|For immediate release|
The Federal Reserve Board today announced its approval of the application by Peoples Heritage Financial Group, Inc., Portland, Maine, to acquire SIS Bancorp, Inc., Springfield, Massachusetts, and thereby acquire SIS Bancorp's bank subsidiaries, Springfield Institution for Savings, Springfield, Massachusetts, and Glastonbury Bank & Trust Company, Glastonbury, Connecticut.
Attached is the Board's Order relating to this action.
Peoples Heritage Financial Group, Inc.
Peoples Heritage Financial Group, Inc., Portland, Maine ("Peoples"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), and its wholly owned subsidiary, Peoples Heritage Merger Corp., Portland, Maine ("Peoples Merger"), have requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to merge with SIS Bancorp, Inc., Springfield, Massachusetts ("SIS"), and to acquire the subsidiary banks of SIS, Springfield Institution for Savings, Springfield, Massachusetts ("SIS Bank"), and Glastonbury Bank & Trust Company, Glastonbury, Connecticut ("Glastonbury Bank").1
Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 54,140 (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 section 3 of the BHC Act.
Peoples, with total consolidated assets of approximately $9.8 billion, operates depository institutions in Maine, New Hampshire, and Massachusetts.2 Peoples is the tenth largest depository institution in Massachusetts, controlling deposits of approximately $1 billion in the state, representing less than 1 percent of total deposits in insured depository institutions in the state ("state deposits"). SIS, with total consolidated assets of approximately $1.8 billion, operates depository institutions in Massachusetts and Connecticut. SIS is the ninth largest depository institution in Massachusetts, controlling deposits of approximately $1.1 billion in that state, representing less than 1 percent of state deposits. On consummation of the proposal, Peoples would be the eighth largest depository organization in Massachusetts, controlling deposits of $2.1 billion, representing 1.8 percent of state deposits.
Competitive, Financial and Managerial Considerations
The BHC Act also requires the Board, in acting on an application, to consider the financial and managerial resources and future prospects of the companies and banks involved, and other supervisory factors. The Board has reviewed these factors in light of the record, including supervisory reports of examination assessing the financial and managerial resources of the organizations and financial information provided by Peoples. Based on all the facts of record, the Board concludes that the financial and managerial resources and future prospects of Peoples, SIS, and their respective subsidiary banks are consistent with approval, as are other supervisory factors the Board must consider under section 3 of the BHC Act.
Convenience and Needs Considerations
The Board has long held that consideration of the convenience and needs factor includes a review of the records of the relevant depository institutions under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As provided in the CRA, the Board has evaluated this factor in light of examinations by the primary federal supervisors of the CRA performance records of the relevant institutions. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a detailed on-site evaluation of the institution's overall record of performance under the CRA by its primary federal supervisor.7 All the insured depository institutions controlled by Peoples received "outstanding" or "satisfactory" CRA performance ratings in their most recent CRA examination by their primary federal supervisor: Family Bank, FSB, Haverhill, Massachusetts ("Family FSB"), received an "outstanding" rating from the Office of Thrift Supervision ("OTS"), as of July 28, 1997; Peoples Heritage Savings Bank, Portland, Maine, received an "outstanding" rating from the Federal Deposit Insurance Corporation ("FDIC"), as of April 8, 1996; and Bank of New Hampshire received a "satisfactory" rating from the FDIC, as of January 17, 1995.
In reviewing this case, the Board has paid particular attention to the record of performance of Family FSB in helping to meet the convenience and needs of the community because Peoples proposes to merge SIS Bank into Family FSB.8 In its most recent CRA examination of Family FSB, examiners noted that Family FSB offered a full range of residential, commercial, and consumer loans. Examiners commented favorably on the institution's no-fee checking accounts, telephone banking services, and an electronic banking card program for social security and public assistance income distribution. Examiners also noted that Family FSB's services were readily accessible and tailored to the convenience of all segments of its assessment area. Examiners stated that all of the institution's branches offered automated teller machines ("ATMs") and 16 of the institution's 21 full-service retail offices offered extended hours at drive-through facilities. Peoples also indicates that it maintains full-service branches operated by students at local high schools to provide business training opportunities for the students.
Examiners stated that, according to data reported for 1995 pursuant to the Home Mortgage Disclosure Act (12 U.S.C. § 2801 et seq.) ("HMDA"), Family FSB originated a substantially higher percentage of residential loans to low- and moderate-income ("LMI") borrowers than the aggregate average percentage for all HMDA lenders in the area. Based on 1995 HMDA data, Family FSB made more than 400 residential loans, totaling more than $25 million, to LMI borrowers. Examiners particularly noted that the institution met many low-income lending needs through special credit programs with flexible debt-to-income ratios, down payment assistance, government guarantees, and mortgage insurance. Examiners stated that Family FSB significantly enhanced efforts to promote home ownership for low-income borrowers through the institution's Community Outreach Program and its participation in first-time home buyer and down payment assistance programs offered by community groups, government agencies, and secondary market sources.9 Examiners also stated that Family FSB's residential loan originations were substantially concentrated in its assessment area from January 1, 1995, to July 31, 1997. Examiners noted that Family FSB participated in affordable housing programs sponsored by government agencies such as the Massachusetts Housing Finance Authority ("MHFA"), the Federal Housing Administration ("FHA"), and the Department of Veterans Affairs ("VA"). Peoples states that the majority of the mortgage loans originated in 1997 by Family FSB were to borrowers earning less than the median income of the assessment area and 36 percent of mortgage loans were to borrowers earning less than 80 percent of the median income.
