Banc of California has won the support of a key advocacy group for a pending acquisition after announcing ambitious goals to invest in underserved Los Angeles communities.

The community-investment plan, announced late Thursday, could make it easier for the Irvine bank to close its planned purchase of 20 Southern California branches from Banco Popular. The California Reinvestment Coalition, or CRC, a group that advocates for better financial services for minorities and the poor, had opposed the transaction, arguing that the $4 billion-asset Banc of California has little history of serving such customers and should be required to make its CRA plan public.

The coalition came out strongly in favor of the branch deal after Banc of California announced new community-investment goals. The plan "sets a new standard for banks around the country" and "will serve as a call to other banks to make similar commitments to community development," Executive Director Paulina Gonzalez said Thursday.

The détente shows the power that advocacy groups can wield in facilitating – or blocking – M&A deals.The CRC's campaign against the branch deal had spurred the Office of the Comptroller of the Currency to extend the public review period for the deal.

The new agreement lays out eight specific goals for Banc of California. They include putting 20% of deposits toward loans, investments or donations to low-income or underserved communities, and investing 0.25% of deposits toward affordable housing, small-business lending and other approved community-based businesses and nonprofits.

Banc of California also agreed to create and market a new account designed for low-income customers that adheres to standards set out by the California Reinvestment Coalition. The bank will also reconfigure its ATM network to waive out-of-network fees for customers who receive certain forms of public assistance.

Former Los Angeles Mayor Antonio Villaraigosa, whom Banc of California brought on last summer as a senior adviser, played an important role in negotiating the agreement. He said in a press release that the pact "marks a meaningful step forward in meeting the banking needs of Southern California's Latino community as well as other historically underserved communities."

Banc of California did not respond to a phone call seeking comment.

The CRC considers the agreement a precedent for coming M&A transactions, Gonzalez said. She mentioned CIT Group's planned purchase of OneWest as a deal she would expect to reach the bar set by the agreement with Banc of California.

"We're proud of this agreement. We think it sets a standard," Gonzalez said. "We think that the benchmarks it sets will encourage other institutions to do more than they've been doing in the past."

The dispute between Banc of California and the CRC began last year. The CRC claims the bank promised to make public its reinvestment plan if the CRC dropped its objection to the bank's planned charter conversion. After the CRC rescinded its objection, Banc of California refused to make its plan public, the group claimed.

Banc of California disputes that version of events, saying that Chief Executive Steven Sugarman agreed to consider the group's concerns, but never conceded to publicly releasing the company's reinvestment plan.

However the disagreement arose, it proved a roadblock for Banc of California. In July, after the CRC spoke out against the proposed branch purchase, the OCC forced Banc of California to file a second public notice of the deal and established an additional 30-day comment period. Last week, the CRC and 46 other California community groups sent the OCC another comment letter urging regulators not to approve the branch acquisition without a public CRA plan.

An OCC spokesman declined to comment, citing the agency's policy not to discuss specific institutions.

Ultimately, Banc of California appears to have conceded to most, if not all, of the CRC's demands. In addition, it has agreed to meet with the CRC annually over the next five years to review its progress toward its goals.

While there are no penalties if Banc of California fails to reach the new community-investment goals, Gonzalez said she expects the bank to fulfill its obligation. The plan has been submitted to regulators, which she hopes will put further pressure on Banc of California to hit its targets.

"Our idea is to help the bank reach those goals. It will become a more collaborative process," Gonzalez said. "I have faith that given that the bank has now made these goals public, it is going to hold itself to the high standards that it has set."

Chris Cumming is a reporter for American Banker.

Read more: