Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas July 9-10, 1998
Public Meeting Transcripts
Public Meeting Regarding NationsBank and BankAmerica
Thursday, July 9, 1998
Transcript of Panel Sixteen
380 3 MR. GORDON: Thank you. My name is Andrew 4 Gordon. I'm president of Arizona Multibank Community 5 Development Corporation. I appreciate the Federal 6 Reserve Bank of San Francisco making this public meeting 7 possible, and I want to take this opportunity to bring to 8 the Fed's attention and all other interested parties Bank 9 of America's tremendous leadership and support in 10 creating and supporting Arizona Multibank. 11 Arizona Multibank does not take exception to the 12 proposed merger and, as you will hear, we have benefited 13 over the years from B of A's strong commitment to 14 addressing credit needs in the community that are 15 legitimate but under-met by traditional banks. 16 Bank of America's commitment to Arizona 17 Multibank's efforts in the enterprise of community 18 development finance is above and beyond its substantial 19 $3 million share of Arizona Multibank's total 20 capitalization of 10.2 million. 21 By way of background, Arizona Multibank is a 22 501C3 corporation and recently certified by the US 23 Department of Treasury as a community development 24 financial institution. Arizona Multibank provides 25 financing, technical assistance to small businesses, 26 affordable housing, projects -- affordable housing . 381 1 projects, nonprofit organizations, and economic 2 development initiatives. 3 Since our first loan in December '92, Arizona 4 Multibank has provided $11 million to 170 projects 5 throughout the state of Arizona. Combined with senior 6 debt provided by banks and equity funded by borrowers, 7 these projects represent total costs of 49 million. 8 For Arizona Multibank, loans range from $500 to 9 a half a million dollars and 70 percent of our small 10 business loans are to minority and women-owned 11 operations. Over 60 percent of the small business loans 12 are $25,000 and less. 13 Arizona Multibank also makes larger loans to 14 nonprofit corporations, including those serving 15 affordable housing needs, youth, special education 16 programs, and American Indians. We are very proud of our 17 accomplishment. B of A through its guidance and 18 commitment has played a central role in our successes. 19 Current chairperson of Arizona Multibank's 20 15-person board is a director from the community and not 21 from an investing bank. This is a first for us. And not 22 only is it a huge statement about our investing bank's 23 confidence in Arizona Multibank, it is testament to the 24 effectiveness of the immediate preceding chairperson of 25 three years, B of A's Arizona president and regional 26 executive for the southwest region. . 382 1 The board was led with exuberance and the 2 standard was set for balancing fiscal responsibility to 3 all the investing banks with the responsibility of 4 proactively responding to community credit needs. 5 Although B of A is one of the corporations largest 6 investors, its leadership really comes from its 7 intelligent, sensitive, and informed approach to guiding 8 and assisting Arizona Multibank. This approach has 9 proven to provide the Arizona Multibank with the solid 10 foundation for serving the community for years to come. 11 It is the executive management officers and 12 staff of B of A that help Arizona Multibank build its 13 capacity to respond to important and legitimate credit 14 needs in the community that would not be financed as 15 undertaken by a traditional lender alone. The 16 chairperson of Arizona Multibank's investment committee, 17 the senior vice president, and senior credit officer at B 18 of A has been instrumental over the past seven years in 19 creating an underwriting culture that integrates a 20 disciplined credit assessment process with decision 21 making flexibility. 22 In addition to volunteering for leadership 23 positions on the board and investment committee, many 24 areas of expertise and corporate resources at B of A have 25 provided Arizona Multibank with important assistance, 26 including senior staff in the offices of corporate . 383 1 communications, appraisals, special assets, and human 2 resources. 3 The qualitative contribution by B of A to 4 Arizona Multibank has and will continue to be 5 significant. But B of A's more easily measured support 6 has also been very meaningful to our operations, from 7 providing office space, to computer and photocopy 8 support, to setting Arizona Multibank up as a separate 9 bank on their commercial loan system for our loan 10 collections and servicing. B of A stands out as our 11 largest in kind contributor. It's in the neighborhood of 12 $125,000 a year. 13 Overall, B of A has focused a lot of corporate 14 muscle on its investment in Arizona Multibank and, as a 15 result, many small businesses, low and moderate income 16 families, community and economic projects have received 17 financing that would not have been available otherwise. 