The former CEO of Yadkin Financial says he was unaware of a federal redlining allegations that the Elkin-based bank discriminated against consumers in Charlotte and Winston-Salem.
Scott Custer led Yadkin for three years before its 2017 sale to Pittsburgh-based FNB for $1.4 billion. FNB this week paid $13.5 million to settle redlining allegations brought by the U.S. Department of Justice and N.C. Attorney General’s office.
Regulators said the alleged redlining — an illegal practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color, or national origin — occurred from 2017 to 2021. A federal official leading the DOJ’s Civil Right Division said the practice started before the FNB purchase and continued thereafter, WRAL News reported.
“At Yadkin, we never had any issue” with redlining, said Custer in an interview with Business North Carolina. He added that he hadn’t seen the settlement announcement from earlier this week and “hasn’t kept up” with what has been going on with FNB, which he left in 2017.
In 2010, Custer became a director and CEO of Piedmont Community Bank Holdings, which he formed with Raleigh investor Adam Abram. The next year, he became a director and CEO of Burlington-based VantageSouth Bancshares and VantageSouth Bank, serving in that capacity until the merger of Yadkin, VantageSouth and Piedmont in 2014. After the sale to FNB, he left Yadkin to become president of Wilmington-based Live Oak Bank in April 2017, serving as president.
In September 2018, he left Live Oak and joined the board of Raleigh-based Dogwood State Bank, where he is now executive chairman.
When FNB bought Yadkin, it had $7.5 billion in total assets, $5.3 billion in total deposits, $5.4 billion in total loans and 100 banking offices in North Carolina and South Carolina. FNB now has about 85 offices in more than 60 N.C. communities.
FNB’s home mortgage lending was focused disproportionately on white areas of Charlotte and Winston-Salem, the DOJ says. For example, other lenders generated applications in predominantly Black and Hispanic neighborhoods at two-and-a-half times the rate of FNB in Charlotte and four times the rate of FNB in Winston-Salem.
FNB’s branches in both cities were also overwhelmingly located in predominantly white neighborhoods, with the bank closing its sole branch in a predominantly Black and Hispanic neighborhood in Winston-Salem in 2021, the DOJ said.
FNB spokesperson Jennifer Reel said the company disagreed with the DOJ’s findings, believing it was fully compliant with federal and state lending laws. However, it settled the case in order to put the matter behind them.
The bank’s statement said that the redlining began before it acquired Yadkin and that it had established its commitment to offering affordable credit in minority communities immediately following the Yadkin acquisition.
“We cooperated fully to reach an agreement in this inherited matter as a good faith effort to avoid prolonged litigation,” Reel said.
“We are also proud to further advance our existing commitment to ensure minority and low- to moderate-income borrowers have access to credit and vital banking resources,” added Reel.
FNB will provide $11.75 million in mortgage loan subsidies over a five-year period, leveraging its previously announced commitment to underserved communities across the footprint, including those located in the Charlotte and Winston-Salem markets.
The settlement does not include any civil money penalties against FNB.