The 32-year-old relationship between Wells Fargo and the city of Davenport is coming to a close as the city is preparing to award a contract for its banking services to Quad-City Bank & Trust.
Davenport received four responses to its request for proposals, or RFP, for its banking services. An 18-member panel of city staff along with Aldermen Jason Gordon, at large, and Kerri Tompkins, 8th Ward, evaluated the bids.
While Quad-City Bank & Trust was the highest scoring bank, Finance Director Brandon Wright also has recommended the city explore U.S. Bank's purchasing card solution, which is available through a state contract.
"My recommendation allows Davenport to take advantage of the stronger points of both proposals," Wright wrote in a July 14 memo to the City Council. "The strongest points for QCB&T are the potential for customization and a higher interest-rate return with a guaranteed floor of 0.80 percent. The strongest points for U.S. Bank are the overall size and strength of the organization and industry-leading purchasing card solutions."
Wells Fargo currently holds the city's primary checking and savings accounts, totaling more than $100 million, which will take months to transition into the new accounts.
Davenport made its decision to seek a new financial institution for its city accounts after Wells Fargo's institutional Community Reinvestment Act, or CRA, rating was downgraded to "needs to improve" in late March.
The CRA rating, which is issued by the federal Office of the Comptroller of the Currency, "requires financial institutions to meet the credit needs of their entire communities, including low- and moderate-income neighborhoods."
Once the institutional rating was downgraded, Wright made the recommendation to change banks because the city's policy requires depositories eligible for city funds to have "satisfactory" ratings in both the local metropolitan statistical area and national ratings.
Wells Fargo maintained both an outstanding local and state rating, but its institutional rating was dropped because of the "extensive and pervasive pattern and practice of violations across multiple lines of business with the bank, resulting in significant harm to large numbers of consumers."
The bank settled with consumers for $110 million in April as a result of the opening of two million accounts that customers did not authorize.
Wells Fargo also settled with minority home buyers five years ago after steering African-American and Hispanic customers into subprime mortgages, which caused them to incur higher rates and fees than white customers.
Wells Fargo and Southeast National Bank also submitted proposals, but Wells Fargo was disqualified and considered a non-responsible bidder because it does not meet the ratings requirement.
"We’re disappointed the city of Davenport is planning to end its 32-year relationship with Wells Fargo," Wells Fargo Vice President of Corporate Communications Steve Carlson said. "We remain committed to the city and all of its residents — as evidenced by our outstanding CRA rating in both Iowa and the Quad-Cities — and Wells Fargo stands ready to serve the city’s financial needs again in the future."
The proposals were evaluated based on the financial institution’s overall strength, stability, and total asset holdings, support capability to the city, time deposit interest rates and quality of project approach and implementation plan.
Although a few members of the City Council had inquired about ensuring its next banking institution was lending to homeowners and businesses in the central city, Wright said that was not included in the evaluation criteria.
"What we articulated to them was that it wasn't within the possibilities of our staff and they understood that," Wright said. "We didn't do an in-depth housing analysis because that would be a fairly large undertaking."
Instead, Wright said the city relied on the national and local CRA ratings to determine eligibility.
Quad-City Bank & Trust's received a "satisfactory" CRA rating while U.S. Bank received a "satisfactory" score for its national rating and outstanding scores for its state and local ratings.
The City Council will discuss switching its financial institution during Wednesday's committee-of-the-whole meeting before voting on the subject at the July 26 council meeting.