|For immediate release|
The Federal Reserve Board today announced its approval of the notice and application of Charter One Financial, Inc., and its wholly owned subsidiary, Charter-Michigan Bancorp, Inc., both of Cleveland, Ohio (collectively "Charter One"), to become bank holding companies by acquiring ALBANK Financial Corporation ("ALBANK") and its subsidiary bank, ALBANK Commercial, both of Albany, New York, to acquire the nonbanking subsidiaries of ALBANK, and to retain some of Charter One's nonbanking subsidiaries.
Attached is the Board's Order relating to this action.
Charter One Financial, Inc.
Charter One Financial, Inc., and its wholly owned subsidiary, Charter-Michigan Bancorp, Inc. ("CMB") (collectively "Charter One"), savings and loan holding companies within the meaning of the Home Owners Loan Act (12 U.S.C. § 1461 et seq.),1 have requested the Board's approval under section 3 of the Bank Holding Company Act (12 U.S.C. § 1842) ("BHC Act") to become bank holding companies by acquiring ALBANK Financial Corporation ("ALBANK") and its subsidiary bank, ALBANK Commercial, both of Albany, New York.2 Charter One also has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire the nonbanking subsidiaries of ALBANK, including ALBANK's subsidiary savings association, ALBANK, F.S.B., Albany, New York ("ALBANK Savings"), to retain some of Charter One's nonbanking subsidiaries, and thereby to engage in the following nonbanking activities:
In connection with this application, Charter One also has requested the Board's approval to retain ownership of 9.95 percent of the voting shares of Gateway American Bank of Florida, Fort Lauderdale, Florida ("Gateway"), that Charter One currently owns. Charter One stated that it does not intend to control Gateway and has made a number of commitments designed to ensure that Charter One will not exercise a controlling influence over Gateway.3
Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 47,499 (1998)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in sections 3 and 4 of the BHC Act.
Charter One, with total consolidated assets of approximately $20.2 billion, is the seventh largest depository organization in Ohio, controlling approximately 3.1 percent of the total deposits of insured depository institutions in the state ("total deposits").4 Charter One Savings currently operates branches in Michigan, New York, and Ohio and Charter One engages in a number of nonbanking activities. Charter One is the 22nd largest depository organization in New York, controlling less than 1 percent of the total deposits.
ALBANK, with total consolidated assets of approximately $4.1 billion, is the 21st largest commercial banking organization in New York, controlling less than 1 percent of total banking deposits in the state ("total banking deposits"). After consummation of the proposal, Charter One would become the 14th largest commercial banking organization in New York, controlling approximately 1.4 percent of total banking deposits.
Competitive, Financial, and Managerial Factors
The BHC Act also requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in the proposal, the convenience and needs of the communities to be served, and certain other supervisory factors. The Board has carefully considered the financial and managerial resources and future prospects of Charter One, ALBANK, and their respective insured depository institutions and other supervisory factors in light of all the facts of record, including supervisory reports of examination assessing the financial and managerial resources of the organizations and confidential financial information provided by Charter One. Based on these and all the other facts of record, the Board concludes that the financial and managerial resources and future prospects of Charter One, ALBANK, and their subsidiary insured depository institutions are consistent with approval, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.
Convenience and Needs Factor
The Board has consulted with the OTS and the Department of Justice on the steps initiated by ALBANK to address these matters. The Board also has reviewed relevant supervisory information indicating that ALBANK's initiatives have generated successful results. In addition, the Board notes that Charter One intends to merge ALBANK Savings with and into Charter One Savings, with the community reinvestment activities of the resulting institution under the direction of current Charter One management. Charter One also has committed that it will ensure full compliance with the consent decree after consummation of the proposed transaction.
Based on all the facts of record, including in particular the performance record of Charter One and the measures taken by ALBANK to ensure compliance with fair lending laws, the Board concludes that convenience and needs considerations, including the CRA performance records of the subsidiary depository institutions of Charter One and ALBANK, are consistent with approval of the proposal.
Charter One also has filed a notice under section 4(c)(8) of the BHC Act to acquire the nonbanking subsidiaries of ALBANK, including ALBANK Savings, to retain some of Charter One's nonbanking subsidiaries, and thereby engage in extending credit and servicing loans, providing asset management and real estate appraisal services, engaging in leasing personal or real property, operating a savings association, providing securities brokerage and data processing services, and engaging in credit insurance and community development activities. The Board has determined by regulation that these activities are closely related to banking for purposes of the BHC Act.9 Charter One has committed to conduct these nonbanking activities in accordance with the limitations set forth in Regulation Y and all relevant Board orders and interpretations.
