Board of Governors of the Federal Reserve System 

Statement by Richard Devine 

on behalf of the Center for Community Change 

on the 

Application of the NationsBank Corporation of Charlotte, North Carolina 

for Approval Under the Bank Holding Company Act 

to merge with 

BankAmerica Corporation of San Francisco, California 

July 9,1998 

The Center for Community Change (CCC) hereby submits this statement to the Board of 

Governors of the Federal Reserve Board in connection with the Application of the NationsBank 

Corporation of Charlotte, North Carolina to merge with Bar&America Corporation of San 

Francisco, California. 

CCC is a national, not-for-profit organization headquartered in Washington, DC that provides 

technical assistance and research on behalf of local community-based organizations serving lowincome and predominantly minority constituencies. For almost thirty years, CCC has been 

especially active in advising community groups on their efforts to develop and implement 

community reinvestment strategies designed to stimulate the flow of private lending and 

investment to underserved urban and rural communities. 

The merger of NationsBank and Bank of America, two of the nation’s largest banks, promises to 

have important and profound implications for the residents and businesses located in the many 

markets currently served by these institutions. CCC is mindful of the fact that community 

groups from different markets served by one or both of these banks have complained about 

various inadequacies in their Community Reinvestment Act performance records. Further, some 

of these local citizens’ groups have also raised questions about whether the proposed 

consolidation will result in reductions in lending or deterioration in the quality of essential 

banking services for their areas. 

In an effort to address some of the concerns that have been expressed, the two banks announced 

on May 20Lh that they would make a ten-year, $350 billion community development 

commitment. While substantial on its face, the commitment lacks important details about how 

this ambitious effort will be undertaken, not just for the twenty-two states now served by the two 

institutions, but for new market areas as well. A detailed implementation plan should be 

required by the Federal Reserve Board should the purposed merger be approved. 
Additionally, we believe the merged institution should be required as a condition for approval to 

establish and capitalize a non-profit corporation that would have two principal purposes: first, to 

improve access to and terms of credit for low and very low income households in all market 

areas affected by this proposed merger, and second, to preserve the affordable housing inventory 

that is either rapidly being converted to market rate properties in places like the greater San 

Francisco Bay Area, or being left to deteriorate at an accelerated pace in communities where the 

conditions for conversion to market rate housing have yet to evolve. 

We advance this proposal because past experience with mergers of lesser scope and magnitude 

has demonstrated conclusively that multi-million or billion dollar loan commitments, however 

well-intentioned or implemented, do not address fundamental issues of income and asset 

inequality that permeate our society. Also, we believe very strongly that communities and 

populations now “credit-scored” below the minimum established for participation in regulated 

credit and banking markets should be accorded the same benefits as the senior executives of 

NationsBank and Bat&America who will realize great personal gain from a favorable regulatory 

ruling. With funds equal to those earmarked for the care and comfortable retirement of senior 

executives, it will be possible to acquire, rehabilitate and preserve for at least an additional 

thirty-five years approximately 75,000 affordable housing units. 

It is our understanding that as part of the proposed acquisition/merger, senior executives of 

NationsBank and Bat&America shall receive, at no cost to them, options to purchase stock of a 

new Delaware holding company at prices not available to the general public. In addition to this 

benefit, senior executives of each institution shall receive lump sum cash payments and other 

compensation typically referred to as “golden parachutes.” 

According to a recent NationsBank Corp. 8-K/A-2 filing, “...the combined company expects to 

incur pre-tax merger and restructuring items of approximately $1.3 billion.” Exactly what I 

fraction of this total amount will be devoted to “exit costs related to contract terminations and 

other Reorganization costs” has yet to be disclosed. An article published in the San Francisco 

Chronicle on April 15, 1998, states that “the five highest paid BankAmerica Corp. officers would 

collect a total of more than $65 million in severance pay and windfall stock profits if they lose 

their jobs in the proposed merger with NationsBank Corp.” And that “a thousand other senior 

managers also are covered by the San Francisco banking giant’s generous golden-parachute 

program, If they all get dumped, they collectively would be entitled to severance benefits 

estimated at well into the hundreds of millions of dollars.” 

Our proposed new, non-profit corporation will be capitalized from two sources: a cash 

contribution from NationsBank and BankAmerica (and other institutions in similar 

circumstances such as Wells Fargo, NorWest, Citicorp and Travelers) equal to the sum of all exit 

costs related to the termination of employment of senior executives and stock options equal in 

number and all other respects to those granted to senior executives of the affected institutions as 

part of the action(s) requiring regulatory appro\ral. 

The initial cash contribution, which will match on a dollar-for-dollar basis the sum of all golden 

parachute payments, will allow the new corporation to commence immediately and stock 

options, assuming the prosperity of the new holding company, will provide funding for future 

years. If these measures are implemented, there should be no need for additional funding. 
The new, non-profit entity will be governed by a Board of Directors having equal representation 

from the financial community and persons or organizations representing low and very lowincome residents of the affected market areas. The corporation would have a paid staff and be 

subject to all statutes, rules and regulations governing this type of organization/activity. The 

stock options would be held by an appointed trustee. 

We ask that in your consideration of this application you recall that thirty-one years ago a 

presidential committee that included two of the Bay Area’s most revered business leaders, Edgar 

F. Kaiser (Chairman) and S.D. Bechtel, Jr. and had as a technical advisor one of the University 

of California’s most esteemed economists, Wallace Smith, was charged “to find a way to harness 

the productive power of America to (address) the most pressing unfidtilled need of our 

society. The need is to provide the basic necessities of a decent home for every American 

family.” Progress has been made in three decades, but the basic need remains unfulfilled. 

In its promotional literature the Bank of America often quotes a statement of its founder, A.P. 

Gamini: “In everything we do we are actuated by one motive -to build our neighborhood, our 

community and our state. In that way we are building a better America.” We believe that 

establishment of the non-profit corporation we have proposed would build better neighborhoods 

and communities in California and all other areas in the nation affected by this merger. 
Good evening, my name is Rose Jacobs Gibson and I am a City Council Woman 

in East Palo Alto. I appreciate the opportunity to express the community’s concerns 

regarding the merger of Bank of America and Nations Bank. 

Over the past years, Bank of America has endorsed the notion of addressing the 

banking needs of low and moderate income customers. This can be seen in their 

Community Reinvestment Projects, such as the Jammin’ Hoops Basketball program and 

the East Oakland Youth Development Center. However, East Palo Alto is one community 

Bank of America has neglected. 

East Palo Alto is a city with a population of 25,000 people, which is 

predominantly African American and Latino. Throughout its history, East Palo Alto has 

been greatly undeserved by banking institutions. Fifteen years ago, many of the bank 

branches that once existed in East Palo Alto closed. BofA was the first bank to leave. As 

a result, residents must travel long distances to deposit pay checks, withdraw cash and 

get change for their businesses. 

Local merchants report that they are unable to develop the kinds of relationships 

with lenders that could result in access to credit. In addition, the City reports having 

difftculty securing loans as well as other discriminatory lending practices despite federal 

fair lending laws. The Home Mortgage Disclosure Act data for 1996 suggests that only 

68.42% of home loan applications from East Palo Alto were ultimately approved. In 

addition local business reports having difftculty securing loans and receiving good rates 

of interests on loans. Seventy-two percent of the small businesses responding to the EPA 

CAN DO survey reported that financial institutions support small businesses in the 

community either “very poorly” (48%) or “poorly” (24%). Only 8% of the small 

businesses responding to the EPA survey reported that financial institutions met their 

credit needs. Because of this, EPA developed a program called the Financial Services 

Incentive Program, This program was developed to make it easier for banks to locate in 

East Palo Alto. As a result, Bank of America began to provide grants to East Palo Alto. 

However, this is not enough. Whenever we talked to bank executives about opening a 

branch in EPA, their reasons for not doing so always boiled down to money and profits. 

The absence of a bank in East Palo Alto is a constant reminder to residents that 

they are being deprived of something that every community deserves. Bank of America’s 

merger application states that “low and moderate income markets have proven to be 

profitable and valued business segments for both banks”, however, this has not been our 

experience. BofA has refused to open a branch despite knowledge of economic 

development progress. On June 27”, we had our first Groundbreaking ceremony on 

Phase I of a major retail center with Home Depot, Office Depot, Comp USA and Good 

Guys as major anchors. It took nearly 10 years to get a BofA ATM. Will it take us 

another 10 years to get a branch bank? Whenever the city of East Palo Alto tried to 

negotiate with BofA to get a branch in our city, BofA always gave us the excuse that they 

are downsizing and are no longer opening new branches. However, in April of 1997, 

BofA built a new branch located in Stanford Shopping Center. This is a branch located in 

a high income community. And East Palo Alto was ignored. 
This merger will facilitate more branch closures, which will result in job loss, as 

for many and death to the banking needs of low-income communities. East Palo Alto is a 

living example of this. 

Last May, NationsBank and Bank of America unveiled a $350 billion, 10 year 

commitment to community development lending and investment, but how much of this 

money will be given to East Palo Alto? B of A’s $350 billion announcement lacks 

specificity. Throughout history, East Palo Alto has been forgotten by many financial 

institutions. Our cries for help has been let? unanswered. Many financial institutions has 

turned a deaf ear. This testimony is not meant to be an accusation but a mere statement of 

fact. The only financial institution that came to our aid was a bank in Sacramento. They 

provided us with the redevelopment funds (in the form of loans) our city needed. 

The Community Reinvestment Act was enacted to encourage banks to meet the 

credit and banking service needs of their entire community, including low-and moderate 

income neighborhoods. However, East Palo Alto is still undeserved. Although Bank of 

America and NationsBank have a great plan for Community Reinvestment, East Palo 

Alto does not seem to be included in that plan. For example, in 1992 Bank of America 

promised to continue and increase their lending program to meet the needs of low income 

residents. However, East Palo Alto did not benefit from this (please see attachment # 1). 

We ask you, the Federal Reserve Board to take into consideration the banking 

needs of East Palo Alto. We are a small city that deserve the same services that every 

community in California already has. The Federal Reserve Bank Board have the power to 

enforce the Community Reinvestment Act on our behalf. 

Sincerely, 

Rose Jacobs Gibson 

City Council Woman 
Jul-OS-98 08:50A ca reinvestment committee 415 864 3981 

,,‘* 7. 

.* ,. 

CR 

Bank of America 

f 

fear Members of the California Reinvestment Committee: &&f 

Bank of tLncrica NT&SA (“Bank of America’ of “Bank”) and the California 

Reinvestment Comminee (CRC) have a long term working relationship. The bank 

has met with the CRC quanerly and will continue to do so, to~~discuss performance, 

community perceptions and credit needs, and upcoming mark& opportunities. ‘gire : 

have engaged in extensive discussion with the California Reinvestment Committee 

since Ihe announcement of our proposed merger with Security Pacific Corpontion. 

. Some items described below involve goals and activities of BankAmerica 

Corporation (“BAC”) and its subsidiary banks in states other than California, and its 

community development lending subsidiary, Bank of America State Bank (“BASE”). 

The outcome of these discussions is mat Bank of America and CRC an in agreement 

on the following enhancements to Bank of America’s and BAC’s Community 

Reinvestment Act (CM) programs: 

I. INCREASING EXLSTKNG BAC CR4 GOALS 

coh4MENsuRATE WITH rrKRMSED SIZE. 

BAC and its subsidiary banks arc committed to increasing CRA lending to mea the 

needs of low income residents of the western states they serve throughout the 

decade. BAC has set goals for its subsidiary banks as follows; 

P-01 3 

- w B. $150 mUion on average a~ually for 

development and long-term financing of low-income housing. 

__ -ional SmalJ Busin=. $200 million on average annually for 

conventional small business loans under SSO.C@O. 

-- SrxciaJ Small Rusi$Xss ProetaW. SIC4 million on average aMuaJ.ly for 

govemmeut-guaranteed and other special pmgmms for small and micmbusiness enterprises and for commercial improvement or development, 

including both dtit and indirect program. 

I- 

- &==chnW7& + / 

- 
hul-OS-98 06:50A ca reinvestment comittee 415 664 3981 

Califomia Rcinvestmcnt Committee 

July 13, 1992 

Page Two 

-- Consumer loans for lower income households. St2 muon on average 

annually under the BASIC program, which includes person& auto, 

home quity, aud home improvement loans that carry m&cd 

underwriting terms. 

‘Abe Corporation’s lending goals are baseline numbers, and do not constitute a 

ceiling on any subsidiary bank’s lending programs. The Bank of America will meet 

an~~ually with the CRC to discuss adjustments in these goals to reflect market 

demand and inflation. 

II. M-ULTLFAI$ILY AFFOP.DABLE HOUSING LENDING 

A. Jncreased D~tlarG~al. Bank of Ammica’s annual god for “L 

CaLifornia is SIOO million.-- 

B.. 3&getine Ven, Low-Income. On the issue of targeting solely those 

projects, or portions themof, that serve very tow-income households, we will 

continue to report both low- and very low-income results, and we will make our best 

cffon to maximize dollars to very low-income households. We will strive to 

allocate two out of every three dollars to units that serve very low income 

households. This target will be a Stretch to reach and we both acknowkdge that 

lcgj~ate reasons outside of our control may exist for meeting, exceeding or falling 

short of this goal. The realization of this goal, however, will not compromise or 

terminate effoti BASB is making and will make to extend credit for transactions in 

under-served markets (i.e., types/site of loans and gcogtaphic areas) that address the 

needs of very low- and low-income households. In instances where Baak of 

America has a choice of projo%, we will give priority to pmjects that have greater 

depth of affordability and looger length of affordability. 

