SOCIAL TOPICS (Archive): HISTORY OF WALDEN ASSET MANAGEMENT/SRI

Published, March 1994

       The Federal Deposit Insurance Corporation (FDIC) in January assigned our sister company USTrust an “outstanding” rating for compliance with the Community Reinvestment Act (CRA). Only 14% of banks nationwide achieve this highest rating for meeting the credit needs of their communities, including low- and moderate-income neighborhoods.

       The January 1994 rating signaled significant improvement from the previous FDIC examination in June 1991 when the bank was assigned a “needs to improve” rating. For those of us involved in asset management, the 1991 evaluation was both surprising and disappointing especially given our own efforts to determine the suitability of banks for social investment portfolios.

       The FDIC cited, in the public section of its 1994 report, a number of areas in which USTrust demonstrated substantial progress in the two-and-a-half-year period between examinations. The audit identified significant improvement in community outreach efforts at all levels of the organization, and board of directors’ support and responsibility for CRA activities. Specifically noted were increased involvement with community organizations, widespread customer surveys, targeted marketing to low-to-moderate income neighborhoods, and advertising in several languages and in a variety of media.

       Innovative products were developed as a result of community input. For example, in 1993 USTrust pioneered an affordable mortgage program for home purchases or refinancing, featuring flexible underwriting standards and no points or closing costs. The unusual refinance component of the program allows homeowners of modest means to participate in the decline in mortgage interest rates.

       The ultimate measure of progress lies in results. An analysis of lending at USTrust shows the bank to be moving solidly along the path toward meeting the mortgage credit needs of low-to-moderate income and minority applicants. Through October of 1993 (the most recent data available for the FDIC examination), just under 75% of applications from low-to-moderate income applicants were actually approved and resulted in loans. These numbers represent 31% of all loans actually made inside the bank’s CRA community.

       Of the total 493 applications received by USTrust during this same time period, 24% were received from minority applicants. This compares favorably with demographic data indicating that minorities comprise 14% of households in USTrust’s CRA territory. The bank’s denial rate of 21% for minority applications, according to FDIC examiners, “appears reasonably consistent with the bank’s overall denial rate of 19%”. USTrust’s self assessment with respect to commercial lending shows steady improvement as well.

       Finally, the FDIC noted improvement internally both in efforts to recruit and hire minorities in key lending positions and in training all lending personnel in Fair Housing and Equal Credit Opportunity. The training was jointly conducted by an African American senior partner from a local law firm and corporate counsel for the minority-owned Boston Bank of Commerce.

       United States Trust Company (USTC) has also been working to increase diversity at all levels of the organization. Our board is currently comprised of seven white men and two women, one of whom is African-American. Of our 50 employees, 70% are women and 14% are minorities. Representation at the officer and professional level (29 individuals) is 7% and 55% for minorities and women respectively. Two women are among the seven members of our senior strategic policy committee. While we are not planning a significant increase in staff, we are focusing our efforts to increase diversity on the hiring and promotion of minorities.

       USTrust, a commercial bank, and USTC, a bank specializing in asset management, are both subsidiaries of UST Corp.