By Jonathan Stempel
(Reuters) -First National Bank of Pennsylvania on Monday reached a $13.5 million settlement with the U.S. Department of Justice and North Carolina to resolve charges it engaged in lending discrimination known as redlining in the Charlotte and Winston-Salem, North Carolina markets.
Redlining occurs when lenders deny or discourage mortgage applications and loans in neighborhoods based on the race, color, or national origin of people who live there.
The five-year settlement addresses claims that FNB and the former Yadkin Bank, which FNB bought in 2017, violated the federal Fair Housing Act and Equal Credit Opportunity Act by avoiding home loans and other mortgage services between 2017 and 2021 in majority-Black and Hispanic neighborhoods.
"The settlement should send a strong message," Kristen Clarke, assistant attorney general of the Justice Department's civil rights division, told reporters on a conference call. "Redlining will not be tolerated."
FNB will invest $11.75 million in a loan subsidy fund, devote $1 million to community partnerships, and spend $750,000 on advertising, credit counseling, education and outreach.
The Pittsburgh-based lender will also open at least two branches in majority-Black and Hispanic neighborhoods in Charlotte, and one such branch in Winston-Salem.
According to court papers, those regions had a respective 32% and 22% of census tracts in majority-Black and Hispanic areas, but FNB devoted just one of 18 branches in each region to those tracts -- and closed the Winston-Salem branch in 2021.
"The playing field isn't level, and that is not what we want for the people of North Carolina," state Attorney General Josh Stein told reporters.
FNB said it strongly disagreed with the accusations and was "deeply disappointed" the Justice Department began a probe so soon after it entered the Charlotte and Winston-Salem markets.
A spokeswoman, Jennifer Reel, said FNB settled "to avoid prolonged litigation and to maintain our focus on promoting equity and economic prosperity."
FNB ended 2023 with about $46.2 billion of assets and 350 branches in seven U.S. states plus Washington, D.C.
The Justice Department called the settlement the 12th in the Biden administration's Combating Redlining Initiative, which was announced in Oct. 2021.
In afternoon trading, FNB shares were down 8 cents at $13.00.