C. m of Affotdable Housine Loans. Recognix&CRCts 

desire for a shorter processing time for individual transactions, to say nothing of our 

own need, BASB will establish internal timeframes which will be appmvcd and 

monitored by BASB’s Board of Dhturs and shared with i& Advisory Board. 

Tbcse timeframes wiU be shared wilh tic CRC in the quarterly meetings. This effort 

to establish an internal timeframe will not wme at the expense of our basic operating 

philosophy of working with non-profit orga&ations iu the early stages of 

development to offer ~ecbnical suggestions on deal strucruring, or possible 

sources/uses of funding or identification of hurdles that sin&u projeas have 

onwuntered. 

P-02 3 
..3ul-qg-98 of3:51A ca reinvestment 

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, 

P.03 

California Reinvestment Commhc 

July 13, 1992 

Page Three ’ 

D. At~~tisals. Bank of America is willing to nlease copies of 

appraisals to a nonprofit affordable housing developer. 

The Bank is willing 10 release a copy of the appraisal to other lenders participating in 

the project financing SO that the project does not incur additional expenses. 

E. Mobile Homez. Bank of America will expand its lending on aches 

located in dcsignatcd low-income COOPS as initiated in the Santa Elena Park in 

Sole&d,, California. Bank of America will implement a S 10 million, 3-year pilot 

program utiliziog the BASIC product. A limitation of flMcing 25 peaat of the 

coaches in any single park will apply. However, the Bank will review applications 

for cxccpti~n~ to tbt 25 % limitation on a case-by- basis, and it may waive._.$ 

requirement if extenuating circutnstanccs cxlst. : 

F. Federal Home Loan Bank. BAC intends to sock for BASB or an 

other BAC subsidiary bank, membership in the Federal Home Loan &tt.k (“FHLB”) 

strictly as a means of accessing gent funds under the Affordable Housing Program. 

It should bc rccognizcd that FPLB membership is designed for membership by 

thrifts, not commercial banks. Membership will bc applied for, provided the costs 

associated with such membership do not significantly outweigh tbc expztcd bcncfits 

of participation in the AHP Program 

BI. SINGLE FAMIL-r’ LENDING 

As stated in the Bank’s October 22, 199 I letter to tbc CRC, the Bank has expanded 

the Neighborhood Advantage progmm beyond lower ioeome census tracts/zip cc&s 

to all arcas of tbe State. Further discussions were held with CRC rtprcscotativer in 

January 1992. Geoctal agrecmcot on program fcaturcs was rcachai at that time. 

Since March 16, Neighborhood Advantage is available on an ‘either/or? 

basis: households putchasing properties within lower income census uactsltip &es 

remain eligible for Neighborhood Advantage underwriting guidelines witbout an 

&ome cap; households purchasing homes outside designated Census tracts/zips arc 

eligible when their income is within 120% of them mcdian income. It was agrccd 

that, since there is no limit on the funds available for this program, it is appropriate 

to allow up to 120% of tbc arca median income as an iccome cap with the 

understanding that CPA is intercstcd primarily in Iending to households uoder 

1~56. -rheBank will separately rcpon loans IO applicants below 100% of median. 
l-os-99 08:SlA ca reinvestment committee 415 a64 3981 

.- 

. . 

P-04 3 

California Reinvestment Comminbc 

July 13, 1992 

Page Four 

. . IV. FOCUS FUNDING 

Bank of America will not continue Security Pacific’s Focus Funding intemst mte 

progtam. It has agreed with the CRC, however, to honor the 1992 commitment 

made by Security Pacific to the CRC by establishing a $3 million revolving 

predevelopment loan fund to be usad by nonprofit intermediary lenders. The Bank 

will review demand and market factors with CRC annually and determine the 

amount of additional investment, if any, in these funds. Generally two thirds of this 

fund will be allocated to California, The Bank has agreed to explore se&g aside a 

portion of the fees earned on preservation project loans to fund a pool for higher risk 

predevelopmenl loans. A proposal is being fmahd by the Bank and will presented 

to CRC by June 30. It has also agreed to explore the us-e of benevolent deposits to 

buy down interest mates on ptievclopment loans. 

In addition, Bank of America has agreed to purchase $50 million in 1991 low 

income housing tax cndits, of which 540 million will be invested in California. 

3% amount includes the entire 512 million unpurchased for the statepmgmm. 

Bank of America has also agreed to’purchase an additional $5 million in tax credits 

for each of the yean 1992-1995. These funds will not be drawn from iu existing 

corporate contribution budget and are in addition to tbe multifamily housing lending 

subgoal discussed above. ‘I% pmgram will be monitored by BASB’s Board of 

Directors. 

V. RACIAL. DISPARA-DES IN REAL ESTATE LENDING 

A. Fair Housing. The Bank will appoint a person as a liaison to tbt 

community on fair housing ~SSUCS. ‘Ihis person's responsibilities will include 

monitoring the Bank’s progress in fair lending, identifying bank lending practices 

that may work agaiust achievement of fair housing objectives and working witb otbcr 

bank units to develop methods to overcome any existing impedimenu. 

B. -t-o V’ me&do fmance. Bank of America will attemp to 

significantly improve its ~~~OIDWIW in lending to racial minorities as demoosuated 

in its 1990 HMDA Statement. Rank of America has hired Price Waterhouse to 

review deolined loan files in an effort to identify the specific nzons for denials of 

minority applicants who were denied based on ctcdit history. The Bank plans to 

discuss the results of this review and possible steps to be taken based upon those 

results with CRC. 
Jul-OS-98 OS:51A ca reinvestment Corrmittee 415 864 3981 

_. . 

California Reinvestment Committee 

July 13, 1992 

Page Five 

v-l. BANK SBRvlCBs 

A. identification. Recognizing Security Pacific’s oumnt P&CY, Bank 

of America is actively working towards ~uiring only one pieoc of identification to 

open an account or to cash a check. Specifically, we expect that a driver’s license 

(U.S. or foreign), California Idcatification card, or a current passport (US or 

fortign) will be acceptable forms of identification in California within a reasonable 

the period foUowing cffcctive date of the merger. 

B. &l&d Checking. Bank of America’s Limited Checking Account is 

53.50 a month, with no mGmnn balance and an opening deposit of only $25.00. 

Liiited Chectig Account customers have full aws to Bank of America services. 

Ibis product includes a Versatel card, the ability to cash checks, witbdtaw funds;’ - 

a,nd make deposiu at any branch. This product will bc enham by increasing tbc 

number of checks allowed, at no additional charge, to 10. BAC intends to make this 

product or its equivalent available in the other states where it has a retail banking 

presence. BAC’s banking subsidiaries in Washington, Oregon, Nevada and Arizona 

are aJready discussing equivalent programs planned for those states with local 

community groups and coalitions. 

C. Cheek C@. Checks drawn on the new Bank of America, and 

federal, state, and local governnient checks will be cashed at no charge at any Bank 

of America branch in the state in which the customer’s account is located, provided 

proper identification is providd. A futed fee of SS.00 will be charged for cashing 

u00g0vemmcnt checks for noncustomers. 

D. Branch m. We recognize tbe importauce of a branch network 

in m&q our commuuities’ fman~ial s-ervicea needs. To that end, WC will use tbc 

fohowing parameters as .wc identify bmchw for consolidationlclosun: ,. 

- maintain or enhance the existing level of service. No oew underserved 

areas ip lower-income markets will be cmated by tbc 

consolklation/closur of a Bank of America or Security Pacific branch. 

__ uot qasolidatc/close any branch locared in a low income area except in 

the cas.0 of a ‘dUndanCy’. 

- when bm.&es arc consdidatd ad closed, Bad of America will retaira 

and bansfer all customer records and account histories to the new branch. 

_ provide a minimum 12Oday notice of branch closures in lower-income 

neighborhoods 
jul-CX3-96 08:5ZA ca reinvestment canmittee 415 864 3981 

. .- 

. . 

California Reinvestment Committee 

July 13, 1992 

Page Six 

__ consider transfcning SU!@S sites (icludirtg by donation) to communitybased, nonprofit economic development organizations on a case-by_cast 

basis, depending on such factors as ownership status, leare re+ircmenvj, 

and market conditions. 

- ensure that women and miootity employees are not dispmp-tionatcly 

affeoted. Efforts to incna~e the employment of women and minorities 

throughout BAC will continue. 

W. SOCIAL POLICY ADVISORY COhtMrrEE 

Bank of America has agreed to’create a Social Policy Advisory Committee 

(“Committee’) as a way to increase community input. Thls Committccwill provide 

advim and counsel to the Bank’sSocial Policy Committee on matters that pertaiif¶o .. 

the Bank’sCommunity Reinvcstmcot Act activities and performance. Such topics ti 

Pair Housing and outreach to specific communities will be discussed and monitored. 

This will be a working conunittect whose comments and perspectives uill be 

considered by the Bank in its program planning and monitoring. ’ 

The Committee will rnti with the Social Policy Committee at least twice. a year. 

‘the agendas for these meetings will be set in advance, based on requests made by 

Committee members and on issues identified by the Bank. Staff support will be 

provided by the Bank’s Corporate Community Development DepaNnent. Issue 

specific joint work groups comprised of member(s) of the Committee and the Social 

policy ~ommittcc will be established by the Chainnan of the Social Policy 

Committee, who will becharged with developing suggested responses to issues of 

concern and will make action ncommendations to the Social Policy Committee. 

‘Ibe Committee will be composed of six to eight individuals chosen by the Chairman 

and CR0 of the Rank and the Chairman of the Social Policy Commit& from 

nominations and comments received from California community gmups such as the 

California Reinvestment Committee. Members will be chosen as individuals, not as 

representatives of specific organizations. E3forr.s will be made IO se& members 

that mflcct the ethnic and gc~gxaphic diversity of California. Critetia for selection 

include personal and pmfessional reputation, knowledge, willingness and ability to 

work with the Bank, and respect for the confidentiality and sensitivity of the issues 

to b.e discus&. Because of the inlportanco of the Committee, members will be 

expactcd to attend all meotlngs. 

Membem will be compensated for tbeh time, and may t&t to have the funds 

donated to an o@tion of their choice. Members wiil serve for staggend threeyear terms. 

I 

P-06 
.iul-cl~-9a OS:SZA ca reinvestment comnittee 415 864 3981 

.: 

California Reinvestment Committce 

July 13, 1992_ 

Page Seven 

VlII. CHARITABLE SVPPORT FOR CO- DEVELOPMENT 

Bank of America will recommend to the BankAmerica Founda~ion’s Board of 

T~stees that they allocate 10 percent of the Foundation’s budget annually (with a 

minimum level of $1 million) for community development grants. The CRC will 

provide input to Bank of America in designing a program that will include economic 

development initiatives in addition to affordable housing. 

IX. EC6NOMfC DEVELOPMENT 

. 

-- . 

BankAmeka wiil irrlpkment new prows, SmdJ micro-business enlerpfise loans 

and minority business loans in California and strive to develop these same type of 

programs in Washington, Arizona, Nevada and Oregon. 

B. Small Business Loans and Enterorke Zones. BASB wlB wntinue lo work 

with CRC to report and prioritize sma.b business guaranteed loans. For those smaU 

business loans made to businesses located in state designated enterprise zones, BASE 

wib quantify the tax credit savings accrued to the Bar& during the fkt 12 moths 

after the merger and discuss with CRC possible affirmative uses for those funds. 

C. peovcline Bntermi~. A representative of the Bank’s environmental 

policy unit will moct by June 30,~ 1992 to DISCUSS with CRC the possibility of 

financing for recycling enterprises sponsored or conducted by nonprofit 

orgauiaations. 

. 

D. Producr DcveluRnxns. Product development staff for conventional small 

business cndit wiU meet with CRC representatives by June 30, 1992. The goal is to 

allow CRC to provide input in product design and delivery planning. 

4 

P-07 ; 
.hl-~a-~a 08:53A ca reinvestment committee 415 864 3981 

CaJifontia Reinvcstmcnt Committee 

July 13, 19% 

Page tight 

E. B$. Our undentanding of the predcvelopmeot loans 

under discussion is that they sould not be considered prudeot cxteosions of c&it. 

We “ill explore participation in the Los AngelcS CoUabntivc or other forms of 

suppon for its ptikipants. However, if philanthropic fuods are used, these will bc 

part of the 10% community development allocation cited in section VIII. 

F. Devclooment ‘Ttaininrr Institute. WC will welcmne the ideotication by 

CRC of potential candidates for sponrors&ip of DTl training. 

G. Local Proerat,t&~ BASE will conlinue to develop special programs IO meer 

specific credit needs in local anzi. 

