First Tennessee boosts lending to low- and moderate-income Chattanooga residents

The First Tennessee Bank building, Liberty Tower, and Republic Center are seen from a new apartment building at 728 Market Street.
The First Tennessee Bank building, Liberty Tower, and Republic Center are seen from a new apartment building at 728 Market Street.

Decades of banking bias have left many unfairly cut out of home ownership, local and national reports show, but one national organization is partnering with a Chattanooga grassroots nonprofit organization to combat the inequity one bank at a time.

After months of conversations with the Washington, D.C.-based National Community Reinvestment Coalition and community-based organizations across the South, Memphis-based First Tennessee bank has signed a "community benefits agreement," which commits nearly $4 billion over a five-year period to benefit local residents traditionally cut out of lending.

"First Tennessee has been a part of Chattanooga's community for over 40 years," said Jeff Jackson, First Tennessee's Chattanooga market president. "During that time, we've supported organizations that do so much to make our community a better place. However, there are still individuals and organizations who need the focus these dollars will provide over the next five years. We are excited to see the playing field leveled for so many who are underserved. For First Tennessee, it's not only the best thing to do, it's the right thing to do."

Bank officials met with community leaders, including Michael Gilliland, board chairman of Chattanooga Organized for Action, in Memphis, Miami and Raleigh, N.C.

In the agreement, First Tennessee promises to fund $515 million in home purchase and rehabilitation mortgage lending, which will translate to about 967 new homes owned by minorities and 533 homes owned by low- or moderate-income people across Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas and Virginia.

The bank's other promises include:

-Funding $1.9 billion in small-business lending to businesses in low-to-moderate income areas and businesses with less than $1 million in annual revenue.

-Funding $1.5 billion in community development and multi-family lending and investments.

-Funding $40 million in grants and philanthropy, including supporting workforce development, small business, housing counseling, community development corporations, community development financial Institutions, and funding financial literacy and education programs for children, young adults and small business entrepreneurs.

-Devoting 3-6 percent of the bank's supplier spending to minority-owned businesses.

-Earmarking a portion of the bank's marketing budget to minority-owned firms.

First Tennessee will announce Chattanooga- specific goals, but officials said those have not yet been determined.

"Our company is dedicated to supporting the success of underserved individuals and strengthening communities across our footprint," said Bryan Jordan, chairman and CEO of First Horizon National Corp., the parent company of First Tennessee, in a statement. "We believe our new $4 billion investment will take our longstanding community commitment to the next level by spurring growth and sustainable economic development."

NCRC, a group that advocates for fair banking practices, sprang up when the federal Community Reinvestment Act - legislation passed in 1977 that outlawed banking practices that discriminated against low-income and minority neighborhoods - came under fire several decades ago.

"The vision is to address historic and current inequities, integration and the wealth gap between African-Americans and whites," said Jesse Van Tol, CEO of NCRC. "We advocate, but we also frequently have dialogue with banks about their level of lending and how they are providing loans, investment and services to people of color and low and moderate income people. It's about economic justice and civil rights and economic mobility for all people."

Community-based organizations such as Chattanooga Organized for Action, which are members of NCRC, have watched affordable housing options in their cities dry up and believe not enough is being done to help low- and moderate- income individuals who can afford a modest mortgage. In 2016, NCRC helped Chattanooga Organized for Action analyze local bank data for their report, "Whose Reinvestment? The Failures of Equitable Home Lending in Chattanooga."

The study found that in Chattanooga, predominantly black neighborhoods are lending deserts. It also found a significant disparity in home loan origination between black and white Chattanoogans.

"The reality of bank practices has constantly involved struggle between profitability on the banks' end and public purpose as defined by residents," the report read. "Banks have, in numerous cases, chosen to lend only toward what are assumed the most profitable investments, often speculatory ventures, at the same time limiting resources for less profitable community needs."

So NCRC's member organizations in the First Tennessee footprint wanted to know the bank's plans for fulfilling its affirmative obligation, outlined in the Community Reinvestment Act, to meet community credit needs by expanding access to capital and banking services, Van Tol said.

NCRC already had a relationship with First Tennessee because, years back, the national group had raised concern about the bank's lending practices.

"They got out of the mortgage business. Their levels of lending to minorities and low- and moderate-income people were low. They were using a third party to originate loans. We began a conversation about that," Van Tol said. "Along the way they became progressively engaged and stepped up in terms of doing more."

The First Tennessee agreement is significant, Gilliland said. It's the first of its kind in Chattanooga and only the second in the South.

The deal will mean a 16-percent increase over five years in the bank's home purchase lending to low- and moderate-income borrowers; a 16-percent increase in lending to minorities; a 16 percent increase in lending to low-to-moderate income census tracts; and a 16 percent increase in lending to census tracts with a high percentage of minority residents. First Tennessee also has developed a mortgage lending product for low-to-moderate income borrowers. The index requires a credit score of just 640 and sets the qualifying income in Chattanooga at about $50,000, Gilliland said.

"We hope it becomes a model of development and investment as our city grow," he said.

And it will help those who may be affected by gentrification more than it will hurt, Gilliland said.

First Tennessee's agreement is a commitment to increase loans to low- and moderate- income individuals and minorities. Banks can meet their legal obligations under the Community Reinvestment Act by making any loan in a low- or moderate-income census tract. So, technically, loans to high-income individuals who want to buy a home or start a business in a gentrifying, undervalued census tract count as a Community Reinvestment Act credit.

It also will increase a commitment to low-income housing tax credit funding for affordable rental development, Gilliland said.

"These are pools of capital specifically for low- to moderate-income applicants and communities of color that did not exist in Chattanooga before this agreement," Gilliland said. "This capital can create long-lasting housing support to keep people from displacing effects of gentrification."

James McKissic, head of the city's office of multicultural affairs, echoed Gilliland's praise for the deal, which was discussed at the city-hosted fair housing conference Friday.

He said his office has already reached out to officials at First Tennessee because he wants to work with the bank to market their services to the residents who need them the most.

"I think it is a great thing," McKissic said. "It is a huge investment in the community, and I love the priorities and targets that they are looking at. These are things that our city really needs."

Contact staff writer Joan Garrett McClane at or 423-757-6601.