Community groups skeptical of TD Bank-First Horizon merger

WASHINGTON — A number of community groups asked regulators on Thursday to hold off approving Toronto-Dominion Bank's deal to acquire First Horizon Corp. in Memphis, Tennessee, until the banks agree to invest more in local communities. 

The groups spoke at a virtual public hearing on the deal — a feature of rulemaking that has been a more frequent occurrence during the Biden administration than in prior administrations. Acting Comptroller of the Currency Michael Hsu pointed to the "value that public input can provide on mergers" as part of regulators' more holistic examination of how to consider bank mergers. 

TD Bank agreed to buy First Horizon for $13.4 billion in cash. The acquisition would create a top-six bank in the United States by assets. 

TD Bank
Community groups speaking at a virtual public hearing sponsored by the Office of the Comptroller of the Currency on TD Bank's proposed acquisition of First Horizon Bank Thursday. Many expressed concern about the impact of the merger on minority and lower-income communities.
Mat Hayward - stock.adobe.com

It's a tenuous time for a large, regional bank merger, however. Regulators are considering whether to impose additional requirements on larger bank deals in general, and TD Bank in particular has faced pushback in Washington over its past supervisory deficiencies. 

Sen. Elizabeth Warren, D-Mass., has urged the Office of the Comptroller of the Currency to reject the deal, citing a report by Capitol Forum that TD used similar employee incentives as those that contributed to the fake-accounts scandal at Wells Fargo. Previously, TD agreed to a $122 million settlement with the Consumer Financial Protection Bureau in 2021 stemming from illegal overdraft practices.

Some groups at the hearing Thursday cited these issues, and asked regulators to block the deal until they work out new rules for large regional bank mergers. 

"The banking regulators, along with the Department of Justice, urgently need to rethink bank merger guidelines to ensure members are serving the needs of their communities," Tykeisa Nesbitt said on behalf of Americans for Financial Reform. "Until then, bank mergers, including this one, should be blocked." 

Other groups asked that regulators approve the deal only on the condition of a Community Benefits Agreement that would give the bank additional obligations to local communities. Rachel Labush, a supervising attorney at Community Legal Services of Philadelphia, which called for a Community Benefits Agreement for the acquisition, said that in Philadelphia, TD was less likely to approve a residential mortgage for a high-income Black applicant than a low-income white applicant. 

"When you look at all the large banks in America, TD Bank is the most likely to deny a loan application from a Black person or Latino," she said. 

Regulators heard a lot from groups in the Southeast, where the Toronto-based bank would significantly expand by acquiring First Horizon. 

Peter Skillern, executive director of Reinvestment Partners in North Carolina, said TD has been essentially absent from discussions about housing and community development in the state since it bought Carolina First Bank in Troy, North Carolina, in 2010. First Horizon, however, has actively engaged in the area, he said. 

"This merger will have a big impact on North Carolina. Combined, TD and First Horizon will have branches running from Wilmington to the mountains," Skillern said. "The question, though, that still remains unanswered is whose bank culture will prevail; what will the bank culture do as far as valuation of diversity? What is the diversity commitment at the local level, not just in the aggregate?" 

Bank executives at the hearing touted recent changes to the banks' overdraft policies, as well as a special credit program designed to increase homeownership in Black and Latino communities. 

"We are proud of the role we play in our communities and we're excited about the opportunity to expand our impact through our combination with First Horizon," said Leo Salom, chief executive of TD Bank in the United States. 

Some groups at the hearing said they back the deal.

"We are in support of this merger because we hope that it can bring additional resources to our community, but also communities across the country that can benefit from a larger bank that has essentially more resources," said William Stoudt, executive director of Rebuilding Together New Orleans.

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