X. CRA RRQGRAM FOR 0IXl.T.R STATE-S .~,C ,, 

To ensure each BAC subsidiary bank strives to attain its CRA-related goals, the 

Bank’s California CRA ofticer wq conlinue IO visit each sew subsidiary bank within 

90 days of aquisition to perform an evaluation of the existing internal structure for 

CPA and to recommend to the subsidiary’s management and board a CEU, Action 

plan designed to initiate programs and activities. The California CRA offker will 

also continue to provide ongoing support and technical assiicc for each BAC 

subsidiary bank. Each subsidiary bank wiII adopt a management Ievel CRA 

oversight wmmincc, or quivaleot process, and also report to the Social Policy 

committee. 

Specific ClU programs such ti.Neigbborhood Advantage and BA53C arc replkable 

sod will continue to be adapted in other states by BAC subsidiary banks to meez 

Iocal credit needs. BASIC has already been inuoduced in Oregon, Nevada, 

Arizona, and New Mexico. Neighborhood Advantage has akady ban immo’uced 

in Washington, Oregon, kiwna, New Mexico and Nevada. In all states, etiting 

CRA commitments of Security Pacific will be honor&. 

In addition, dollar goals will be set state-by-state as pan of BAC’s SlZ billion, 10_ 

year corporafe goaI annouoced October 17, 1991. 

Bank of Amcrica understands that tbc CRC does not purpon to represent 

wcamunitics in other states, and that the inclusion of the= general principles in his 

letter is not intended to substitute for oegotiations and agnement berPre~n the Bank 

and WUIIIIU~~~~ groups in other states. 

P.O.3 
Jul-08-98 08:53A ca reinvestment committee 415 a64 3981 

.‘.. . .-*., 

California Reinvestment Commitlee 

My 13, 1992 

page Nine 

XI. QUARTERLY h4EETlNGS 

Bank of America will continue the quarterly meetings with the California 

Reinvestmcn~ Commitrcc, with reports submitted at least two weeks in advance of 

each meeting showing each booked multifamily affordable housing loan, including: 

__ 

__ 

_* 

-4 

_- 

__ 

__ 

__ 

__ 

total loan amount and amounts alhxafed for low- and very low-income 

housing; 

loan type: conslructioo, acquisitioa and construction, permanent (and 

term); 

city or county; -* ‘- , 

unit mix and number of units: very low, low, moderate market; 

type of project: rental, for sale, self-help, etc.; 

type of borrower: noopmfit, for profit, joint venture; 

whether concessionary terms were part of the loan; 

application dam (pending definition) 

commitment date; and 

closing date. 

The Bank wilI provide similar information for loans in the pip&x, along with the 

estimated quarter for closing and an estimate of the probability of closing. The 

report will also provide tbe number of applicadoas discouraged and declined, and the 

reasons for discouraging or de4ining those applications. 

The Bank txxognizes that CRC continues to be concerned about issues which have 

been raised by otbcr groups. The Bank and other BAC subsidiary banks have 

discussed these issues with such other groups, including but not litniu&.to 

Communities for Accountable Reinvestment, the Washington Reinvestment Alliance, 

Southern Nevada Affordable Housing Reinvestment Coalition, the Northern Nevada 

Reinvestment Alliance and ACORN-Phoenix. These issues include small business 

loans, branch site donations, racial patterns in real estate lendiug, job losses and 

economic dislocation, and other mattern as well. 

P-09 
California Reinvestment Committee 

July 13, 1992 

Page Tea 

XJI. CONCLUSION 

Bank of America appreciates the concerns and cooperative spirit of CRC in assisting 

the Bank to more fully understand issues of importance and in developing effective 

ways IO address the nctds of low- and very low income individuals and 

communities. We look forward to continuing a positive working relationship with 

CRC. 

Chy an and Chief -/E vecutive Officer 

. 

Executive Vice President 
Ms. Joy Hoffman-Molloy 

Community AlTairs Offtcer 

Federal Reserve Bank of San Francisco 

Division of Banking Supervision and Regulation 

Mail Stop 620 

101 Market Street 

San Francisco, CA 94105 

r 

Dear&is. Hoffman-Molloy: 

Madam Chairman and Members of the Committee, the East Palo Alto Community Alliance and 

Neighborhood Development Organization (“EPA CAN DO”) wishes to thank you for the 

opportunity to present testimony regarding the proposed merger of Nations Bank and Bank of 

&nerica to the City of East Palo Alto. My name is Leonard Randolph, and 1 am the Executive 

Director of EPA CAN DO, a non profit community development organization who’s mission is 

IO enhance the qlrality of life for all residents of East Palo Alto by empoweriizg our members to 

erlgage it1 housing, economic and community developmeni. EPA CAN DO was founded in 

1989, as a direct result of community residents organizing to attract a financial institution to 

East Palo Alto. We serve a very low income population within San Mateo County, one of the 

wealthiest counties in the country. The median income for our city ($34,000 for a household of 

4) is approximately half of the county’s ($68,600), and 18.6% of our population lives below the 

U.S. poverty level according to the 1990 census. The private sector and the surrounding 

jurisdictions contributed to these conditions through pillaging of our resources and 

disinvestment~ 

I 

I would like to raise three (3) concerns with respect to the merger of NationsBank with Bank of 

America and the moving of the corporate headquarters to Charlotte, NC. 1) As a community 

development corporation (CDC) that is engaged in affordable housing development, we are 

extremely concerned about the potential impact this merger will have on lending for multi-family 

housing developments. I applaud the 10 year $350 million commitment in community 

development lending and investment that, as Mr. Hugh McCall described is “a floor and not a 

ceiling.” I also commend you on your commitment to “acquire, build or rehabilitate 50,000 

-..Xordable housing units” over this same time periods But, if my math serves me correctly, the 

% I I5 million NationsBank and BankAmerica have allocated for affordable housing equates to 

only $2300 per unit. While this may be adequate in the southern states, though 1 very much 

Lcimrrd P, iRandolph f\cco”~~dc~‘bofatsst.d”c -7/W% 

East Palo Alto Community Alliance & Neighborhood Development Organization 

2369 University Ave, East Palo Alto, CA 94303 Phone (650) 473.9838 Fax (650) 473-09 13 
doubt it, in California, and especially the San Francisco Bay Area, this is woefUlly insufficient to 

meet our building costs. 

To date there has been no commitment from Nations Bank to prioritize loans or lines of credit 

Lr affordable housing developments serving very low income (50% of AMI) households. As 

the median income of East Palo Alto is 50% of the AMI, our ability to provide housing 

opportunities for our residents would be severely hampered should Nations not continue 

supporting these developments. We are equally concerned that with this merger, a new CDC 

will enter the California market to develop housing. I am well aware that Nations Bank’s CDC 

has been extremely successful in developing over 14,000 units, but having them enter this 

heavily saturated market makes me uncomfortable. Community-based and grass-root 

development organizations are uniquely qualified to represent, develop products and provide 

services that truly benefit their communities. Removing this local connection, will mean that the 

concerns of the community will give way to the bottom line of the disconnected outside agency. 

In my opinion this will lead to the demise of community-based groups, the displacement of low- 

! ncome households and ultimately to the destruction of the community. 

2) Mr. McCall indicates that it is their intention to “employ more people, lend more money, do 

more business with minority vendors, be more active in the community and generally make a 

bigger difference than our predecessor institutions.” These are noble intentions indeed, and I 

admire his commitment to community development. But I do have a concern about past 

performance and future accountability. To make the best difference in our community we need 

the presence of neighborhood based financial institutions with local employees and advisory 

‘&ard. The city of East Palo Alto has been without a financial institution since 1984. The 

former Bank of America site, closed in the 1970’s, and is now a McDonalds. A Wells Fargo 

site, also closed in the 1970’s, and is now home to a number of non-profit organizations. 

Glendale Federal was the last to leave the city in 1984, and their building now houses the city’s 

Community Development Depattment~ While East Palo Alto does not have a single bank 

branch, we have over 12 locations, including convenience and liquor stores, where our residents 

cash checks and get money orders at exorbitant prices. Disinvestment by banks over the past 14 

years has dealt a severe blow to our community, eroding the city’s economic base, forcing 

money out of the community and creating hardship for our residents. In June of this year, Bank 

of America opened the first ATM connected to a major financial in our community. And while I 

applaud this small step, I am a little chaffed that it took two and a half years from whence the 

Idiscussions first occurred with Bank of America 

Regardless of how much banking patterns and surveys will tell you that in-store banking and 

electronic banking are what people find convenient - this does not tell you why check cashing 

outlets and pawn shops flourish in low income communities~ In the last IO years. as banks have 

abandoned low income communities. the numbei~ of pawn shops has doubled~ There is plenty 

of financial activity going on in our communities but at exorbitant prices and in an unregulated 

em’tronment People use these facilities because for one. they’re there In another survey we 

L%nducted outside check cashing outlets, we found 48% of respondents had bank accounts, 

30% of them with Bank of America, Secondly, these outlets are attractive because they are 

staffed by human beings, who provide services in various languages, and with whom customers 
can build the relationships that we all know are necessary for borrowing. The lack of branch 

access especially affects our local merchants. Small business owners have told us they go 

butside East Palo Alto to deposit their checks to their bank branch in person, three times a week 

sometimes, in order to develop the relationship they will later need for borrowing. This has 

become the cost of doing business in low income communities. In a survey we conducted last 

year 70% of East Palo Alto businesses stated their financing sources were not banks, and over 

73% felt that financial institutions rated poorly or very poorly in meeting their needs. It is very 

important that banks, in their desire to cut costs and consolidate operations do not forget the 

needs that small businesses have for cash. Mini branches will need to be staffed appropriately 

for merchant services. 

People in low income communities have a much larger need to develop personal relationships 

with lenders and for tellers who will help them open checking and savings accounts, understand 

their bank statement or apply for a loan. It is unrealistic to expect that the electronic hurdle will 

be overcome easily in low income communities. More importantly, moving to electronic 

banking clearly benefits higher income clients and furthers disparity. 

If NationsBank and BankAmerica are going to reach their lending goals in low income 

communities, it needs to be a fir11 participant in creating the conditions that make lending 

possible. This includes not just indirect job creation through consumer and business lending, it 

also means direct job creation. The disproportionate closing of branches in low income 

Communities and the refusal to open new ones impacts the joblessness and spending rates in 

these communities and results in stagnant local economies. We all know banks need robust 

economies in order to reinvest. They must then participate in the process fully.. 

3) BankAmerica Foundation has long been a contributor to our organization, and in particular 

their contributions have supported our economic development program which works with small 

businesses, child care providers and local contractors. Through their generosity we have 

provided technical assistance, loan packaging and monitoring, financial management workshops 

xd one-on-one counseling to local merchants. We work with the business population that has 

traditionally been under-served by major financial institutions, the small morn and pop stores. 

BankAmerica has also launched its Community Access Initiative in six locations including East 

Palo Alto. I am encouraged to here that the combined giving ofBankAmerica and NationsBank 

will exceed $100 million, yet I am unclear as to what the commitment to California will be. I 

truly expect that the Community Access Initiative will remain in place and that support given to 

community-based organizations will continue to increase in the l?nure. 

We do not support the proposed merger of NationsBank with Bank of America unless the 

Federal Reserve requires them to clearly define their strategy for reaching low income 

communities whose deposits they hold, We believe this is the only way the unscrupulous, 

6nregulated financial system that is currently the reality in low income communities will 

disappear. Additionally, we want NationsBank and Bank of America to commit specifically to 

open fully staffed branches in East Palo Alto and other low income communities 
Yours truly, 

Executive Director 

1) 

2) 

3) 

4) 

In as much as this merger represents a threat to the use of the Community 

development Bank as method for doing CRA, we are opposed. 

In as much as this merger represents a movement by the merged bank 

away from recognizing and validating the crucial benefits of forming 

specific local partnerships to eradicate disinvestment, we are opposed. 

In as much as this merger represents the potential for higher fees for home 

loans, for checking accounts, for check cashing services, for small 

business loans, and for other basic banking services, we are opposed. 

In as much as this merger represents increased costs, lintitations in 

services, increased interest and fee rates for micro and small business 

borrowers, we are opposed. 

In addition to these concerns and objection I would like to highlight some specific issues 

with the performance of the Bank of America in the San Diego regio,n and seek redress in 

this merger process. As we stated the Community Development Bank has exhibited 

stellar performance in its stated goal. What has been missing with the Bank has been the 

recognition in the mainstream bank that it too has reposnsibility for implementing CRA 

investment. For example; 

Of the top ten home mortgage lenders in the San Diego market there is an annual 

rejection rate over a period of five years, for African American borrowers of about 22%. 

Overall this rate is higher than rejection rates for other ethnic groups and for Caucasians. 

This ratio of rejection is basically duplicated in older, lower income communities. But 

this high rate is exceeded by the Bank of America consistently. On average over five 

years the bank of America shows a 40% rejection rate for this population This is almost 

twice the rate of other lenders. It is a striking statistic. What lending policies of Nations 

Bank will mitigate this problem? 

The Bank of America has shown a consistent decline in its level of home mortgage 

lending in minority communities under 120% of median income between the years of 

1992 and 1996. Though the Bank of America is always one of the top ten lenders in this 

market if they are compared with their peers (e.g.) Home Savings, GreatWestern, 

American, their market share has shown regular decline or sporadic behavior at best. 

(attachment 4). 

On small business lending, of course, we do not have a full statistical accounting as yet. 

