MONOPOLY MATTERS

Black Farmers Association Opposes BB&T and SunTrust Bank Merger

by Claire Kelloway

In a recent letter to government regulators, the National Black Farmers Association (NBFA) argues that the proposed $66 billion takeover of SunTrust by BB&T will harm “rural and economically disadvantaged areas.” In the letter, the NBFA said the takeover will result in fewer rural branches, less competition in the regions where many of their members farm, and cuts in staff and services, particularly those dedicated to anti-discrimination compliance oversight.

Both public and private lenders have a long history of discriminating against black farmers, preventing black farmers from owning land or receiving the same financial supports as their white counterparts. Such structural racism has nearly wiped out black-owned family farms in America. In the 1910s and 1920s, over 14 percent of all farmers were black. As of the latest Census of Agriculture released last month, only 1.3 percent of farmers today are black, and they own only 0.4 percent of all U.S. farmland.

Recent banking consolidation only exacerbates black farmers’ barriers to credit access. As more money flows through large centralized institutions, low-income, rural, and predominantly-black communities have disproportionately lostboth national bank branches and community banks.

“When these banks come together, they’re always closing branches in rural areas, especially those that affect African Americans,” says John W. Boyd, founder of the National Black Farmers Association.

SunTrust and BB&T may seem relatively small compared to goliaths like Wells Fargo and Bank of America – but their merger would create the sixth largest bank in the U.S., larger than Capital One or PNC. And these size comparisons undersell the impact that the merger will have on regional banking consolidation, particularly in parts of the southeast. For instance, a merged SunTrust and BB&T would hold over 27 percent of deposits in Roanoke and Charlottesville, VA, and over a quarter of all deposits for the entire state of Georgia.

The NBFA cautions that this merger could harm credit access and financing for black farmers in banking markets that become more consolidated. A study by the FDIC found that rural areas with consolidated banking markets had less small business loan growth than rural areas with less consolidated banking markets. Another 2017 study found a correlation between greater antitrust enforcement of bank mergers and higher deposit interest rates, illustrating how banks may offer more favorable financing when they’re competing for customers.

Another major concern for black farmers is branch closures. BB&T said it hopes to cut $1.6 billion in annual costs after the takeover. BB&T’s CEO said this will come, in part, from closing rural branches. Local bank branches play a crucial role in providing credit access; one 2016 study found that after merging banks close a branch, the number of small business loans made in that census tract fell by 13 percent. These effects are more severe when low-income and minority neighborhoods lose a branch.

“The closure of these branches is going to withdraw personnel and therefore eyes on the ground from these communities,” explains Stacy Mitchell, Co-Director of the Institute for Local Self Reliance. “That is going to be reflected in lower availability of capital for businesses and farms.”

BB&T and SunTrust say they will make up for lost branches and services by introducing more financial technology, like online banking. But small business loans are particularly “information-intensive,” which is part of the reason why small business lending is higher in regions where borrowers can receive in-person consultation and build relationships with lenders.

Further, relying on virtual technology to replace physical branches overlooks rural broadband deficiencies. Many farmers, especially black farmers, lack reliable internet access. “Forty percent of our members do not have online services in their homes,” says Boyd. “Online driven banking is not going to help poor and low-income communities.”

Threats of national bank branch closures are exacerbated by the fact that low-income rural communities have already lost large numbers of community banks. Small- and medium-sized local banks spend a larger portion of their resources on small businesses than larger banks to begin with, but their numbers are shrinking, especially in communities of color.

“Community bank failures have disproportionately been in African American communities,” says Mitchell. “That’s been part of the problem that’s just further eroded capital availability for black farmers and black-owned businesses.”

Even when black and Latinx businesses have access to banks, large or small, they secure credit at lower rates than white businesses. In 2013, the Small Business Administration found that black- and Latinx-owned small businesses are less likely to secure loans than white small business owners with the same credit profile. Farmers of color face similar discrimination.

With large-scale farmers, Boyd says, “banks compete for their business, they come out to their farms and say, ‘Hey come bank with us, we can help you.’” By contrast, “we get the treatment that they don’t want you at all … These banks don’t want our business.”

The NBFA is also concerned that this merger will cut the number of staff dedicated to antidiscrimination oversight, particularly enforcement of the Community Reinvestment Act and the Equal Credit Opportunity Act.

“We want to be treated with dignity and respect, and if we qualify we would like to be lent money like other farmers,” says Boyd. “If you don’t, they need to tell you why you don’t qualify and what you can do next year to improve that situation. Those are the relationships that we need to succeed in business.”