FNB to pay $13.5M to settle DOJ redlining probe

Dive Brief:

• Pittsburgh-based First National Bank of Pennsylvania has agreed to pay $13.5 million to settle allegations that, between 2017 and 2021, it failed to provide mortgage services to predominantly Black and Hispanic neighborhoods in Charlotte and Winston-Salem, North Carolina, the Justice Department announced Monday.

• “When banks discriminate, it means hardworking people can’t buy a house, start a business, or invest in their futures,” North Carolina Attorney General Josh Stein said in a statement. “I want every person who calls North Carolina home to have a fair shot, and I’m pleased that this settlement will create better borrowing opportunities for all North Carolinians.”

• First National Bank spokesperson Jennifer Reel said the bank “strongly disagrees” with the DOJ’s allegations. “We cooperated fully to reach an agreement in this inherited matter as a good-faith effort to avoid prolonged litigation and to maintain our focus on promoting equity and economic prosperity,” Reel said.

Dive Insight:

The DOJ complaint alleges FNB discouraged people seeking credit in predominantly nonwhite communities from obtaining home loans and that the bank’s mortgage lending was focused disproportionately on white areas of Charlotte and Winston-Salem.

Other lenders generated applications in predominantly Black and Hispanic neighborhoods at 2½ times the rate of FNB in Charlotte and four times the rate of FNB in Winston-Salem, the DOJ said.

FNB’s branches in both cities were also “overwhelmingly” located in predominantly white neighborhoods, and the bank in 2021 shuttered its only branch in a predominantly nonwhite neighborhood of Winston-Salem.

FNB entered North Carolina through its purchase of Yadkin Bank in 2017 — hence, Reel’s reference to an “inherited matter.”

Reel said the bank is “deeply disappointed” the DOJ began an investigation after the bank’s “brief presence” in the Charlotte and Winston-Salem markets, particularly when FNB had established its commitment to offering affordable credit in nonwhite communities immediately following the Yadkin acquisition.

“We are also proud to further advance our existing commitment to ensure minority and low- to moderate-income borrowers have access to credit and vital banking resources,” Reel said.

Under terms of the settlement, the bank will provide $11.7 million in mortgage loan subsidies over five years to increase access to home mortgage, home improvement and home refinance loans for residents of majority-Black and Hispanic neighborhoods in Charlotte and Winston-Salem.

FNB will also spend $750,000 for advertising and credit counseling focused on predominantly Black and Hispanic neighborhoods and agreed to open three new branches in those communities.

“This agreement will have a transformative impact for Black and Hispanic communities, providing them with new opportunities to become homeowners, bank in their neighborhoods and create generational wealth,” Kristen Clarke, assistant attorney general in the Justice Department’s Civil Rights Division, said Monday.

The DOJ’s complaint, for its part, alleges FNB relied on mortgage loan officers who worked out of predominantly white areas to generate loan applications and that the bank did not track how its loan officers developed referrals.

The settlement is the DOJ’s 12th since 2021 and the second this year to focus on redlining since the agency launched a coordinated effort to fight lending discrimination alongside the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. The initiative has yielded $122 million in relief.

Last month, Patriot Bank agreed to pay $1.9 million to settle a probe into allegations that it avoided providing mortgage services to Black and Hispanic neighborhoods in Memphis.

FNB said it has developed specialized loan products for more than a decade that expand access to credit for nonwhite and low- to moderate-income borrowers. The bank has also invested more than $1 billion in loans and investments to strengthen marginalized communities throughout its footprint, it said.

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