The experience of the RTF is defined by a number of small business credit needs 

assessments in lower income communities throughout the county. In some cases the Bank 

of America is the primary lender in terms of branch locations, a fact we would applaud 

them for and encourage to continue. However, in these neighborhoods, with thousands of 

small businesses, we find a consistent and overwhelming experience of dramatically 

higher levels of rejection on small business loan applications than in other communities 
c ’ 

or in comparison with national and state averages (see attachment 5). We encourage a 

serious look by the regulators at the small business lending statistics of both Nations and 

the Bank of America before approving this merger. 

Finally, we are concerned that the size of this merger and the potential arrogance that it 

may engender in its corporate culture has been recently experienced by the reinvestment 

task Force in our efforts to dialogue with the two institutions regarding the continuation 

of the 1992 Bank of America Reinvestment Strategy for San Diego. Key personally from 

both banks attended as did key players in the affordable housing and economic 

development communities. When asked to validate, update and continue the San Diego 

plan we were told that they did not have time to do so at this point. How does the local 

community interpret this? A simple analysis says that they are too big to deal with local 

issues. There is no link between Charlotte North Carolina and San Diego and certainly 

there is not time in the context of such a major merger to respond to a single counties 

credit need a and efforts to obliterate disinvestment in its communities. 

The RTF has nine agreements with the major lenders, mostly all being California based 

institutions. In our first encounter with a national bank we are told they do not have 

time. This experience provides us with a metaphor for the future. It may be that 

eventually, they may not have time for the Federal Reserve Bank either (see 

Travelers/Citicorp merger and Office of Thrift Supervision). 
ATTACHMENT 1 
,’ : 

-‘ ‘1.: 

I 

! 

ICOMMUNITY REINVESTMENT MASTER PLAN 

BACKGROUND 

i 

KxtcY 

U”“BER 900-O 9 I 

Lending institutions, through their credit practices and'the 

banking services they provide, play an essential role in 

maintaining healthy businesses and community institutions and 

promoting savings by and providing jobs and affordable housing for 

San Diego Residents. 

Banks are granted a public charter conveying numerous economic 

benefits for which they must in return serve a public purpose. 

Federally regulated financial institutions are required to comply 

with the Federal Community Reinvestment Act of 1977 (CRA). CP.A 

requires that financial institutions act affirmatiyeIy to meet 

their local communities' 

granted a charter. 

banking needs as a condition of being 

Local government is uniquely able to identify specific community 

deposit and credit needs and is a major consumer of banking 

services. The City of San Diego can encourage banking practices 

and programs which are responsive to community needs and support 

community-based organizations in establishing positive working 

relationships with local banks within the context of CPA. 

PURPOSE 

It is the purpose of this policy that the City encourage lending 

practices and programs that promote the economic stability and 

growth of the City of San Diego and meet the credit and banking 

services needs of all of its neighborhoods and residents. 

POLICY 

It shall be the policy of the City to encourage each lender doing 

business within its boundaries to develop and implement a San 

Diego-specific community reinvestment program consisfent with CRA. 

Such a program may include, but need not be limited to, the 

following reinvestment activities. 

P Affordable single-family and multi-family residential mortgage 

new construction and rehabilitation lending, especially to 

nonprofit organizations and to women, minorities and low- and 

moderate-income persons; 

0 Consumer lending and checking and deposit services, especially 

to women, minorities and low- and moderate-income Persons and 

neighborhoods; 
COUNTY OF SAN DIEGO, CALIFORNIA 

BOARD OF SUPERVISORS POLICY 

Subject Policy 

County Community Reinvestment Policy Number 

A-177 

Backoround 

T-- Page 

Lending institutions, through their credit practices and the banking services they provide, play an 

essential role in maintaining healthy businesses and community institutions and promoting savings 

by and providing jobs and affordable housing for San Diego residents. 

Banks are granted a public charter conveying numerous economic benefrts for which they must in 

return serve a public purpose. Federally regulated financial institutionsare required to comply with 

the Federal Community Reinvestment Ad of 1977 (CRA). CRA requires that financial institutions 

act affirmatively to meet their local communities’ banking needs as a condition of being granted a 

charter. 

Local government is uniquely able to identify specific community deposit and credit needs and is a 

major co&umer of banking services. The County of San Diego can encourage banking practices 

and programs which are responsive to community needs and support community-based 

organizations in establishing positive working relationships with local banks within the context of 

cm 

Puroose 

it is the purpose of this policy that the County encourage lending practices and programs that 

promote the economic stability and growth of the County of San Diego and meet the credit and 

banking services needs of all of its neighborhoods and residents. 

It shall be the policy of the County to encourage each lender doing business within its boundaries 

to develop and implement a San Diegospetic community reinvestment program consistent with 

CRA. Such a program may include, but need not be limited to the following reinvestment 

activities. 

Affordable single-family and mufti-family residential mortgage, new construction and 

rehabilitation lending, especially to nonprofit organizations and to women, minorities and 

low- and moderate-income persons; 

Consumer lending and checking and deposit services, especially to women, minorities ant 

low- and moderate-income persons and neighborhoods; 

Small business and commercial lending, especially to women, minorities and low- am 

moderate-income persons and neighborhoods; 

Financial participation in County housing, redevelopment, revitalization and economic 

development projects; 
ATTACHMENT 2 
BANKAMERICA'S C~MMUNITV REINVESTMENT ACT PLAN 

SAN DIEGO COUNTY 

JANUARY 1992 

. 
Bar&America's Community Reinvestment Act Plan 

San Diego County 

January 1992 

I. INTRODUCTION 

1 

Described below are the elements of a San Diego - specific Community 

Reinvestment Act Plan for Bank of America National Trust and Savings 

Association both before and after its merger with Security Pacific 

National Bank.' This plan is intended to meet the intent of the City 

of San Diego's Council Policy #900-g. 

We believe the request of the City and the County of San Diego and their 

various constituents for a description of BankAmerica's planned CRA 

activities, as they address the City's and County's needs, is a sincere 

attempt to enhance the availability of credit for lower-income and 

ethnic communities in the San Diego area. 

*BankAmerica has developed this plan based on many interactions with 

representatives of various constituents over the years. We particularly 

recognize the work of the groups convened by the City of San Diego and 

City/County Reinvestment Task Force in providing us with valuable input 

for this plan. 

We hope that the City and County and its various constituents will 

recognize that Bank of America, as a statewide financial institution, by 

its nature brings a different set of resources than local institutions, 

and that there is a strong value to these. We also hope they will 

recognize that as an institution with a single but diverse delineated 

community, the State of California, for CRA purposes, we must provide a 

consistent approach to CRA activities. While this may mean less 

flexibility in some ways, it also means the availability of specialized 

skills, economies of scale, and the ability to do larger transactions 

that smaller, locally-headquartered institutions cannot provide. We 

believe our programs and activities add significant value to the role 

financial institutions as a group play in the San Diego Community. 

We also hope the City and County and their various constituents will 

recognize that setting San Diego-specific dollar goals for lending 

programs presents us difficulty. Based on discussions with community 

groups and coalitions of groups throughout the state, we set dollar 

goals for our single community, the State of California. It is 

administratively difficult to subdivide and monitor these goals for the 

many localities that wish us to set individualized goals. Even more 

important, subdivision of the goals works against our ability to focus 

our resources on needs and take advantage of opportunities where they 

are the greatest. Our experience has shown that there are many 

variables in assessing community credit needs -- market conditions, 

specific needs in different areas, the capacity of nonprofits to support 

projects, to name a few. We believe an effective statewide CRA program 

For sake of clarity, we refer herein to the pre-merger bank as "Bank of 

America NT&SA" and the post-merger bank as "Bank of America". 
including Bank of America NT&SA, when reviewing certain applications submitted by the Corporation. 

We view the City and County of San Diego and their various 

constituents as partners helping us to determine local credit 

needs, providing comments and input on our CRA program, and in 

many cases helping us to meet local credit needs. 

C. CRA Proqram Goal. Bank of America, along with other banking 

subsidiaries of BankAmerica: has a goal of achieving and maintaining an "outstanding" rating for CRA performance. It currently 

has a rating of "outstanding". Bank of America State Bank, the 

Bank's community development affiliate, also has a rating of 

"outstanding" from its regulatory agency, the Federal Deposition 

Insurance Corporation (FDIC). 

D. Delineated Community. Bank of America NT&SA has a single 

delineated community, the entire State of California. Bank of 

America NT&SA serves California through its branches located in 

. 

over 800 neighborhoods and cities. An important value Bank of 

America NT&SA brings to each of these neighborhoods and communities is the ability to provide resources and specialized 

expertise for local needs that local institutions may not have the 

capacity to provide. 

We will continue to strive to distribute our resources equitably 

throughout our delineated community, but our ability to do so is 

affected by competitive factors, the availability of resources, 

local capacity, and local economic conditions. Further, we will 

take affirmative steps to distribute credit, help build capacity, 

and create partnerships where there is both a need and a local 

willingness to make that happen. 

E. Existinq CRA Goals. In order to maintain its rating of "outstanding" in CRA performance, Bank of America NT&SA has in place 

a plan for its entire CRA community. This plan is "localized" 

through internal goals for operating units conducting CRA 

activities for geographic areas throughout the community. 

As part of its existing CRA Plan, Bank of America NT&SA is working 

against a lo-year $5 billion goal for specialized CRA lending. 

This current goal includes on average annually: 

. $400 million in home loans in low income census tracts. 

. $50 million in loans for development of low- and very lowincome housing. 

. $40 million in SBA and other government-guaranteed small 

business lending. 

. $8 million in consumer loans to low-income consumers using 

the B.A.S.1.C program. 
lending (loans between $50,000 and S500,000), governmentguaranteed student loans, and financing for government entities. 

In order to accomplish the overall CRA goals the new BankAmerica 

has set for itself, CRA-specific targets within those goals will 

be set based on communication with community representatives 

regarding the nature of credit needs, ways to meet those needs, 

and performance in meeting the needs. 

III. BANK OF AMERICA'S CRA PROGRAM AND SAN DIEGO COUNTY 

Bank of America NT&SA's CRA Program relates to San Diego County as 

follows: 

A. Delineated Community. San Diego is a significant portion of Bank 

of America NT&SA's single delineated community. Bank of America 

NT&SA intends to continue the full range of banking services to 

the entire community, notwithstanding mergers, consolidations, 

acquisitions, headquarters location, and opening and closing of 

. branches. 

B. Ascertaininq Communitv Credit Needs. Bank of America NT&SA 

maintains, and will continue to maintain, an active program for 

ascertaining community credit needs. The cornerstone of this 

program is an annual Needs Assessment Calling Program conducted by 

two CRA Calling Teams covering San Diego County. In 1989, these 

teams made 82 calls and in 1990 they made 63 calls. For the year 

1991, through October, 84 calls were made. See Exhibit I for a 

list of organizations called on. These calls have resulted in a 

description of credit needs for each of the Calling Team's 

respective geographic areas, which in turn feed into the description of the needs in Bank of America NT&SA's entire local 

community. Beginning in 1990, combined Needs Assessment and 

Marketing Calls were made by Bank of America State Bank officers 

and their input has helped identify San Diego County credit needs. 

Their calls (1990 and 1991 year-to-date) are also included in 

Exhibit I. 

The needs assessment program for the merged institutions in San 

Diego County will consist of the following elements: 

. Continued calls made by Calling Teams. Bank of America 

NT&SA maintains internal goals for its call program, and the 

goals for the merged institution will be at least as large 

as existed prior to the merger. 

. Continued calls by Bank of America State Bank officers. 

. Review of any special needs assessments, including those 

completed by the Federal Reserve Bank, SEDC, and the City or 

other public entity. 

. Regular meetings with the representatives described later in 

this document in Section III (M). 
including the one in San Diego. Using the $100 million goal as a 

reference, Bank of America and Bank of America State Bank will 

strive to originate loans in the City and County of San Diego at 

a level commensurate with the size and level of needs in the City 

and County relative to our total local community. However, our 

ability to do so will depend on, among other things, competitive 

factors, availability of public sector and charitable support for 

local projects and local capacity to develop low-and very lowincome housing. Another factor is the long lead times required 

for many deals to come to fruition. 

For this type of financing, we tailor our underwriting to meet the 

specifics of each transaction. 

Programs currently offered by Bank of America State Bank and Bank 

of America NT&SA in San Diego County include: 

. Construction and rehabilitation loans for new and rehabili- 

'tated units of low-and very low-income housing. 

. Resident motivated mobilehome park cony,ersions. 

. Site and acquisition financing for nonprofit developers of 

low-income housing projects. 

. Government-assisted loan placements such as HUD- and Fannie 

Mae-insured mortgages. 

. Participation in long-term financing provided by the 

California Community Reinvestment Corporation. 

As of the time of writing, our activity in San Diego County during 

1990 and 1991 has resulted in the following: 

. In 1990, a $4,000,000 loan closed for resident purchase of 

a 143 space mobilehome park in Vista. 42,993,OOO of the 

loan amount was allocated to low- and very low-income units. 

. In 1990, we also issued a S3,000,000 construction loan 

commitment for a 68-unit project in Southeast San Diego. 

20% of the units would have been for low-income. 

. Also in 1990, a $80,000 loan to Casa Familiar in San Vsidro 

was closed with all funds allocated for low-income housing. 