18 Regarding NationsBank, although my direct 19 contact with them has been limited, I have had the 20 privilege over the past couple years to work with Shore 21 Bank Advisory Services, which was commissioned by 22 NationsBank to draft guidelines for establishing 23 Multibank Community Development Corporations. We are 24 pleased to be highlighted in that study which identifies 25 eight core characteristics of successful Multibank 26 CDC's. This is the report (indicating). . 384 1 It is my understanding that NationsBank's 2 strategy is to invest in organizations that deliver 3 results and create a climate for sustained investments. 4 Arizona Multibank is one of those organizations. And I 5 anticipate a strong and serious working relationship with 6 Bank of America and NationsBank now and as a merged 7 corporation. Together we can continue to provide 8 financing projects that are responsive and dynamic, as 9 dynamic as the every changing needs and vibrant dreams in 10 our community. Thank you. 11 MS. SMITH: Thank you. Mr. Sweet. 12 MS. KEENER: Ken Sweet wasn't able to be here. 13 I'm Margaret Keener. I missed getting the little tag. 14 Ken is in the Bull Head City where it's 115, so I got the 15 treat to come. 16 Northern Arizona Council of Governments is a 17 voluntary association of local and county governments in 18 Northern Arizona. There are 25 governments, four of 19 which are counties. The other are small cities and towns 20 ranging from 540 persons to 52,000 people. The average 21 is about 2,500 persons to 5,000 persons. We're a 22 nonprofit and our board of directors is made up of the 23 elected officials of those cities, towns, and counties. 24 Since our inception in 1965, we have initiated 25 and developed a variety of programs with human services, 26 education, planning, community development, housing, . 385 1 economic development, and small business development. 2 Our four counties are very rural and they're 3 economically distressed by federal definition. Our 4 service area covers about 48,000 square miles and it's 5 mostly off reservation, but we do provide some programs 6 on Navajo Nation, Hobie, and White Mountain Apache. 7 Our service area has not benefited from the 8 booms that have occurred in Southern Arizona and Phoenix 9 and Tucson. Our county unemployment rate still range 10 from 8.4 percent to 19 percent. Our poverty rates are 11 generally twice the state's rate of 20 percent. Our 12 average 1990 family income in the region was 29,490 per 13 year compared to 40,110 for the state average. The 14 average income of our client families was about $10,070. 15 Bank of America has been a very important 16 partner in our economic and housing development efforts. 17 They've generously given of their time and money, whether 18 it's been the branch manager assisting with setting up 19 interim revolving loan program for small business 20 development, serving on a small business loan committee, 21 or the community development division giving us funds to 22 initiate a first-time home buyers program so that we can 23 get some of our lower income clients into housing. 24 They are also very quick to respond to requests 25 to begin an innovative program where we're taking out 26 crummy mobile homes and replacing them with new modular . 386 1 housing. They developed a special consumer loan package 2 with reduced rate and underwriting criteria so that we 3 could do loans with rural development. 4 Their special willingness to try different 5 approaches and to create new solutions to old problems 6 needs to survive the merger. The new bank must continue 7 the vision that Bank of America and it's Rural 2000 8 initiative has brought to Northern Arizona. 9 We realize that 350 billion has been pledged for 10 the continuing support of the community development 11 lending and investment and that this is a large and 12 comprehensive effort launched by a bank. However, our 13 concern does center around the resulting delivery system 14 and how it will function for our rural distressed 15 communities of Northern Arizona. 16 We feel that our solutions in these small 17 communities are often beyond the capacity of a national 18 cookie-cutter approach. Our small rural community and 19 customers need continued attention and creative 20 approaches that meet local conditions. 21 Our experience has been that Bank of America has 22 stepped up and joined us in efforts to work with the 23 communities. We like the Bank of America's community 24 development division's past approach in our region. 25 They've listened to our needs and respect our ideas. 26 Bank of America has truly been a good partner with us and . 387 1 a good corporate citizen in our communities. The spirit 2 and methodology of the Rural 2000 initiative must be 3 preserved. Thank you. 4 MS. SMITH: Thank you. Ms. Rogers. 