TD Bank Group unveiled an agreement Wednesday to invest in local U.S. communities in connection with its pending acquisition of First Horizon Corp.
Under the plan, Toronto-based TD committed to expanding banking services in low-to-moderate income markets in 22 states and Washington, D.C.
The agreement with the National Community Reinvestment Coalition could help the Canadian bank to secure regulatory approval for the First Horizon deal, which was announced a year ago. Last week, the two banks extended the deal’s targeted closing date by three months to May 27.
“The deal we just signed will ensure that communities of need see tangible increases in resources and economic opportunity in their neighborhoods—as every bank merger is legally required and morally bound to do,” Jesse Van Tol, president and CEO of the NCRC, said in a press release.
TD’s agreement with the NCRC was touted as a five-year, $50 billion commitment.
Other recent community benefits agreements include U.S. Bancorp’s five-year, $100 billion plan in connection with its acquisition of MUFG Union Bank. In 2021, PNC Financial Services made an $88 billion pledge in connection with its acquisition of the Spanish banking giant BBVA’s U.S. operations.
TD’s commitment includes $21 billion in residential mortgages and home improvement loans, $17.5 billion in community and economic development loans and $7.75 billion earmarked for lending to small businesses with under $1 million in annual revenue, according to the press release.
The plan also calls for TD to develop specific outreach plans for communities in Philadelphia and Memphis, Tennessee, where First Horizon is headquartered.
In addition, the plan calls for the opening of at least 25 new branch locations in marginalized communities.
Ken Thomas, president of Community Development Fund Advisors, said that the focus on opening new branches reflects a shift in how community benefits agreements are being written.
“The number one priority now is opening branches in banking deserts,” Thomas said in an interview Wednesday. “When it comes down to it, there is no substitute for having a branch in a community. It’s a statement that the bank believes in that community.”
Van Tol, the president and CEO of NCRC, also highlighted TD’s commitment to opening brick-and-mortar branches.
“At a time when many banks are closing branches, I don’t believe many other plans have that type of commitment to maintaining a physical presence,” Van Tol said in an interview.
TD said that it will meet quarterly with community advisory councils for the first two years of the agreement. It also pledged to review its progress in meeting the plan’s objectives with the National Community Reinvestment Coalition.
“Our community benefits plan builds on TD Bank’s and First Horizon’s longstanding focus on our communities,” Leo Salom, CEO of TD Bank, said in a written statement. “We are excited to continue this focus in First Horizon markets as we move forward with combining our two organizations.”
At least one bank has recently run into problems in the aftermath of entering into a community benefits plan while seeking approval for a merger.
The NCRC has been expressing concern about KeyCorp’s mortgage lending record to Black borrowers following a $16.5 billion community benefits plan the Cleveland-based bank reached in 2016. At the time, Key was seeking to acquire First Niagara Financial Group in Buffalo, New York.
TD Bank’s pending acquisition of First Horizon has faced delays amid heightened scrutiny from regulators and community groups. At a public hearing last August, some community groups asked regulators to hold off on approving the acquisition until the banks agreed to invest more in local communities.
In a speech last May, acting Comptroller of the Currency Michael Hsu said that more discussion is merited regarding the role of community benefits plans in mergers.
“On the one hand, they can serve as transparent and clear mechanisms for banks and communities to discuss and agree on what the needs of the community are,” Hsu said. “On the other hand, questions may arise as to the representativeness and motivations of the organizations negotiating on behalf of the communities served.”
Hsu also said that the Office of the Comptroller of the Currency was considering options to facilitate public input on mergers, including a presumption in favor of holding public meetings on larger bank deals.