Bank of the Ozarks in Little Rock, Ark., has received the final regulatory OK for two acquisitions — but with strings attached.
The $11.4 billion-asset bank said Wednesday that the Federal Reserve has approved its deals for Community & Southern Holdings in Atlanta and C1 Financial in St. Petersburg, Fla. The transactions are expected to close on July 20 and 21, respectively.
The C&S deal comes with some Community Reinvestment Act-related conditions after concerns raised by examiners and a member of the public, according to an approval order issued by the Fed on Tuesday.
A commenter objected to the deal because of alleged disparities in the number of home purchase and refinance loans made to African-Americans as compared with whites in the Atlanta and Little Rock areas, the order said. The bank had countered that its lending activity reported under the Home Mortgage Disclosure Act in those two metropolitan areas is a small sample of its business, and that it approved 15% more HMDA-covered applications to African-Americans in Little Rock in 2014 than the average lender there had, the order said.
Both Bank of the Ozarks and C&S had received "satisfactory" ratings in their most recent CRA exams, but C&S "originated a limited number of community development loans," could have been more flexible in addressing the needs of the underserved, and could have been more innovative in community-development-related investments, the order said.
In response to exam findings, Bank of the Ozarks pledged to take steps to identify the needs of communities served by C&S, the order said. Those include working with as many as eight nonprofit organizations; hiring a dedicated CRA loan officer in Atlanta; and working with an advertising agency to develop marketing campaigns for new mortgage products.
It also agreed to abide by and adapt C&S's CRA action plan from January related to its acquisition of certain CertusBank branches. Bank of the Ozarks pledged within 60 days to develop a four-step action plan, which includes providing sufficient branching and residential lending services in C&S's CRA assessment area, as well as monitoring applications and originations from high-minority census tract areas.
The Fed said it would evaluate Bank of the Ozarks performance on these CRA-related agreements "as it reviews any future expansionary proposals" by the bank, the order said.
The Federal Deposit Insurance Corp. and the Arkansas State Bank Department approved the C&S and C1 deals in May, but Bank of the Ozarks had been waiting for the Fed approval until this week. The reason for the holdup had been unclear, but Bank of the Ozarks in April had disclosed that it faced a CRA protest tied to the C&S deal.
Chairman and Chief Executive George Gleason said during Bank of the Ozarks' first-quarter earnings call on April 12 that the bank essentially "inherited" a complaint that was filed against C&S after it had agreed to buy CertusBank branches in Florida. Though Gleason expressed confidence that the acquisition of C&S would get done, he warned there could be some conditions attached to regulatory approval.
Bank of Ozarks agreed in October to buy the $4.4 billion-asset C&S for nearly $800 million, and in November it announced a deal to buy the $1.7 billion-asset C1 for $402.5 million. It had expected to complete the C&S deal by the second quarter and the C1 deal by early in the second quarter.
Bank of the Ozarks operates 177 offices in Arkansas, Georgia, North Carolina, Texas, Florida, Alabama, South Carolina, New York and California.