5 MS. ROGERS: Good evening. I'm Sheila Rogers 6 from West Company, which is an economic development 7 corporation. I've traveled today from Mendocino County, 8 which is located about 100 miles north of San Francisco. 9 It's a rural California county with a population of 10 86,000 and a traditionally high unemployment and poverty 11 rate. 12 Ten years ago, the organization which I direct 13 was founded to address economic self-sufficiency among 14 low-income people. The West Company promotes 15 micro-enterprise as a strategy to increase economic 16 self-sufficiency for people with limited access to 17 economic resources. 18 One of the first community partners to join this 19 endeavor was Bank of America. Originally the foundation 20 capitalized the micro-loan fund with $10,000. Two years 21 later, in 1993, the foundation provided a 99,000-dollar 22 grant. Sixty thousand went into the micro-loan fund and 23 39,000 went for technical assistance. Subsequently, the 24 bank came back with another $25,000 to keep us going. 25 During the same era, the local commercial Bank 26 of America branches provided human capital to West . 388 1 Company, board of directors, and micro-loan fund 2 committee. As well, Bank of America paid the salary and 3 placed a former Bank of America employee at West Company 4 for a period of six months to help us develop our loan 5 program. We were also able to obtain no-cost loans -- 6 excuse me, accounts for low-income customers. 7 The impact of Bank of America's investments on 8 one rural California county has been immense. Among the 9 outcomes from those investments, Bank of America helped 10 to build the capacity of a community-based organization 11 to bring low-income entrepreneurs into the mainstream. 12 It enabled us to make $198,000 in micro-loans to 61 13 non-bankable customers. That assisted with the startup 14 of 40 businesses and the expansion of 39 businesses. All 15 in all, 83 jobs were created. 16 I am here today to commend these contributions 17 and the commitment that they demonstrate to rural 18 California communities and to micro-enterprise as an 19 economic engine. I am here today to ask for renewed 20 commitment to the Rural 2000 initiative as developed 21 during the last year by Bank of America and its community 22 partners. 23 I am here today to ask that the Bank of America 24 Foundation and the Bank of America Community Development 25 Bank, as they currently exist, be retained in 26 California. Thank you very much for this opportunity to . 389 1 testify. 2 MS. SMITH: Thank you. Mr. Vigil. 3 MR. VIGIL: My name is Thomas Vigil from 4 Northern New Mexico. I'm a member of the Jicarilla 5 Apache Tribe in Northern Mexico. And there I operate 6 several businesses, one resort hotel and a guest ranch 7 for high-income guests and 32,000 acres, which I invite 8 you to come and you enjoy yourself. Fish are this big 9 (indicating). I know the time is limited. 10 Today I'm here as -- I come before you as 11 chairman of the board for First Nations Development 12 Institute, which is headquartered in Virginia. As an 13 organization, First Nations Development Institute has 14 been assisting the culturally directed economic 15 developments of Native American tribes and organizations 16 for almost 20 years. During this time, banks have been a 17 study focus of our efforts to bring about economic 18 relationships in the remote rural communities that 19 characterize Indian country. 20 While First Nations does not specifically focus 21 on metropolitan native population, we know that they, 22 too, have often lacked access to credit. For most native 23 individuals in any location, banking relationships have 24 not existed in the past. 25 As a function of our normal effort to keep 26 Indian communities informed of their rights under the . 390 1 Community Reinvestment Act and since the announcement of 2 the NationsBank/Bank of America merger, First Nations has 3 conducted a survey of banking needs in Indian 4 communities, the findings of which we have attached to 5 the document that we've provided to your staff. 6 Our survey of 177 tribal and nonprofit 7 organization in 22 states affected by the proposed merger 8 reveals a willfully inadequate collective encounter with 9 mainstream financial channels. The vast majority of 10 tribes in native organization had not had any experience 11 with either NationsBank or Bank of America, nor did they 12 know of any NationsBank or Bank of America activities in 13 native communities. 14 The prevailing view among tribes and native 15 organizational representatives that big banks in 16 particular don't do business in Indian country. And 17 notwithstanding the accelerated banking activity in the 18 past five years, only 91 percent -- only 91 home 19 mortgages have been closed on tribal land during the 20 past -- during this, the same period, ninety-one homes in 21 the market with an estimated need of 200,000. 