. In 1991, a 44,078,OOO loan for a multi-unit rental property 

in National City was closed. Of this amount, $3,842,000 was 

allocated to very low-income units and $236,000 was allocated to low-income units. 

. During 1991, we have made commitments to finance the 

following projects: 
There is no minimum loan size and applicants will not be 

disqualified due to lack of a credit bureau history provided 

they can demonstrate an ability and willingness to repay 

obligations through other verifiable records such as rent 

receipts, utility payments, and savings records. 

2. To Minoritv Borrowers. In August 1990, Bank of America 

NT&SA retained a private consultant to conduct an analysis 

of its 1989 Home Mortgage Disclosure Act Report. The 

consultant finished the analysis in October 1990. As a 

result, Bank of America NT&SA initiated a number of steps to 

increase the level of applications from minority applicants 

and the number of approvals for minority applicants. 

These steps include: 

. Creation of a new review process for real estate loan 

applications involving minority applicants and/or 

applicants in lower-income census tracts. If the 

original underwriter in the Residential Loan Center 

"RLC" does not approve the application, it is passed 

to a senior officer at the RLC for another review. If 

a decline is recommended at that level, it is forwarded to corporate underwriting officers at the San 

Francisco headquarters. Bank of America NT&SA has 

allocated a special $30 million fund for loans of this 

type that do not meet even the liberalized underwriting guidelines of Neighborhood Advantage, the home 

loan program for low-income areas. This review 

process is helping Bank of America NT&SA become more 

aware of why the loans are not approved at the field 

level, enabling it to take steps where appropriate to 

modify the credit review process. 

. Creation of a new production staff to focus exclusively on originating home loans to low-income and 

minority customers through realty channels, in 

addition to originations through branches and wholesale mortgage brokers. 

. Increasing financial incentives for loan officers to 

make creditworthy loans in lower-income areas. 

. Modifying Neighborhood Advantage to allow down 

payments as low as five percent on selected loans for 

property in lower-income areas and, for a limited 

time, waiver of non-recurring closing costs and fee 

reductions on fixed rate loans in lower-income areas. 

. Development of affirmative marketing programs, 

including Spanish-language advertising and bilingual 

services at selected branches and future plans to 

target marketing to other minority communities. 

. Increased recruitment of minority loan officers. 

-9 
1. The B.A.S.1.C Proqram. This program is available only to 

households that earn 80% of less of the area median income 

as calculated by the United States Department of Housing and 

Urban Development. For San Diego County residents, we use 

these income calculations as reported for San Diego County 

by the State Department of Housing and Community 

Development. 

The program makes available auto loans, personal loans, 

manufactured housing (mobilehome) purchase loans, and home 

equity loans, including home improvement purpose loans. The 

B.A.S.1.C program allows longer maturities than available 

with conventional loans in order to reduce monthly payment 

amounts. Minimum loan sizes are smaller than for conventional products, e.g., the minimum 'loan size for a 

personal loan is $1,000 instead of $2,500. Applicants will 

not be disqualified due to a lack of a credit bureau history 

provided they can demonstrate an ability and willingness to 

repay obligations through other verifiable records such as 

rent receipts and utility bills. 

2 Home Improvement. Personal and home equity loans and lines 

of credit may be obtained for home improvement purposes. Of 

special note, the B.A.S.1.C program (described above) home 

equity loan provides home equity and personal loans for home 

improvement purposes. During 1990, 188 home improvement 

purpose loans and lines of credit were extended in San Diego 

County low income census tracts. 

3. Participation in Local Government Proqrams. Following the 

merqer, we will have the caoacitv to participate in local 

government programs that leverage federal and local funds 

for home improvement or rehabilitation purposes. At that 

time, we would welcome discussions with the County of San 

Diego, the City of San Diego, and other municipalities 

within the County regarding our participation in such 

programs. 

H. Small Business and Economic Develoament 

1. Goals. As described above, BankAmerica has set a goal of 

average annual originations totalling $200 million of 

conventional small business loans of less than $50,000. It 

has also set a goal of at least $100 million on average 

annually in government guaranteed and other special programs 

for small and micro businesses. These goals apply to the 

delineated communities of BankAmerica subsidiaries throughout the western states. Approximately two-thirds of the 

goals will be allocated to California. Using these goals as 

a reference, Bank of America NTSSA, prior to the merger, and 

Bank of America, following the merger, along with Bank of 

America State Bank will strive, on an ongoing basis, to 

originate loans in San Diego County at a level commensurate 

with the size of and level of needs in San Diego City and 

County relative to our total local community. However, our 

-11. 
5. Reliqious Orqanizations. Loan applications from churches 

often present unique characteristics that are difficult for 

financial institutions to evaluate. We are willing to 

discuss this issue under the provisions of Section III. N. 

as described on page 13. 

6. Small Business Incubators. Small business incubators are a 

relatively new concept for providing a comprehensive set of 

services designed to foster small business development. We 

believe the incubator concept has a high level of potential 

for small business start-up, development, and growth. We 

also believe support of small business incubators enhances 

our broader role in financing small businesses and other 

economic development projects. We intend to continue our 

support for the activities of the San‘ Diego Incubator 

Corporation and other incubators provided they continue to 

show strong potential and to achieve significant results. 

I. Use of Charitable Funds. BankAmerica's philanthropic arm, 

. BankAmerica Foundation, will continue to use contributions and 

grants to enhance its CRA program. Grants and contributions to 

support nonprofits active in housing and economic development are 

relevant to CRA. We will allocate an amount equal to 10% of 

BankAmerica Foundation's budget or $1 million, whichever is 

greater, to support these activities within the delineated 

communities of BankAmerica's banking subsidiaries. Using this 

allocation as a reference, we will provide, on an ongoing basis, 

charitable support to housing and economic development nonprofits 

providing services to San Diego County at a level commensurate 

with the size of and level of need in San Diego City and County 

relative to our total local community. 

During 1990 and 1991, we pursued a strategy of building capacity 

within San Diego nonprofits involved in the production of low- and 

very low-income housing. During this period, examples of our 

support include a $100,000 commitment needed to help bring Local 

Initiatives Support Corporation “LISC” to San Diego. We also 

provide LISC, the California Housing Partnership, and the San 

Diego Housing Federation free office space, furniture, and 

equipment on an on-going basis. During 1990 and 1991, we helped 

sponsor four San Diego County nonprofit staff persons as National 

Interns at the Development Training Institute in Baltimore to 

enhance housing development skills. 

We use written guidelines for support of housing and economic 

development. Currently, our areas of interest are capacitybuilding, project support, and support for organizations dedicated 

to increasing resources available to community-based development 

organizations. We will continue to use written guidelines, and a 

copy of the current guidelines is attached as Exhibit 2. 

We will consider San Diego a priority areas for capacity-building 

grants during 1992. 
community. We believe you already recognize that there is 

no easy solution, and that the responsibility for providing 

banking services to underserved areas throughout our 

marketplace (the State of California) is not solely the 

responsibility of any single institution. We believe we 

have more branches in low-income and high minority areas 

than nay other institution in the State, and will continue 

to do so after the merger. We hope you will also recognize 

that even after the merger, we will not be the largest 

financial institution in San Diego County. 

Our intent is the ensure that the level of service to lower-income 

areas and minority dominant areas is not reduced by the merger. 

The immediate concern of the merger is around'consolidation of 

duplicate branch locations and the divestiture of branches to 

address competitive concerns. It is premature to discuss the 

opening of new branch locations, however, we will commit to 

exploring options for Southeast San Diego, including options with 

. providers of other consumer services. 

,' 

L. Low-Cost Checkinq and Other Bankino Services. Bank of America 

NT&SA's Limited Checking Account was designed to meet the needs of 

lower-income customers. For $3.50 a month, no minimum balance, 

and a minimum opening deposit of only $25, customers have full 

access to our services. Not only do they have a checking account, 

but they receive a VERSATEL card, the ability to cash checks, 

withdraw funds, and make deposits at any branch. A full product 

description of Limited Checking is attached as Exhibit 3. 

Following the merger, Bank of America anticipates increasing the 

number of checks honored without charge each month from 8 to 10. 

Bank of America NT&SA offers free check cashing to all depositors. 

We will continue to charge market rates for cashing checks for 

non-customers. We believe that promoting banking relationships is 

in the best interest of our community, including San Diego County, 

and that the low cost of Limited Checking makes it affordable to 

everyone. 

We are willing to discuss with the appropriate public officials, 

and to seriously consider, a program for direct deposit of public 

assistance checks. 

M. Traininq. Bank of America will provide training to its staff 

sufficient for the successful carrying out of our CRA plan. 

N. Reqular Meetinqs. Bank of America NT&SA and Bank of America, as 

well as Bank of America State Bank, welcome the opportunity to 

meet regularly with a committee of representatives of the San 

Diego City and County agencies, including nonprofits and religious 

organizations, to discuss in good faith our progress toward 

meeting local credit needs. We will provide this committee with 

publicly available information regarding performance in San Diego 

County. We are willing to discuss at those meetings the progress 

of our CRA program including specific lending products and 

-15. 
1. 

2. 

3. 

4. 

5. 

6. 

7. 

Bank of America NTbSA/Rank of America State Bank' 

San Diego County, 

CRA Activity Contacts 

As of December 31. 1991 

Senior Officer Responsible for CRA Activities 

Larry Knutson 

Senior Vice President & Region Manager 

(619) 230-5100 

Affordable Multi-Family Housing 

Mitch Thompson 

Vice president 

Bank of America 

(619) 230-5421 

Government-Guaranteed 

Rod Maldonado 

Vice President 

. Bank of America 

(619) 230-6183 

State Bank 

Small Business Loans 

State Bank 

Conventional Small Business Loans 

Jose Vale2 

Vice President and District Manager 

(619) 588-3701 

Fred Baranowski 

Vice President and Manager, Consumer Banking Services 

(619) 230-5200 

Single Family Home Loans Including Neighborhood Advantage 

Norm Austin 

Vice President 

(619) 230-5010 

Consumer Loans Including Home Improvement and 6.A.S.I.C Loans 

Norm Austin 

Vice President 

(619) 230-5010 

Retail Deposit Services Including Limited Checking 

Judy Maudsley 

Vice President and District Manager 

(619) 230-5111 

-17. 
AN ANALYSIS OF HOME 

MORTGAGE DISCLOSURE ACT 

LENDING DATA 

: 

FROM 1992-1996 

Written and Researched by 

David Oddo 

March, 1998 
‘_ 

STUDY SUMMARY 

This study compared home loan denial rates for African American and white applicants in 

San Diego County between 1992 and 1996. 

Ten lending institutions were surveyed: American Savings Bank, Bank of America, 

Downey Savings and Loan, Glendale Federal Bank, Great Western Bank Grossmont Bank, 

Home Savings, Union Bank, Wells Fargo and World Savings and Loan. 

-_a 

The study only looked at conventional (non-government insured) home purchase loans on 

1-4 unit family dwellings in San Diego County Tom 1992 to 1996. 

KEY FINDINGS OF THE STUDY INCLUDE: 

*** 

*** 

**t 

*** 

**+ 

*** 

In 1996 (the most recent year for which data is availabE)< African American loan 

applications were, on average, 2.87 times more likely to be turned down than 

white applicants. This represents a SO percent increase over 1992, when African 

Americans were only 1.91 times more likely to be turned down than white 

applicants. 

Even when the income levels of the borrower were the same, At&an American 

loan applicants were still turned down more often than whites in 1996. For 

example, upper income (those with incomes of greater than 120 percent of the area 

median) A&can American loan applicants at Great Western Bank were turned 

down 3 times more frequently than upper income white loan applicants in 1996. 

At Union Bank in 1996, low income (those with incomes of less than 80 percent of 

the area median) A&ican American loan applicants were turned down 5.36 times 

more frequently than low income white loan applicants. 

In 1996, only 1.64 percent of ah the loan applications received by the 10 lending 

institutions were submitted by African Americans. This represents a 12.3 percent 

drop in such applications compared to 1992, when 1.87 percent ofall applications 

received 6om the 10 lenders came from African Americans. 

In terms of loans actually granted to AtXcan Americans, the numbers are worse. 

In 1992, the 10 lenders granted 127 conventional home purchase loans to African 

Americans, or 1.62 percent of their total. In 1996, these same 10 lenders granted 

only 70 such loans to Atiican Americans, or 1.2 percent of their total -- a decrease 

of nearly 26 percent compared to 1992. 

According to 1990 census data (provided by the San Diego Association of 

Governments), African Americans represent 6 percent of the total population of 

San Diego County. 
*t* 

*** 

*** 

Union Bank had the best record of &tra.cting loan applications Tom .&ican 

Americans in 1996. Nearly 4 percent of alI their conventional home purehase loan 

applications in San Diego County were submitted by A&ican Americans. 

Grossmont Bank had the worst record of attracting loan applications. from A&&n 

Americans in 1996. Out of 122 total conventional home purchase loan 

applications in San Diego County, none were submitted by African Americans. 

Glendale Federal Bank took in only two applications from African Americans in 

1996, out of a total of 208. _ >~ 

Union Bank had the worst record in terms of denying loan applications from 

African Americans relative to white applicants. In 1996,42.86 percent of Afi-&n 

American applicants were rejected, compared to 8.2 percent of white applicants, a 

ratio of more than 5 to 1. 

