Midland States Bank Criticized Over Minority Lending Practices

St. Louis Post-Dispatch, October 29, 2013

Only six black applicants were among the 1,503 St. Louis residents who sought home loans at Midland States Bank in the past four years, according to a community group seeking changes at the bank.  The St. Louis Equal Housing and Community Investment Alliance wants the Federal Reserve to require such changes before it approves Midland’s purchase of Heartland Bank in St. Louis.

Black applicants made up just 0.39 percent of applicants at Midland, according to the group’s analysis of federal racial lending reports.

“It’s standing out to us that they are not providing equal services to African-American communities,” said Alliance spokeswoman Elisabeth Risch. “We look at this and kind of see redlining as an issue.”

Redlining is the practice of refusing to lend in minority areas and is prohibited by federal rules.

By contrast, Heartland has a better than average record of minority lending, the Alliance says.

In an emailed statement, Midland CEO Leon Holschbach said the bank has “a 135-year history of serving its communities and has an excellent record in the areas of fair lending and community reinvestment, and we look forward to continuing this community involvement as we expand further into the St. Louis market.”

Midland, based in Effingham, Ill., has four branches in the St. Louis area: one in Chesterfield, two in Waterloo and one in Columbia, Ill. The Chesterfield and Waterloo branches are in census tracts with 0.1 percent black population. The Columbia branch tract is 0.4 percent black, according to Alliance figures.

Banks often lend money outside their neighborhoods. Risch says that in federal reports Midland defines its service area as including most of the metropolitan area, including the city of St. Louis. That area is 21 percent black, according to the Alliance.

The planned purchase of Heartland would give Midland a much larger presence in the St. Louis market, with 11 branches here. Heartland has $793 million in assets.

The purchase is subject to approval by the Federal Reserve. The regulators consider a bank’s record in serving minority and low-income residents as part of the approval process.

The Alliance wants the bank to locate branches in minority neighborhoods with low- and moderate-income populations, increase minority staffing, market to minority communities and develop products for low-income customers.

Federal loan data, examined by the Post-Dispatch, show blacks last year made up 0.8 percent of mortgage applicants last year at Midland in St. Louis. Nearly 400 applications were received from all consumers.

At Heartland, blacks made up nearly 8 percent of more than 3,000 applications.

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