22 Despite the shortcomings revealed in our survey, 23 we remain optimistic that a critical mass problem 24 solvers, responsible borrowers, and business interest 25 will eventually bring full-fledged banking and financial 26 services to Indian communities. We're pleased that . 391 1 NationsBank/Bank of America has agreed to be a part of 2 this progress following the proposed merger. 3 Not only have they included a specific mention 4 of Indian country in their pledge of $10 billion in 5 lending and investment for community and economic 6 development in rural areas over the next ten years, but 7 in a meeting of June 16 with First Nations, other Native 8 American groups, they also agreed to work with First 9 Nations and the task force on an analysis of loan 10 products and financial services that would inform a 11 Native American specific lending goal. 12 The stated commitment of the two banks will 13 greatly mitigate our original concerns regarding 14 competitive factors and the convenience and needs of 15 Indian communities under the merged entity. Our concerns 16 were based on NationsBank lack of experience with Native 17 Americans due to the small number of reservations, native 18 urban population centers in the south and southeastern 19 states. 20 But NationsBank has provided assurances that the 21 merged bank would take positive approach in providing 22 banking and financial services to any community in the 23 newly acquired service areas. And, for that reason, I 24 have other -- we support the merger. 25 In conclusion, I'd just like to say that we have 26 reached this decision based on considerable thought and . 392 1 serious thought because, as you know, we have probably, 2 as a group, been promised more than any other group. As 3 you remember, as long as the wind shall blow, the rivers 4 shall flow, and we're going to hold NationsBank and, if 5 this merger is approved, and Bank of America to their 6 promises, and hope that you will, too. 7 I'd just like to say that we appear here today 8 bearing letters of support from 29 tribes and nonprofit 9 organizations within service areas that would be affected 10 by the proposed merger and in cooperation of the 11 400-member National Indian Housing Council, the 12 200-member plus National Congress of American Indians, 13 and the American Rights Funds, and the Council of Energy 14 Resource Tribes. Thank you. 15 MS. SMITH: Thank you. Mr. Beane. 16 MR. BEANE: Yes, my name is Sid Beane, and I'm 17 here today representing United Indian Nations Community 18 Development Corporation, which is the first American 19 Indian community development corporation established here 20 in the Bay Area. I would also support much of which the 21 previous speaker said in that I'm also a Native 22 American. I'm a Dakota, originally from South Dakota but 23 living here in the Bay Area for a number of years. 24 As we all know, Native Americans are among the 25 most invisible population and least understood in terms 26 of particularly financing since much of our land is . 393 1 federal land in trust and difficult to approach in terms 2 of financing vehicles. And that's why it's important 3 that we be understood by banks and special consideration 4 be given for special financing packages that also involve 5 Native Americans within the banks and within the 6 programming strategies for any banking services that 7 might be delivered. 8 As a representative of an off-reservation 9 organization, I think it's important to keep in mind that 10 we are probably the most invisible of the Native American 11 population, because when you think of Native Americans, 12 you automatically think of Indians on the reservations. 13 Yet a majority of Indian people live and have been 14 relocated to the off-reservation areas. 15 Our involvement in affordable housing and 16 community economic development has been rather new and so 17 our groups have not been well-represented within the 18 community development circles, nor within the financing 19 institutional strategies of any of the financial 20 institutions. 21 Our experience recently with the development of 22 the CDC and with Bank of America I would say has been 23 positive in that we have not had any difficulty in 24 approaching the bank and receiving assistance in planning 25 and with some planning dollars and further assistance in 26 looking at our affordable housing and community economic . 394 1 development strategies. 2 We are concerned that as we've been developing a 3 relationship with this bank that the merger sustain the 4 Community Development Bank and the Community Foundation 5 that have been very forthcoming in outreach and looking 6 at strategies that might affect this most invisible 7 population. 8 You may not be aware that our unemployment rates 9 are as high, if not higher, than any groups. Our 10 drop-out rates are generally higher than any groups. Our 11 poverty rates are as high, if not higher, than any 12 groups. So we are probably amongst the least served and 13 the least understood. 