the St. Louis Regional Unbanked Task Force and its BANK-On SAVE-Up St. Louis initiative.
Fennoy and Watson expect by the Pagedale location’s third year, it will turn a profit. That’s two years earlier than the normally expected five-year profit mark.
“I think we really developed the right strategy around not going down a single path but really trying to make sure we had products and services that the community needed,” Watson said. “We also had the right partners to help accelerate the trust in the community.”
In Pagedale, the bank works closely with Beyond Housing and established an advisory board that includes clergy, educators and mayors. Its products are also tailored to the community’s needs, which is partly because of the DOJ settlement.
The settlement specified that the bank had to invest $900,000 in a special financing program to increase the amount of credit the bank extends to the black community. The DOJ also required that it spend $300,000 for consumer education and credit repair programs and $250,000 for outreach to potential customers.
In Pagedale, one of their most popular products is the Affordable Home Improvement Loan, a $5,000 loan with an interest rate of 1.99 percent for residents living in low- to moderate-income neighborhoods. Many of their requirements of the borrowers are “relaxed” to where the credit scores can be as low as 580, compared to the typical 640, Fennoy said.
Fennoy is proud that they have helped more than 300 families through the loan program. And last year, 75 percent of all home improvement loans in their assessment area – including St. Louis City, St. Louis County, Jefferson County and St. Charles – originated at Midwest.
Now with the acquisition, the bank is making even more commitments to minority and low-income communities. In January, Midwest leaders met with SLEHCRA before they applied to the Federal Reserve Bank of St. Louis to acquire Southern Commercial.
SLEHCRA co-chair Elisabeth Risch said the coalition wanted to see how the bank leaders were going make the acquisition an opportunity to serve new minority communities and further expand into North St. Louis – which is highly unbanked.
The coalition and the bank drew up a “Community Benefits Partnership Plan,” which includes Midwest opening a new location in North St. Louis in the next two years. They are also committing to expanding lending outreach to Latino borrowers in South St. Louis and offering small business lending and financial education.
SLEHCRA wrote a letter to the Fed to explain the bank’s new commitments to the community, which helped Midwest to look favorably in its application, Risch said.
Over the years, the bank has gone “above and beyond” meeting its DOJ settlement, she said. But Risch is really excited about the community plan that comes with their newest acquisition.
For six years, the coalition of community organizations has worked towards increasing bank investments in underserved communities and, she said, “We hope this plan takes it to the next level.”
