After thousands of letters, a raucous public hearing in downtown Los Angeles and 364 days of waiting, Pasadena’s OneWest Bank and CIT Group Inc. in Livingston, N.J., finally got regulators to bless their proposed union.

The community groups that opposed the deal didn’t get what they really wanted – a “no” from regulators – but they didn’t walk away empty-handed. In signing off on the deal, regulators included several conditions the banks must meet – requirements that opponents of the deal say leave them with some leverage and justifies their campaign against the transaction.

On July 21, the Federal Reserve and Office of the Comptroller of the Currency signed off on the merger of the two banks, which will create CIT Bank, a Pasadena institution with about $65 billion in assets – one that will become L.A.’s biggest bank.

It was a deal that brought out a significant amount of community opposition, which caused regulators to take the relatively rare step of holding a public hearing on the deal. The opposition, in which San Francisco umbrella organization California Reinvestment Coalition played a leading role, focused on OneWest’s foreclosure activity and alleged lack of commitment to lower-income communities.

There was also the issue that both banks benefited tremendously from government assistance during the uncertain times after the 2008 crash. CIT received $2.3 billion from the Troubled Asset Relief Program – which it failed to pay back before going bankrupt in 2009. And OneWest, which was formed by private equity investors out of failed Pasadena thrift IndyMac Bank, benefited immensely from a shared-loss agreement with the Federal Deposit Insurance Corp.

But almost exactly one year after it was announced July 22, 2014, the merger cleared its biggest hurdle yet.

Wade Francis, president of Long Beach bank consulting firm Unicon Financial Services Inc. – and a former OCC bank examiner – expected regulators would approve the deal all along.

In his view, if regulators shot down a deal involving banks that had passed their financial viability and community outreach tests, it would mean their own examiners had done a bad job. Francis also said that while regulators acknowledged some of the opposition from public commenters and community groups, they didn’t meaningfully engage with that opposition.

“The results are exactly what were expected based on the legal standard,” he said. “And the legal standard was never in doubt. They didn’t really give any credence to the complaints. In my mind, I think it vindicates the deal.”

CIT released a statement acknowledging regulatory approval and welcoming OneWest employees to CIT. Through a spokesman, OneWest declined to comment.

Not done yet

However, the community groups that had vociferously protested the merger took solace from the OCC imposing a series of conditions in its 57-page approval letter, mainly related to the bank’s Community Reinvestment Act plan. Under that 1977 act, banks are required to adequately serve lower-income communities, and regulators are tasked with reviewing banks’ compliance with the law when evaluating mergers or acquisitions.

As a condition of approving this deal, the OCC demanded the combined bank submit a new CRA plan within 90 days, post the plan online and seek public feedback – all of which go beyond what the OCC typically demands.

CRC Executive Director Paulina Gonzalez said the plan now is to hold CIT and OneWest accountable to the OCC’s conditions. Unlike Francis, she believes the community and public opposition did influence the OCC’s conditional approval.

“We’ve never seen this level of requirements from the OCC,” Gonzalez said. “The regulators have laid out a road map: ‘We want to see a better CRA plan, what you have is not good enough. You have to go back and revise it and have to do it with community input.’”

Gonzalez said that while the CIT-OneWest merger received the regulatory approval her group had campaigned against, the process was not a complete victory for the banks.

“There’s been a long drawn-out fight,” she said. “The bank has been left with a black eye given all the dirt that’s been dug up, when really this could have been taken care of months ago.”

Francis believes that CIT and OneWest’s success in getting regulatory approval without meaningfully engaging its opponents justified that tactic. He thinks other banks who decide to play ball probably concede too much.

“With the way CIT and OneWest handled it, they didn’t have to give away the farm,” he said.

But Gonzalez said that’s yet to be determined, as regulators have not given the final OK to the bank’s CRA plan.

“If CIT and OneWest do what they’ve been doing for the last year, our expectation is that the regulators are not going to be happy,” she said.

At this point, Gonzalez said she’s prepared to push the reset button and work with OneWest and CIT on a revised CRA plan. She said she sent an email to OneWest Chief Executive Joseph Otting last week, congratulating him on the approval and asking to meet to discuss how they can work together on OneWest’s CRA activities.

Not surprisingly, Gonzalez said she has yet to hear back.