AU lending and loan denial data for this study was provided byihe.Federal Financial 

Institutions Examination Councii and the 10 lending institutions surveyed, under terms of the 

Federal Home Mortgage Disclosure Act of 1975. This law requires financial institutions to 

publicly disclose detailed data on their mortgage Lending activity every year; such as the number 

and type of housing loan applications by census tract, and by the race, income, and sex of the 

borrower. By law, institutions must indicate whether the applications taken in were approved or 

denied and the amount of the loan. 
PART I Combined Africandmerican Conventional Home Purchase Loan Applications, 

Originations, and Denial Ratios of All Ten Lenders Surveyed - 

San Diego County 1992 and 1996 

1992 1996 .~. _.A-== 

County-wide Total 11,698 8,807 

From African-Americans 219 (1.87% of total) 144 (1.64% of total) 

Percentage of change in African-Amedcan Applications: -12.3% ’ 

Number Of Loans Originated (Granted) 

County-wide iota1 

1992 1996 

7,843 5.831 

To African-Americans 127 (1.62% of total) 70 (1.2% uf total) $,.’ 

Percentage of Change in African-American Loans: -25.93% 

Average Disparity In Denial Ratios Between African-Americans and White Applicants 

[In 1992, African-American applicants [In 1996. African-American applicants 

were turned down 1.91 times mote often were turned down 2.87 times more often 

than white applicants.] than white applicants.] 

Percentage of Change in Disparity in Denial Ratios: + 50.26% 

‘Notes: 

Even when the income level of the borrower was the same, African-Americans 

were still turned down more often than whites in 1996. 

[Only those loans on 1 to 4 unit family dwellings were counted.] 

According to 1990 census data provided by the San Diego Association of 

Governments, African-Americans make up 6% of San Diego county’s population. 

The 10 lenderr: 

American Savings Bank 

Bank of America 

Downey Savings and Loan 

Glendale Federal Bank 

Great Western Bank 

Grossmont Bank 

Home Savings 

Union Bank 

Wells Fargo Bank 

World Savings and Loan 
PART I Combined AfricanAmerican Conventional Home Purchase Loan Applications, 

(confd) Originations, and Denial Ratios of All Ten Lenders Surveyed - 

San Diego County 1992 and 1996 

Sources for lending data: Table 4-2 of each lender’s 19921996 “Home Mortgage Disclosure 

Ad’ statements for San Diego county. and the Federal Financial 

Institutions Examination Council (FFIEC). 

.a 

Notes: A”conventional’ loan is one that is not insured by the federal government Therefore, 

the risk is carried by the individual lending Institution. 

The number of loans oriainatad means the number of loans actually aranted by a particular 

lending instiiution. 

1996 is the most recent year for which lending data was available. For Wells Farao Bank_ 

1995 was the most recent year for which data was available. 1995 was the last year in which 

they made home loans directly. They now make home loans through a joint venture with a 

mortgage company. 
PART II Denial Rates on Conventional Home Purchase Loan Applications for Whites and 

African-Americans In San Diego County, 1992-1996 (All Income levels)-Minimum 5 applicants 

-Loans on I to 4 unit family dwellings 

Financial Institution 1992 1993 1994 1995 1996 

American Savings Bank 

Whites: 19% 19.76% 16.44% -l.ld9% 12.08% 

African-Americans: 28.57% 31.25% 32.14% 43.75% 24.14% 

Disparity Ratio: 1.51 1.58:l 1.95:1 3.91:1 2:1 

(Note: A disparity ratio of 1.5:l means that African-Americans were denied ldans 

1.5 times more often than white applicants.] “Conventionar’ means that the loan 

Is not insured by the federal government and the lender carries the risk 

Bank ofAmeri& 

Whites: 22.98% 26.15% 18.90% 17.87% 16.14% 

Aftican-Americans: 40.24% 47.50% 24.32% a’.’ 44% 46.15% 

Disparity Ratio: 1.75:1 1.82:1 1.29:1 2.46:l 2.86:1 

Downey Savings and Loan 

Whites: 30.95% 32.88% 14.67% 29.66% 17.89% 

African-Americans: I’1 I’) 0% 2 ApPl. 4 ApPf. 

Disparity Ratio: 0:1 

I’) No Applications Submitted 

Glendale Federal Bank 

[ 

Whites: 

African-Americans: 

Disparity Ratio: 

34.38% 

[‘I 

22.86% 12.04% 20.75% 19.44% 

1 ApPl. 3 ApPl. 3 &PI. 2 ApPl. 

[‘) No Applications Submitted 

Great Western Bank 

Whites: 22.87% 18% 11.16% 14.43% 14.33% 

African-Americans: 36.10% 33.30% 25.80% 25% 43.75% 

Disparity Ratio: 1.58:1 1.85:1 2.3:1 1.73:1 3.051 

Grossmont Bank 

Whites: 52.94% 32.81% 2256 20.19% 12.82% 

Afrfcan-Americans: [‘I [‘I 1 &PI. 40% [‘I 

Disparity Ratio: 1.98:1~ 

[‘) No Applications Submitted 
PART II Denial Rates on Conventional Home Purchase Loan Applications for Whites and 

(aM’9 African-Americans In San Diego County, 1992-1996 (All income levels)-Minimum 5 applicants 

-Loans on 1 to 4 unit family dwellings 

Financial Institution 1992 1993 1994 1995 1996 

Home Savings 

Whites: 8.60% 9.48% 8.70% -1242% 11.90% 

African-Americans: 16.67% 17.10% 19.10% 32.60% 25% 

Disparity Ratio: 1.94:i 1.8:l 2.2:1 2.62:1 2.1:1 

Union Bank : 

Whites: 12.60% 13.30% 14.81% 8.76% 8.20% 

African-Americans: 3 &PI. 42.86% 57.14% 25% 42.86% 

Disp.arity Ratio: 3.2:1 3.86:1 2.85:1 5.23:l 

Note: At Union Bank. African-American applicants were turned down 

5.23 times more o&n than white applicants in f996. This is th& 

highest disparity in denial&es of a// the lenders Surveyed. 

Wells Fargo Bank 

Whites: 

African-Americans: 

Disparity Ratio: 

World Savings and Loan 

52.53% 

66.67% 

1.27:i 

38.59% 26.02% 26.13% 

28.57% 47.06% 3 ApPl. 

.74:1 1.81:1 

Whites: 10.66% 8.80% 8.44% 11.20% 10% 

African-Americans: 36.36% 28.57% 35.71% 10% 20% 

Disparity Ratio: 3.41:1 3.25:1 4.23:1 .89:1 2:1 

Average denial disparity ratio between African-American and white loan applicants: 

1992) 1.91:1 

1996) 2.87~1 

In 1992. African-Americans were (on average) 1.91 times more likely to be turned down for a 

home loan than whites. In 1996, African-Americans Were (on average) 2.87 times more likely 

to be turned down for a conventional home purchase loan than vMtes. a 50.26% increase 

over 1992. 

Sources for lending data: Table 4-2 of each lend& 1992-1996 “Home Modgage Disclosure 

Ad’ statements for San Diego county. and the Federal Finandal 

Institutions Examination Council (FFIEC). 

Note: 1996 is the most recent year for which information is available. 1995 was the last 

yearWells Fargo offered home loans. 
PART III 1996 Denial Rates on Conventional Home Purchase Loans When Borrower ;ncome 

Levels are the Same : Loans on 1 to 4 Unit Family Dwellings (mlnlmum 5 applications) 

Financial Institution “Low Income f3orw.vers “UppeP Income Borrowem 

American Savings Bank 

Whites: 14.29% 10.98% - - 

African-Americans: 60% 15.38% 

Disparity Ratio: 4.2:i I.411 

Bank of America : 

whines: 26.36% 11.64% 

African-Americans: 3 APPI. 33.30% 

Dkparity Ratio: 2.86:1 

Lbwney Savings and Loan 

.’ 

Whites: 15.22% 15.71%’ 

Aftican-Americans: 2 Appl. 1 Appl. 

Glendale Federal Bank 

Whhes: 26.67% 15.12% 

African-Americans: 2 Appl. 0 App1. 

Great Western Bank 

Whites: 20.24% 12.34% 

Aftican-Americans: 63.64% 38.46% 

Disparity Ratio: 3.14:1 3.12:l 

Grossmont Bank 

Whites: 35% 4.44% 

African-Americans: 0 ApPl. 0 ApPl. I 

Home Savings 

Whites: 18.45% 9.13% 

African-Americans: 60% 20% 

Disparity Ratio: 2.71~1 219:1 

Union Bank 

Whites: 8.47% 6.80% 

African-Americans: 45.45% 3 &pi. 

Disparity Ratio: 5321 
PART 111 1996 Denial Rates on Conventional Home Purchase Loans When Borrower Income 

(cont’d) Levels are the Same : Loans on 1 to 4 Unit Family Dwellings (minimum 5 applications) 

Financial Institution *‘Low income Eorrowerj “Uppe? Income Borrowers 

Wells Fargo (1995 d&a) 

Whites: 50% 17.19% 

African-Americans: 1 Appl. OAppl. _ I 

World Savings and Loan 

Whites: 14.89% 9.87% 

African-Americans: 3 ApPl. 28.57% ’ 

Disparity Ratio: 2.89:1 

- 

Note: Four lending institutions denied low income African-American jban applicants more 

frequently than low income white applicants: American Savings, Great Western Bank, 

Home Savings and Union Bank Also, 5 lending institutions denied upper income 

African-American loan applicants mere frequently than upper income white loan 

applicants: American Savings. Bank of America. Great Western, Home Savings and 

World Savings and Loan. 

Sources: Table 5-2 of each lender’s 1996 Home Mortgage Disclosure Act Statements for 

San Diego County and the Federal Financial Institutions Examination Council (FFIEC). 

“Low Income”: 0 - 80% of area median income ($38,880 or less) 

“Upper Income”: 120% or more than area median income ($58,320 or more) 

According to the US Department of Housing and Urban Development (HUD), the 1996 

San Diego County median income (for a family of 4) was $48.600. 

The term “median” means that 50% are above that level and 50% are below that level 

(Note: HUD sets the limits for the various income levels.) 
‘: 

PART IV Conventional Home Purchase Loan Applications in San Diego County, 1992-1996 (Loans 

applications on I to 4 unit family dwellings) -Number submitted by African-Americans 

Financial Institution 

American Savings Bank 

1992 1993 1994 1995 1996 

Total Applications Submitted: 

Total by African-Americans’: 

* Percentage of Total Submitted: 

Bank of America 

Total Applications Submitted: 

Total by African-Americans’: 

* Percentage of Total Submitted: 

Downey Savings and Loan 

Total Applications Submitted: 

Total by African-Americans’: 

* Percentage of Total Submitted: 

Glendale Federal Bank 

Total Applications Submitted: 

Total by African-Americans’: 

* Percentage of Total Submitted: 

Great Western Bank 

Total Applications Submitted: 

Total by African-Americans-: 

* Percentage of Total Submitted: 

Grossmont Bank 

562 529 1,294 Y,43?~ 1,871 

7 16 28 32 29 

1:25% 3% 2.16% 2.23% 1.55% 

, 

3.742 2,303 2,489 1,231 1,638 

82 40 37 25 26 

2.19% 1.74% 1.49% 2% 1.59% 

,’ 

54 91 528 ’ 180 491 

0 0 6 2 4 

0% 0% 1.14% 1.1% 0.81% 

120 88 252 167 208 

0 1 3 3 2 

0% 1.14% 1.19% 1.8% 0.96% 

1,818 1,653 2,101 2.008 1,696 

36 42 31 44 32 

1.98% 2.54% 1.48% 2.19% i.89% 

Total Applications Submitted: 59 84 174 181 122 

Total by African-Americans’: 0 0 1 5 0 

* Percentage of Total Submitted: 0% 0% 0.57% 2.76% 0% 

Home Savings 

Total Applications Submitted: 

Total by African-Americans’: 

* Percentage of Total Submitted: 

3,023 3,001 3.505 2,229 1,495 

60 76 89 46 24 

1.98% 2.53% 2.54% 2.06% 1.60% 
PART IV Coriventtonal Home Purchase Loan Applications in San Diego County, 19921996 (Loan 

(cu”f’d) applications on 1 to 4 unit family dwellings) -Number submitted by Afrlcan-Pmericans 

Financial Institution 1992 1993 1994 1995 1996 

Union Bank 

Total Applications Submitted: 168 275 328 3&- 353 

Total by African-Americans’: 3 7 14 16 14 

* Percentage of Total Submitted: 1.79% 2.55% 4.27% 4.2% 3.97% 

Wells Fargo 

Total Applications Submitted: 278 440 1.255 198 - 

Total by African-Americans*: 9 7 51 3 

l Percentage of Total Submitted: 3.24% 1.59% 4.06% 1.52% - 

Wodd Savings and Loan : 

Total Applications Submitted: 1.874 1.428 1,764 989 735 

Total by Afrtcan-Anwicans’: 22 14 28 20 10 

* Percentage of Total Submitted: 1.17% 0.98% 1.59% 2.02% 1.36% 

Note: According to the 1990 Census of Population and Housing, African-Americans make up 

