Wells Fargo is not prepared to end its 32-year relationship with the city of Davenport.
Patrice DeCorrevont, executive vice president of Wells Fargo's Government and Institutional Banking Group, said the banking giant will attempt to retain the city as its client after Davenport announced its intentions to release a request for proposals for new banking services.
In March, Wells Fargo's institutional Community Reinvestment Act rating, or CRA, was downgraded by the Office of the Comptroller of the Currency to "needs to improve," making Wells Fargo ineligible for city funds.
"Our intention is to respond," DeCorrevont said. "It might end up being thrown out, but we will let the city of Davenport make that decision. This is a 32-year relationship that we don't wish to see go."
The CRA rating, established in 1977, "requires financial institutions to meet the credit needs of their entire communities, including low- and moderate-income (LMI) neighborhoods."
Davenport's depository policy establishes that financial institutions must have a "satisfactory" or above rating for both its national and local CRA ratings in order to receive city funds.
Wells Fargo is the primary holder of the city's checking and savings accounts, which hold more than $100 million in total. In 2012, Wells Fargo held $1.1 billion in deposits for the entire metropolitan statistical area.
While it received an outstanding rating in Iowa and the Quad-Cities, Wells Fargo's institutional rating was downgraded 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 March as a result of the unauthorized opening of up to 2.1 million accounts of which customers might not have been not aware.
Five years ago, Wells Fargo also settled with minority homebuyers after steering African-American and Hispanic customers into subprime mortgages, which caused them to incur higher rates and fees than white customers.
DeCorrevont said Wells Fargo has continued to monitor how the rating will affect its business because Davenport is not alone in having a depository policy in place with CRA requirements.
With approximately 5,500 city, county, state and other government clients, DeCorrevont called those accounts "a very large piece of the wholesale of products and services Wells Fargo offers," but he could not estimate what toll the downgrade would have on its business.
Some cities and states took a proactive approach to removing funds from Wells Fargo in 2016 when the unauthorized account scandal broke.
Illinois Treasurer Michael Frerichs, for example, announced the indefinite suspension of $30 billion in annual investment transactions in October.
Although Wells Fargo has been embroiled in these scandals, Mike Rizer, executive vice president of community relations, said the ratings downgrade was not reflective of Wells Fargo's community investment as the bank was the No. 1 lender to small businesses, African-Americans and Hispanics.
"We were disappointed in the rating given that our performance was outstanding in all categories," Rizer said. "In each and every one of those, and when you look at our performance nationally, we're actively meeting those needs of low- and moderate-income communities, placing our branches in those areas, and supplying mortgages and loans to small businesses."
Wells Fargo has requested to expedite the timing of its next CRA rating. Regardless of the outcome, Rizer said it will not have an effect on the financial institution's practices.
"We're going to keep on doing what we're doing," Rizer said. "We self-assess ourselves each year to make sure we're in position to meet the community's needs."
As Davenport seeks a new depository for its funds, the City Council has asked for more emphasis to be placed on loans and mortgages aimed at developing the central city.
In response to Finance Director Brandon Wright's recommendation to seek new banking services, Alderman Bill Boom, 3rd Ward, wrote in an email that "Davenport prides itself on its diverse population and our actions should support our words."
While Rizer and DeCorrevont expressed disappointment in Davenport's decision, Wells Fargo's practices paint a favorable picture of its investment in the Quad-Cities.
In the OCC's report, which analyzed 2008-12, it found that Wells Fargo's "grants and investments exhibit adequate responsiveness to the needs identified in the (assessment area)."
Projects included a $1 million investment to fund the building of the Holiday Court apartments, as well as $3.7 million for the building of the Harrison Lofts.
Wells Fargo also was lauded for extending a $150 million line of credit to a tax credit investment fund, which used $7.2 million to build a 41-unit housing project in Davenport that was restricted to LMI households.
Beyond receiving outstanding local CRA ratings, the most recent Home Mortgage Disclosure Act, or HMDA, data showed Wells Fargo provided $3.8 million in credit to LMI communities and $6 million in credit to LMI borrowers in Davenport in 2015.
Out of its 188 small business loans, 58 were extended to LMI communities, accounting for $4.2 million.
Additionally, Wells Fargo received the Minority-Owned, Women-Owned and Start-Up Small Business Awards from the Small Business Administration in Iowa in 2016.
The question remains for Wells Fargo how Davenport will treat its proposal given that the financial institution will not comply with city policy.
"These local ordinances are meant to make sure they are working with companies that are doing the right thing and working with the marginalized communities," Rizer said. "The (national CRA) rating is not correlated with what we're doing in the community."