14 So the off-reservation population that I 15 represent is clearly one that needs to be looked at in 16 any merger and served and with a specific strategy that 17 includes within any particular initiative for surveying 18 rural, as well as Indian country, that the urban 19 community be clearly served. 20 And I just want to say that, in summary, that we 21 are not taking opposition to any merger. Thank you. 22 MS. SMITH: Thank you. Mr. King. 23 MR. KING: Thank you. My name is Johnny King. 24 I'm president and chief operating officer of the King 25 Group of Dallas, Texas. 26 The King Group is one of the largest . 395 1 African-American female-owned marketing firms in the 2 southwest and specializes in advertising, sales 3 promotions, and community relations that target the 4 African-American segment of the population. 5 The King Group has worked with Bank of America 6 since its first year of operation as a retail bank in the 7 state of Texas. Our primary function with the bank has 8 been to work with the bank in all of the above areas in 9 African-American communities across the state of Texas. 10 I would like to address three areas. First I 11 would like to address some of the unique banking needs of 12 African-Americans that our research and experience have 13 pointed out to us, along with some of the historical 14 basis for those needs. 15 Next I would like to present some of the 16 programs and activities that Bank of America, with the 17 assistance of the King Group, has implemented to address 18 these needs in the African-American segment over the past 19 six years. 20 And finally I would -- I believe that I would 21 like to address some of the concerns that must be, and I 22 think will be, addressed with the combined NationsBank 23 and Bank of America entity. 24 The King Group conducted extensive research on 25 banking as it relates to African-Americans on behalf of 26 Bank of America. This research was conducted by . 396 1 Dr. Delva King, our CEO, who is also recognized as one of 2 the top ethnic researchers in the country. Our research 3 revealed some unique banking needs of African-Americans 4 and, more importantly, identified the historical basis 5 that contributed to those special needs. 6 In general, the belief is that banks are not 7 sensitive to the needs of African-Americans and the 8 barriers that African-American have historically faced in 9 attempting to do business with banks. 10 The historical basis for this includes limited 11 success in accessing bank products and services, the fact 12 that few banks were located in African-American 13 communities, and a perception that banks did not value or 14 want to do business with African-Americans. The term 15 "redlining" is what appeared in our research over and 16 over again. 17 Finally, our research revealed that 18 African-Americans felt that banks have ignored our 19 history and some of the reasons that we have difficulty 20 in meeting the general criteria of banks. 21 Based on this research -- and I might add was 22 quite extensive -- we, together with Bank of America, 23 developed a comprehensive five-year plan that we used to 24 build market share for Bank of America and increase 25 accessibility to African-Americans and ensuring Bank of 26 America had the products, programs, and services to do . 397 1 business with African-Americans. 2 First of all, and perhaps our greatest 3 challenge, was to deal with the image that has 4 historically -- African-Americans have historically had 5 about banks. To this end, we created several programs, 6 the marquis one of which was the Black History 7 Chronicles. The Chronicles was not only programmed to 8 celebrate the lifetime achievement of African-Americans 9 in local communities; it was our belief that by creating 10 such a program based on the rich heritage of 11 African-Americans that Bank of America could best and 12 rightfully so learn about this heritage and, at the same 13 time, assure African-Americans that we're concerned and 14 knowledgeable about the history of African-Americans. 15 Today this program is the highest, most visible 16 program, and most intrusive program in the 17 African-American community in the state of Texas. It has 18 been lauded by black clergy, elected officials, community 19 leaders, and others of all races and nationalities 20 throughout the state. 21 The Chronicle program is an example of how we 22 used our research and knowledge of the segment to create 23 business for the bank and, at the same time, give back to 24 the community while attempting to overcome some of the 25 historical perceptions that banks have in the eyes of 26 African-Americans. . 