6% of the total population of San Diego County. Source: San Diego Association of 

Governments - SANDAG 

Sources for lending data: Table 4-2 of each lender’s 1992-1996 “Home Mortgage Disclosure 

AC? statements for San Diego county. and the Federal Financial 

institutions Examination Council (FFIEC). 
PART V Conventional Home Purchase Loan Orlglnations In San Diego County, 19921996 

(Loan originations on < to 4 unit family dwellings) -Number of loans originated (granted) 

to AfricanAmericans 

Financial institution 1992 1993 1994 1995 1996 

American Savings Bank 

Total Loans Originated: 362 323 878 .~.9ti 

Total to African-Americans’: 

1.356 

4 11 17 9 16 

‘Percentage of Total Originated: 1.10% 3.40% 1.94% 0.93% 1.18% 

Bank of America : 

Total Loans Originated: 2,458 1.418 1,705 738 

Total to African-Americans’: 

1,076 

47 18 26 10 12 

‘Percentage of Total Originated: 1.91% 1.27% 1.52% 1.36% 1.12% 

Cowney Savings and Loan 

Total Loans Originated: 28 51 393 (: 108 337 

Total to African-Americans’: 0 0 6 2 4 

‘Percentage of Total Originated: 0% 0% 1.53% 1.85% 1.19% 

Glendale Federal Bank 

Total Loans Originated: 

Total to African-Americans’: 

‘Percentage of Total Originated: 

Great Western Bank 

Total Loans Originated: 

Total to African-Americans’: 

‘Percentage of Total Originated: 

Grossmont Bank 

Total Loans Originated: 

Total to African-Americans’: 

‘Percentage of Total Originated: 

60 49 173 100 115 

0 0 1 2 0 

0% 0% 0.58% 2% 0% 

1,054 1.038 1.457 <.284 1,055 

19 20 18 25 11 

1.80% 1.93% 1.24% 1.95% 1.04% 

21 42 82 91 73 

0 0 0 2 0 

0% 0% 0% 2.2% OS;, 

Home Savings 

Total Loans Originated: 2,340 2,227 2,539 1.472 1,017 

Total to African-Americans’: 43 45 56 24 13 

‘Percentage of Total Originated: 1.84% 2.00% 2.20% 1.63% 1.28% 
PART V 

(cvnt’d) 

Conventional Home Purchase Loan Otiglnations in San Diego County, 1992-1996 

(Loan originations on 1 to 4 unit family dwellings) - Number of loans originated (grant&) 

to AfricanAmericans 

Financial Institution 1992 1993 1994 1995 1996 \ 

Union Bank 

Total Loans Originated: 110 165 224 283 244 

Total to African-Americans’: 1 3 5. < ‘1 7 

‘Percentage of Total Originated: 0.90% 1.62% 2.23% ‘3.89% 2.87% 

Wells Fargo Bank 

Total Loans Originated: 103 234 723 83 - 

Total to African-Americans*: 3 5 21 1 

‘Percentage of Total Originated: 2.91% 2.14% 2.90% 1.20% - 

. 

;. 

World Savings and Loan 

Total Loans Originated: 1,307 1,012 1.308 679 475 

Total to African-Americans’: 10 6 14 12 6 

*Percentage of Total Originated: 0.77% 0.59% 1.07% 1.77% 1.26% 

Note: According to the 1990 Census of Population and Housing, African-Americans made 

up 6% of San Diego Count@ total population. Source: SANDAG I San Diego 

Association of Governments. 

Sources for lending data: Table 4-2 of each lend&s 1992-1996 “Home Mortgage Disdosure 

ACT’ statements for San Diego county. and the Federal Financial 

Institutions Examination Council (FFIEC) 
METHODOLOGY 

1. How the loan denial rates and the denial disparity ratios were computed: 

Example: If lender “A” receives 20 loan appli&iOnS from African-Amedcans and denies 6 of 

those applications, 20 divided by 6 results In a 30% denial rate. 

If the same lender rejects IO out of 100 loan applications from white borrowers, the reSult 

is a 10% denial rate. - ._ 

To compute the disparity ratio, the AfriCan-AmedWn denial rate of 30% is divided by the *se denial 

rate of 10% to result In a 3:l disparity ratio. This means lender ‘A” denied African-Amerf,san 

loan applicants 3 times more often than white loan applicants. : 

2. Source of lending data used in thls survey: each lenders 1992,1993,1994,1995 and 1996 

HMDA (“Home Mortgage Disclosure AcY) statements for San Diego County. Data obtained 

via written request to each of the 10 lending Institutions included in this survey. 

Eaoh year a government agency named the Federal Financial Institutions Examinations 

Council (FFIEC) compiles a HMDA statement fOr tirtUally every lending institution in the country. 

These statements are available to interested members of the public and can be obtained from 

Individual lending institutions or can be ordered diredly from FFIEC. 

Source for all census data used In this survey San Diego Association of Governments I SANDAG. 

3. Ten Lenders Surveyed: American Savings Bank Grossmont Bank 

Bank of America Home Sayings 

Downey Savings and Loan Union BanlC 

Glendale Federal Wells Fargo” 

Great Western Bank World Savings and Loan 

* Union Bank had the best record of all ten lenders surveyed in terms of receiving loan 

applications from and granting loans to African-Americans in San Diego County. The 

percentage of Loan applications received from Afri’can-Arnen’cans Increased substantially 

between 1992 and 1996; as did the number of loans granted to this community. However, 

the disparity In denial rates between African-Americans and whtte applicants also increased 

substantially between 1992 and 1996, regardless of borrower income level. 

_ Wells Fargo1995 was the most recent year for which lending data was available. 1995 was 

the last year Wells Fargo made home loans directly. They now make home loans through 

a joint-venture with a mortgage company. For the other nine lenders, 1996 was the 

most recent year for which data was available. 
ATTACHMENT 3 
I , I 
ATTACHMENT 4 
HMDA 

Home Mortgage Lending: Minority I LMI (ClZO%) 

Percent of Market Share 

92 93 94 95 96 

BofA 37.79% 11.57% 11.68% 

Union 2.68% 1.68% 1.53% 

Web 3.09% 1.39% 11.54% 

Home 23.98% 27.90% 24.67% 

American 4.82% 2.71% 11.38% 

Gr. Wes;. 23.67% 18.77% 14.31% 

7.34% 

2.68% 

1.26% 

17.99% 

11.99% 

22.00% 

10.91% 

1.89% 

0.18% 

9.47% 

13.21% 

10.88% 
ATTACHMENT 5 
MID-CITY SMALL BUSINESS CREDIT 

NEEDS ASSES’SMENT I’ 

__. 

.: ‘- :::. 

September, 1997. 

BY: Ann Meier, Independent Research Consultant 

Thii study is sponsored by the City of San Diego OfGce of Small Business, Council Member 

Christine Kehoe’s Oflice, Bank of America, Union Bank of California, Wells Fargo and the 

Business Improvement Districts of Adams Avenue, El Cajon Boulevard, North Park and 

City Heights. Project oversight was provided by the San Diego City-County Reinvestment 

Task Force. 
City of San Diego was conducted by David Paul Rosen & Associates, Community Development 

Consultants from Irvine. This study used an interesting methodolo,? of applying actual banking 

industry norms as reflected in measures published by Robert Morris & Associates (RMA) to the 

199 1 City business license database. The authors of this report note that their estimates of credit 

demand do not reflect very small businesses with sales below $50,000 which are very difficult to 

quantify. A large proportion of the small businesses in the Mid-City fall into this category and 

thus were not covered by this 1992 report. Also in 1992, the San Diego City-County 

Reinvestment Task Force completed a credit needs assessment in Spring Valley. In 1993 Adams 

Avenue conducted a credit needs assessment and reported on barriers to small business capital 

formation. In 1994 City Heights developed a Business and Economic Development Plan based 

on a survey. While not exclusively a credit needs assessment, some measures of credit need were 

addressed. The Mid-City Business Improvement Districts and the San Diego,City-County 

Reinvestment Task Force decided a credit needs assessment was needed to measure the current 

situation in a broader scope, encompassing more of the Mid-City. That is the purpose of this 

study. 

Survey Methodology 

The survey incorporated questions asked in many of the studies mentioned above as well as 

similar studies in other cities across the nation. The contents of the questionnaire were reviewed 

and revised by the BIDS. Reinvestment Task Force members, and officials from Wells Fargo, 

Union Bank of California, and Bank of America (see Appendix A). 

The questionnaire was sent to approximately 3.500 Mid-City small businesses (which did not 

include apanment owners). Approximately 1000 of these surveys were “returned to sender.” 

This high volume of returns indicates several things. The mailing list used for the survey came 

from San Diego Data Processing whose database is apparently not current. The return volume 

may also indicate a high rate of small business failure or relocation in the Mid-City. It is likely 

that many, if not most, of the business whose surveys were “returned to sender” were once, but 

are no longer in business or have moved. 

Excluding the returned surveys, approximately 2500 surveys reached the correct owner of a 

currently operational small business. 183 small business from four BLDs (Adam’s Avenue, El 

Cajon. North Park and City Heights) responded to the survey. The survey responses were 

supplemented with two focus groups with BID committee members. These focus groups allowed 

us to solicit more in-depth information and to ensure the clarity of the survey instrument. 

Although the survey was in English, a volunteer from UPAC canvassed the neighborhoods to 

assist non-English speaking business owners with the survey. The data.Gm the UPAC 

volunteer, the two focus groups and the survey responses were compiled to report on the credit 

needs of small businesses in San Diego’s Mid-City. Because of project financial constraints, we 

were not able to mail survey pre-notification letters, reminder post-cards. or conduct a survey 

remailing to non-responders. These steps usually increase the survey response rates. We did. 

2 
land use issues. The way that commercial strips are zoned in the Mid-City prevents business 

owners from having larger square footage for their stores and from physically expanding their 

business at their current site. The commercial linear strips are restricted by the size of the 

buildings on them which are currently mostly older, small structures. This may explain the small 

median square. footage of small businesses in the Mid-City and indicate a need for creative 

solutions regarding land-use in the Mid-City. 

Most of respondents lease, rather than own their business location -- 76 and 24 percent 

respectively. When we look at the age of the businesses who lease versus those who own their 

business location, we find that as age of the business increases, SO does ownership of the business 

location. Among respondents who have been in their current business for under four years, 87 

percent lease their location and just 13 percent own. For respondents who have been in their 

business for four to ten years, 77 percent lease and 23 percent own their locations. For those in 

their current business for 1 I to 20 years, 71 percent lease and 29 percent own the location. 

Finally, for those who have been in their current business for more than 20 years, 41 percent still 

lease their location and 59 percent own it. While more of the older business own their properties, 

a significant percent (41%) still lease the location, 

.’ 

About half of the responding business owners said they live in the Mid-City (49%) and half live 

outside of the Mid-City (51%). Most of the respondents own “smaller” small businesses with 76 

percent of them employing 3 or fewer full-time employees and 87 percent employing 3 or fewer 

part-time employees. Forty-nine percent actually do not have any part-time employees. The 

businesses employ more people from the Mid-City (55%) than they do from outside of the MidCity area (45%). For the 183 respondents, a total of 495 Mid-City residents are employed by 

businesses local to them. This is important and could stand to be higher because the 

unemployment rate in the Mid-Ciiy is two-time what it is in other parts of the city. Small 

businesses in Mid-City are a main source of employment for local residents. 

When asked their gross sales volume last year, 40 percent of all respondents said they grossed 

less than $50.000. 17 percent grossed between $50,000 and $lOO,OCO, 15 percent between 

$lOO,OOO and $250,000, and 10 percent each between $250,000 and $500.000 and $500,000 and 

one million. 7 percent repotted grossing over one million dollars 

Gross Sales 

40 -AC 

3s 

30 

_ 25 

4 
Gender & Minority Status 

of Respondents 

L.l 

i! 

Minority-Owned 

Female-Owned 

Min. and Female Owned 

Neither Min. or Fem. Owned 

Ethnicity of Respondents 

Caucasian African-Amer. Middle Eastern 

Businesses in the Mid-City are of all different ages. Thirty-one percent of business owners have 

owned their current business for 4 to 10 years, while another 22 percent htive owned their current 

business for just one year. Nineteen percent have owned their business for 2-3 years, 16 percent 

for 1 I-20 years and 13 percent for more than 20 years. In contrast, most of the business owners 

have been in their industry longer than they have owned their current business. A large 

percentage of owners have been in the industry more than 20 years (30 percent). Twenty-eight 

percent have been in the industry 1 l-20 years and another 27 percent for 4-10 years. Only 8 

percent are new to the industry (2-3 years) and 7 percent are rookies (only one year in the 

industry). The median number of years respondents have owned their business is 5 years, but the 

median number of years in the industry is 14. While many owners are apparently new to their 

current business, few are naive to their industry, products, customer base and challenges faced in 

financing a businesses’ growth and development. 