In order to approve a notice under section 4(c)(8) of the BHC Act, the Board also must determine that the proposed activities are a proper incident to banking, that is, that the proposal "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."10 As part of its evaluation of these factors, the Board considers the financial condition and managerial resources of the notificant and its subsidiaries, including the companies to be acquired, and the effect of the proposed transaction on those resources. For the reasons discussed above, and based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of the notice.
The Board also has carefully considered the competitive effects of the proposed acquisition of nonbanking activities. Charter One represents that there are few overlaps in the services provided by Charter One and ALBANK.11 To the extent that Charter One and ALBANK offer different types of products, the proposed acquisition would result in no loss of competition. In those markets in which the product offerings of Charter One and ALBANK overlap, such as brokerage services and the sale of insurance and annuities products, there are numerous existing and potential competitors. Consummation of the proposal, therefore, would have a de minimis effect on competition in the markets for these services, and the Board has concluded that the proposal would not result in any significantly adverse competitive effects in any relevant market.
Charter One has indicated that, after consummation of the merger proposal, it may provide more products and services than those currently offered by ALBANK. In addition, as the Board has previously noted, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they consider to be most efficient when such investments and actions are consistent, as in this case, with the relevant considerations under the BHC Act.12
The Board also concludes that the conduct of the proposed nonbanking activities within the framework established under Regulation Y is not likely to result in adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices, that would outweigh the public benefits of the proposal, such as increased customer convenience and gains in efficiency. Accordingly, based on all the facts of record, the Board has determined that the balance of public benefits that the Board must consider under the proper incident to banking standard of section 4(c)(8) of the BHC Act is favorable and consistent with approval of Charter One's notice.
The acquisition of ALBANK Commercial shall not be consummated before the fifteenth calendar day after the effective date of this order, and the proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Cleveland, acting pursuant to delegated authority.
By order of the Board of Governors,13 effective October 28, 1998.
(signed) Robert deV. Frierson
Robert deV. Frierson
Commitments For Retaining Shares of Gateway
Charter One Financial, Inc. ("COFI") and CMB have committed, jointly and severally, that they will not, directly or indirectly:
1 CMB controls Charter One Bank, F.S.B. ("Charter One Savings"), Cleveland, Ohio.
2 Pursuant to the merger agreement between Charter One and ALBANK, ALBANK would be merged with and into CMB. ALBANK also has granted Charter One an option to acquire up to 9.9 percent of ALBANK's outstanding common stock. The option would expire on consummation of the merger.
3 The Board has relied on similar commitments in other cases to determine that an investing bank holding company would not be able to exercise a controlling influence over another bank holding company or bank for purposes of the BHC Act. A complete list of these commitments is set forth in the Appendix.
4 Asset, deposit, and ranking data are as of June 30, 1997.
5 12 U.S.C. § 1842(c)(1).
6 ALBANK Commercial received its charter from the State of New York on October 8, 1997, and has not yet been examined for CRA performance.
7 12 C.F.R. 225.28(b)(4)(ii).
8 Charter One has committed that it will conform all the insurance, annuities, real estate, and other nonconforming activities conducted by Charter One and its subsidiaries to the requirements of section 4 of the BHC Act within two years after consummation of the proposal. Charter One must also conform the savings bank life insurance activities conducted by ALBANK to the requirements of section 4 of the BHC Act within two years after consummation of the proposal. ALBANK already is required to conform its other activities to the requirements of section 4 of the BHC Act within two years of the date on which ALBANK became a bank holding company, and Charter One must conform these activities of ALBANK to the requirements of the BHC Act within that same period.
9 See 12 C.F.R. 225.28(b)(1), (b)(2)(i), (b)(2)(vi), (3), (4)(ii), (7)(i), (11)(i), (12) and (14).
10 12 U.S.C. § 1843(c)(8).
11 Charter One Savings and ALBANK Savings do not compete in any relevant geographic market in providing savings association services.
12 See, e.g., Banc One Corporation, 84 Federal Reserve Bulletin 553 (1998); First Union Corporation, 84 Federal Reserve Bulletin 489 (1998).
13 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Meyer, Ferguson, and Gramlich. Absent and not voting: Governor Kelley.
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1998 Orders on banking applications