398 1 As for the accessibility, while we were working 2 on the perception problems with banks, Bank of America 3 was simultaneously planning two DeNovo's, one in Dallas 4 and one in Houston. Three-fourths of the 5 African-American population in the state of Texas reside 6 in these two markets. 7 We work with Bank of America on site selection, 8 grand openings, patronage programs, and others to make 9 sure that the state-of-the-art banks were successful in 10 the heart of the African-American community. 11 With the share-building, branding, and access 12 initiative underway, Bank of America was creating the 13 products that we believed were appropriate to address 14 some of the needs in the African-American marketplace. 15 Products such as the ABC loan which was designed to 16 assist small businesses and with a line of credit product 17 that addressed the number one needs that we identified in 18 our research of our African-American businesses and that 19 was cash flow. 20 The product simplified the loan process and 21 provided quick turnaround time and service. The King 22 Group created advertising programs for these products but 23 at the same time created outreach programs such as the 24 Minority Opportunities Success Program, or M.O.S.T. as we 25 affectionately call it, to assist small businesses in 26 accessing these new products. . 399 1 The M.O.S.T. Program is a training program that 2 assists African-American businesses in how to apply for 3 loans such as ABC, SBA, and other traditional banking 4 products. The Neighborhood Advantage product at the same 5 time was rolling out and was designed to have a similar 6 impact in mortgages. We took this product, which targets 7 LMI census tracts, and created a neighborhood advantage 8 club. The club provided training and benefits beyond 9 what the products's initial intent was, again, another 10 part of our intent. Thank you. 11 MS. SMITH: Thank you very much. 12 MR. KING: We fully support the merger by the 13 way. 14 MS. BARRERA: Thank you. Good evening. My 15 name is Janie Barrera, and I'm president and CEO of 16 Lexion Texas based in San Antonio. We are a nonprofit 17 micro-lending organization that lends money to small 18 businesses who cannot access loans from banks. 19 We have disbursed since June of 1994 over 800 20 loans, which equals about close to $3 million to about 21 400 businesses, and we have lost $22,000. That's less 22 than one percent of the portfolio, which means that doing 23 loans to small businesses really does work. 24 The commitment has been there from both Bank of 25 America and NationsBank from the very beginning. We are 26 taking this model, then, and replicating it to the entire . 400 1 state of -- well, the major cities in Texas. 2 We opened up an office in the Rio Grand Valley, 3 which is one of the poorest sections in the United 4 States, in March of this year. We will be opening a 5 second office in the area of McAllen, Texas. We'll be 6 opening a second office in the Rio Grand Valley in 7 Harlingen, Texas in about four weeks, which will be 8 housed inside a NationsBank building. Then we will be 9 also offering the same products and services in Houston 10 in August and, by the first quarter of next year, be in 11 Austin and Dallas, Texas, where we will also be officing 12 in a NationsBank property. 13 What we are saying here is that the partnership, 14 not only from NationsBank and Bank of America but from 15 all banks, has allowed us to become the intermediary. 16 They lend us the money or they provide us the investment, 17 which NationsBank has committed 1.1 million for the 18 entire state network to be able to provide the working 19 capital to the small businesses. 20 Now, these small businesses are cab drivers, 21 beauticians, plumbers, painters, people that have 22 absolutely no way of providing or getting this, this 23 capital. They're the -- the competitors are pawn shops 24 and they are money lenders who they go out and take maybe 25 25 to 35 percent in interest for these loans. And these 26 loans are averaging -- our average loan size is $3,000. . 401 1 We send from $25,000 -- from anything from $500 to 2 $25,000. 3 And, as we stated, too -- as I stated, also, the 4 repayment rate is definitely there. Our stats show, too, 5 that after two loans from -- to our customers, their 6 take-home income increases by 38 percent, which is 7 substantial when you think about that 90 percent of our 8 customer base is in low and moderate income families, 9 neighborhoods. It's also substantial when you think 10 about that close to about 43 percent are women and 81 11 percent are minority-based. 12 So we are truly serving the populations that the 13 banks cannot or will not, and I encourage the 14 continuation of the community reinvestment act to pursue 15 this and also that the merger of these two major 16 institutions will also continue their commitment to 17 serving this population. Thank you very much. 18 MS. SMITH: Thank you very much. We'll start 19 with Ms. Kitchen.
Last update: December 3, 2010