Yrs. Owning Business Versus 

Yrs. In The Industry 

1 2 to 3 4to10 11 to20 21+ 

2 Yrs. In Current Business 

m Yrs. In Industry 

6 
Gender & Minority Status 

of Respondents 

Minority-Owned 

Female-Owned 

Min. and Female Owned 

Neither Min. or Fem. Owned 

Ethnicity of Respondents 

60 -- 

5J 

50 - 

Caucasian AfricawArner. Middle Eastern 

Businesses in the Mid-City are of all different ages. Thirty-one percent of business owners have 

owned their current business for 4 to 10 years, while another 22 percent htive owned their current 

business for just one year. Nineteen percent have owned their business for 2-3 years, 16 percent 

for 1 I-20 years and 13 percent for more than 20 years. In contrast, most of the business owners 

have been in their industry longer than they have owned their current business. A large 

percentage of owners have been in the industry more than 20 years (30 percent). Twenty-eight 

percent have been in the industry 1 l-20 years and another 27 percent for 4-10 years. Only 8 

percent are new to the industry (2-3 years) and 7 percent are rookies (only one year in the 

industry). The median number of years respondents have owned their business is 5 years, but the 

median number of years in the industry is 14. While many owners are apparently new to their 

current business, few are naive to their industry, products, customer base and challenges faced in 

financing a businesses’ growth and development. 

Yrs. Owning Business Versus 

Yrs. In The Industry 

1 2 to 3 4to10 11 to20 21+ 

2 Yrs. In Current Business 

m Yrs. In Industry 

6 
Small businesses in the Mid-City are serving the lo.cal community as well as bringing outside 

customers into the community. Forty-two percent of the respondents said most of their business 

comes from outside of the Mid-City while 58 said m&t of their business comes from local 

customers. 

Mid-City Business Expansion 

Respondents were asked if expansion of their business was anticipated within the next year. 

Fifty-four percent of respondents reported expected expansion in the next yeear. Of those who 

anticipate expansion in the next year, 50 percent plan on adding additional personnel, 28 percent 

on relocating for additional space, 23 percent hope to secure more space at additional locations, 

20 percent plan on more space at their present site and 20 percent plan on adding a new product 

to their business. 

Expansion Anticipated 50 

,’ 

Mare sites Relocation 

More space-same site More Personnel Different Product 

Fifty-nine percent of Adams Avenue resoondents said thev _ anticinated . exnansion compared to 52 

percent in North Park, 55 percent in El dajon and 49 percent in City Heights. 

Anticipated Expansion by BID 

60 7 

50 

40 

L; i 

s3oi 

z 

a / 

20 

10 

0 I 

r 

8 
Financing Growth and Development 

Next. business owners were asked how they fmance the growth and development of their 

business. An overwhelming 67 percent of respondents said they finance their business out-ofpocket. Thirty-one percent say they use loans from family or friends and 30 percent said they use 

bank credit. Twenty-nine percent use personal credit cards and only 20 percent use business 

credit cards. Very small percentages use finance companies (5%). credit unions (4%). thrifts 

(1%) and other investors (4%). 

Financing Growth and Development 

70 7 67 

,,j F 

i 1 I 

SO! i 

Ethnicity seemed to have some effect on how small business owners chose to finance growth and 

development of their businesses. While 53 percent of responding business owners are 

Caucasian, a higher percentage (59%) of those who report using bank credit are Caucasian. 

Asians are 24 percent of our total respondent population, but just 19 percent of those who use 

bank credit. African-Americans are 7 percent of our respondent population, but just 4 percent of 

those who use bank credit. The converse is also true -- while Asians were 24 percent of our 

respondent population, they are 33 percent of those who use loans from friends or family. On 

this measure, Caucasians drop to 36 percent. More Caucasian business owners finance growth 

and development out of their own pocket (61%) and less Asians use this method of financing 

(17%). Other ethnicities follow the same pattern Asians on this measure -- proportionally fewer 

African-Americans, Mexican-Americans. and Middle Easterners finance their business out of 

pocket. Caucasian and Middle-Eastern business owners use both pe&Kal and business credit 

cards at a high rate than do African-Americans. Mexican-Americans and Asians. 

IO 
When asked why they use the bank(s) that they do. most respondents had multiple reasons. The 

reason that was listed by the most respondents was location (59%) followed by convenience 

(47%). quality of service (33%) and cost (I 5%). Variety of services/products scored the lowest 

with just 7 percent. 

Respondents were asked what business services they use at their banks and the amount of their 

monthly service charge. Then they were asked if they felt that their business was getting a good 

value for their monthly service charge. The median monthly service charge of all who answered 

this question was.Sl2.00. The largest percentage of respondents pay between $1.00 and $10.00 

per month (21%). Sixteen percent pay no monthly service charge. The services used by most 

businesses are deposits (86%). bank cards (26 %). night drop (14%). and payroll services (8%). 

A majority of respondents feel that they are getting a good value for the monthly service charge 

they pay (56%). 

The Mid-City has suffered from many recent branch closures. Almost a third (28%) of 

respondents said they bank has changed sites over the last two years, and for most of the 

businesses reporting that their branch had closed, this made their bank less accessible (73%). 

Accordingly, 37 percent of all respondents, even those whose branch has not closed feel that the 

quality of services at their bank has changed because of branch closures. Thirty-five percent say 

they don’t know why their bank has changed sites indicating banks that close branches in the 

Mid-City need to’better communicate the reasons for closing. Twenty percent of all respondents 

said they have changed banks in the last 2 years. When asked why, many responded that the 

service at their bank has declined -- longer lines, frequent employee turn-over, or less interest in 

the businesses inthe community. 

Next, respondenti were asked about specific services and products offered to small businesses by 

banks and other financial institutions. The following are the products and services we asked 

about: 

1. Business Checking Account 

2. Business Savings Account 

3. Business Credit Cards 

4. Business Line of Credit 

5. Business loans for $25,000 or more 

6. Business loans for $lO,ooO to $25,000 

7. Business loans for under $10,000 

8. Accounts receivable loans 

9. Loans for machinery and equipment 

10. Real Estate loans for business facility 

11. Venture Capital/Equity 

12. Business counseling and referral services 

13. Financial statement preparation 

14. Financing for business start-ups 

15. Credit cards 

12 
All respondents were asked to rate the importance of the products and services to them. Eightynine percent of all who responded said business checking accounts were important or very 

important to them. Only 4 percent rated them as not very or not at all important. For business 

saving accounts, 45 percent rated them as important or very important, 17 percent said somewhat 

important. and a high 38 percent said business savings accounts are not very or not at all 

important. For business credit cards there was a split as well with 49 percent saying they were 

important or very important, 20 percent saying they were somewhat important and another 3 I 

percent saying not very or not at all important. 

Level of Importance of 

Produ’cts and Services \ 

b. save. acct. b. line of credit loans $10.25K b. counseling ! 

b. check. acct b. credit cards loans $25K+ loans c$lOK start-up fin. 

0 Important or Very Important 1 Somewhat Important 

q Not Very or Not at all Important 

When rating the importance of business lines of credit and the three different loan amount 

categories, business lines of credit had the highest percentage of respondents reporting that they 

were important or very important to them (64%). Forty-nine percent of those responding said 

loans for over $25,000 are imponant or very important and 40 percent said loans for $10,000 to 

$25,000 are important or very important to them. Thirty-seven percent of those responding said 

smaller loans. those under $10,000, are very important or important to them. Business 

counseling and referral was rated as very important or important by 43 percent of those 

responding as was financing for start-ups. 

Loan Application Experiences 

A majority of respondents have not made any business loan applications in the past three years 

(57%). Twenty-three percent have made one loan application in the past three years, 7 percent 

have made two. 6 percent made three and 7 percent made more than threeloan ap&ations in the 

past three years. Of those who made tit least one loan application in the past three years, 73 

percenl have been denied a business loan. Arthur Anderson’s Enterprise Group reports a 

business loan denial rate of just 23 percent nationwide and 34percenf in the western region. The 

14 
(25%). “not showing profit long enough” (IS%)_ and “bankruptcy” (11%~. 

Reasons Given for Loan Denial 

For thosehenied loans, most were requesting the loan for working cap&(56%). The second 

most common intent for use of the loan was real estate purchase (17%). Thirty percent of those 

denied were requesting small to mid-sized loans between !fXUO and $15,000 and 35 percent 

were requesting large loans over $50,000. The median loan request was S25,OOO. 

For almost all of those denied, the bank who denied them did not discuss any alternative lending 

sources with the business owner. Forty-eight percent of respondents turned to their friends and 

relatives when denied a loan and 41 percent relied on themselves to come up with the funding 

they needed. Twenty-one percent used their credit cards to finance their growth and development 

after they were denied a bank loan and 18 percent went to another bank. Nearly all of those who 

were denied a loan would have accepted a loan at a higher price, but still lower than a credit card 

if the bank would have offered such a loan (79%). Sixty-two percent of all respondents said 

they would attend seminars on how to get credit for their businesses if such seminars were 

offered by a local bank. 

Where Did You Turn 

When Denied a Loan 

50 - A 

I6 
Some respondents felt that banks could improve their level of services by lowering the cost of 

services, adding personnel and branches. One respondent suggested that banks “open more teller 

services or windows to avoid long lines every day.” Another thinks banks should create “more 

locations in neighborhood areas with parking. Small sub-branches would be fine.” A third 

respondent said banks need to “stop all the take avers (friendly and hostile) and stop raising fees 

to finance mergers, take avers and grocery store banks.” 

Several respondents suggested that banks develop more specialized programs for the “smaller” 

small businesses. One respondent said that Mid-City small businesses would benefit greatly by 

bank?.x&ng services to small businesses with just a handful of employees. Some small 

business programs [currently] are for 100 and under employees. or loans of maybe $250,000 and 

over us little guys need our own programs.” Several other respondents recommended a 

locally owned bank, more specialized for businesses. One North Park respondent felt that 

“business owners need a business bank in North Park. This could work as a small credit union 

does, with shares.” While credit unions do not offer business loans, the concept of community 

banking embraced by credit unions is coveted by small businesses in the Mid-City. Based on the 

responses given, respondents feel that banks need to make improvements’in credit accessibility, 

personal banking relationships, quality of services, and programs specifically for “small” smallbusinesses. 

The Mid-City Population 

The City of San Diego’s Economic Development Division found some interesting statistics about 

the general population of the Mid-City. The median household income in the Mid-City is more 

than $lO,OGG less than it is city-wide, $22,586 and $33,686, respectively. The percent of single 

parent households in the Mid-City is 16 percent compared to just 9 percent city-wide. Eighteen 

percent of Mid-City households receive public assistance compared to 9 percent of households 

city-wide. Twenty-three percent of the families in the Mid-City live below the poverty line while 

that same measure is 13 percent city-wide. The percentage of unemployment in the Mid-City is 

10 percent and 6 percent in the whole city. Twenty-four percent of all Mid-City residents have 

only a high school diploma and city-wide this number is 20 percent. Nineteen percent of all MidCity residents are without vehicles and 10 percent of residents city-wide don’t have their own 

transportation. City-wide 6 percent of households are without an adult who speaks English. 

That percentage jumps to I I percent for the whole city. Twenty-five percent of all Mid-City 

residents and 21 percent of all resident city-wide are foreign born. Although these are stark 

differences. many feel that they are a bit conservative and the actual differences arc even greater. 

18 
closed branches as did the personal banking relationship the business owners relied on to get fair 

consideration for financing. Small business owners in the Mid-City want banks to get to know, 

them and the+ businesses. Only through a personal banking relationship can a loan officer 

recognize that a high level of personal debt is attributable to investment in one’s business or that 

a business employs four Mid-City residents who may have otherwise been unemployed but are, 

instead, depositing their paychecks in an account at the loan officer’s bank. Most of the 

businesses in the Mid-City are seeking credit because they are doing well, and want to expand 

(53%). not because they are failing and need to save their business. Making credit available not 

only allows the businesses to grow but it also facilitates Mid-City employment growth and 

ultimatelyeconomic growth. A personal banking relationship allows branch managers and Toan 

officers to assess the whole business, the business owner, and the potential for positive effects on 

the community. 

According to the statistics provided by the City of San Diego’s Economic Development Division, 

we see that there is a need for local job creation in the Mid-City area. Credit extensions to small 

businesses tiould likely result in job creation and hopefully diminish the great disparities in 

unemployment and economic well-being between Mid-City residents and the city-wide. 

L “second 1ook”policy should be established by all existing lenders in &e Mid-City area IO 

reduce the loan denial rate. 

The loan denial rate among respondents was 73 percent compared to just 23 percent nationwide 

and 34 percent in the western region. The businesses responding were not financially weak with 

most reporting assets exceeding liabilities. Existing lenders in the Mid-City are not lending to 

viable, stable small businesses enough. The establishment of a geographic, branch-based, second 

look policy for loans denied using credit scoring methods may reduce the exorbitant rejection 

rates. 

Efforts to establish additional bankingfacilities which address snmll business credit needs, 

such (IS a community bank in the Mid-City, should be endorsed and pursued by all relevant 

agerxies. 

It is clear from the data in this report that Mid-City small businesses have been impacted by 

branch closures which have occurred over the past five years. The impacts range from a 

perceived lack of services to disparate treatment in credit granting procedures. Further, there is 

ample evidence to suggest that there is a residential and small business deposit base adequate to 

support additional branches. 

The implementation of this item can occur in a range of forums. The City-County Reinvestment 

Task Force should advocate to lenders working in partnership with the Task Force-to establish 

new branches in the Mid-City. 

A joint effort by the Mid-City Business Associations, the City Offices of Small Business and 

Economic Development Depamnents as well as other pertinent groups can explore the formation 

20