Security Pacific Vows $2.4 Billion for Local Efforts : Banks: The plan will provide loans for low- and moderate-income housing and small businesses owned by minorities. It is thought to be the biggest such program ever.
Security Pacific Corp. said Thursday that it has committed $2.4 billion over the next decade to loans for low- and moderate-income housing, small- and minority-owned businesses and similar programs.
The plan, believed to be the largest community investment effort ever by a U.S. bank, is the latest evidence of the growing influence of some community organizations that have been urging California’s largest banks to provide more loans and other resources to the poor and minorities.
Security Pacific’s commitment is substantially larger than rival Wells Fargo Bank’s recent $1-billion, seven-year community investment plan. The move by Los Angeles-based Security Pacific comes after community groups had protested its bid to acquire 20% of Mitsui Manufacturers Bank on grounds that Security Pacific’s commitment to minority and low-income communities was insufficient.
“It sounds like they’ve set a record,” said Reed M. Morgan, managing director for the Community Reinvestment Institute, a nonprofit organization based in San Francisco that works to ensure that borrowers, lenders and government agencies comply with the 1977 federal Community Reinvestment Act. The act, among other things, requires that federal regulators review banks’ record in serving their diverse communities before approving mergers.
“No bank can come close in terms of (Security Pacific’s) commitment,” added Robert Gnaizda, an attorney for the Greenlining Coalition, a group of 16 community groups that has met with the bank since November, 1988. This may trigger other financial institutions nationwide to invest $20 billion in community development, he said.
The $2.4-billion commitment over 10 years represents, on an annual basis, a 20% increase by Security Pacific over its 1989 community investment spending.
In addition, top managers at Security Pacific, the state’s second-largest bank, will hold a series of meetings with leaders in 13 communities throughout California, including those in Los Angeles, Orange County and San Diego, to ascertain their needs. The meetings could begin as soon as mid-May.
“It’s bringing the institution closer to the people,” said Robert H. Smith, president and chief executive for Security Pacific, in announcing the program at a press conference.
This improved program will “help low- and moderate-income families get their piece of the American dream,” Smith said.
This is the first time that the bank has announced a goal for Community Reinvestment Act programs, Smith said. Its formal CRA program began in 1987 and was rooted in a 1974 home loan program, said Hugh Loftus, Security Pacific’s first vice president and community reinvestment officer.
Security Pacific will also set aside money for its corporate philanthropy and minority-vendor purchasing programs.
About 70% to 80% of the money will be used for affordable housing and real estate purposes, including mortgage, rehabilitation and construction loans and government-sponsored housing programs, Security Pacific said. Bank officials said it is too soon to determine the number of people who will benefit, but they said people throughout the state will gain.
Last year, the bank spent $189.7 million in community reinvestment, or 95% of its total $199.6 million in community involvement spending.
“No doubt that was our biggest year,” Smith said.
The new goal, which works out to $240 million annually, was made by the bank itself and not in response to other banks’ goals, Smith said. It also was not made because of protests by community groups, he said.
Irving Margol, Security Pacific’s executive vice president for community and employee relations, said this program will be profitable for the bank as long as it assists profitable businesses and helps strengthen communities. “What goes around comes around,” he said.
Leaders from eight community-oriented groups, including the Black Business Assn., Community Advocate and the Latin Business Assn., praised Security Pacific’s efforts during the press conference.
Rodney Fernandez, chairman of the California Community Economic Development Assn., said that although the $2.4-billion goal was important, Security Pacific’s continued investment in communities was more important.
“They know it’s the right thing to do, and that it’s good business,” Fernandez said later.
In 1977, Congress passed the Community Reinvestment Act, which mandated that all federally insured bank and savings and loans meet the needs of communities they serve. The act was an attempt to prevent redlining--the refusal by banks and insurance companies to offer loans to certain neighborhoods.
According to Morgan of the Community Reinvestment Institute, federal regulators have rigorously enforced commitments under the act since March, 1989, and as a consequence, several institutions have been denied acquisitions, mergers or branch openings. Beginning July 1, the Community Reinvestment Act records of lenders will be made public.
Smith said Security Pacific indeed must comply with act, but it also has an obligation to help the community.