Examiners noted that Family FSB made almost 500 loans, totaling more than $84 million, to small businesses in its assessment area from January 1, 1996, to July 31, 1997. Examiners noted that these loans represented more than 60 percent of Family FSB's commercial loans and more than 90 percent of the institution's small business loans. Moreover, examiners stated that Family FSB made 80 small business loans, totaling more than $12 million, in LMI census tracts. Peoples states that, in cooperation with the North Quabbin Community Advisory Board, Family FSB made loans totaling more than $250,000 pursuant to a $1 million commitment to a small business loan pool since the pool was established in June 1998. Peoples also states that Family FSB has been designated a "Preferred Lender" by the Small Business Administration.
Examiners stated that, from January 1, 1996, to July 31, 1997, Family FSB made 28 loans, totaling more than $5 million, to organizations in its assessment area that supported affordable housing, economic and community development, and neighborhood stabilization. Examiners also noted that, of these loans, almost 40 percent by number and more than 30 percent by dollar amount were made in LMI census tracts. Examiners favorably commented on the more than $2 million in investments in community development organizations made by Family FSB during the examination period, including investments in low-income housing limited partnerships, small business loan funds, and programs for housing rehabilitation. Peoples states that, in 1996 and 1997, Family FSB made grants and donations of more than $200,000 to organizations such as The United Way, Merrimack Valley Housing Partnership, Worcester County Food Bank, Worcester East Side CDC, and the North County Land Trust. Examiners also noted that the institution's management and officers contributed financial expertise to a significant number of community organizations and programs, including affordable housing development and rehabilitation corporations, credit and home ownership counseling agencies, job training and placement services for low-income individuals, and financial intermediaries that lend to small businesses in LMI areas.
SIS Bank received an "outstanding" rating from the FDIC at its most recent CRA examination, as of September 22, 1997.10 Glastonbury Bank received a "satisfactory" rating from the FDIC at its most recent CRA examination, as of August 26, 1996. Examiners noted that, based on 1995 HMDA data, SIS Bank was the market leader in its assessment area with 8.7 percent by number and 11 percent by dollar amount of the HMDA loans reported in the assessment area. Examiners also noted that, based on 1996 HDMA data, SIS Bank made almost 50 HMDA loans, totaling more than $2.7 million, in LMI census tracts and 250 HMDA loans, totaling more than $14 million, to LMI borrowers. Examiners stated that, during 1996, SIS Bank made more than 80 home equity loans, totaling more than $2 million, in LMI census tracts and more than 470 home equity loans, totaling more than $12 million, to LMI borrowers. Examiners commented favorably on the innovative and flexible lending programs offered by SIS Bank, many of which were focused on first-time home buyers in LMI areas. Examiners noted that, in 1996, SIS Bank made approximately $1.5 million in mortgage loans under its Soft Seconds Program which provides LMI borrowers with two mortgages; the second mortgage is subsidized with public funds and provides for significantly reduced payments during the first nine years of the loan.
Examiners also stated that, during 1996, SIS Bank made 38 mortgage loans, totaling more than $2.7 million, under a program sponsored by the MHFA to assist first-time home buyers that includes a 30-year fixed rate mortgage at below market interest rates with low down payment requirements and flexible underwriting guidelines. Examiners also noted that, in 1996, SIS Bank made 21 mortgage loans, totaling more than $2 million, in a VA mortgage program that provides 100 percent financing to eligible veterans.
Examiners stated that, in 1996, SIS Bank made more than 260 commercial loans, totaling more than $10 million, in amounts equal to or less than $100,000, representing more than 60 percent by number of the commercial loans made by SIS Bank during the period. Examiners also noted that 65 percent of commercial loans made by SIS Bank with original balances of $1 million or less during the period were originated to businesses with gross annual revenues of $1 million or less.
Examiners stated that the number and distribution of SIS Bank's branches provided reasonable access to the bank's services by everyone living in the bank's assessment area. Examiners noted that most of the bank's branches offered extended operating hours. Examiners stated that SIS Bank employed numerous bilingual individuals who could provide translation services. Examiners also noted that SIS Bank offered several free deposit products, such as basic checking, statement savings, and unlimited usage of proprietary and nonproprietary ATMs.
Peoples states that, after consummation of the proposed merger, the combined organization would continue to offer many of the consumer products and services offered by SIS, including a checking account with no minimum balance, no monthly service charges, and no transaction limits; home equity loan and credit lines; relationship checking packages, which provide enhanced deposit rates and reduced fee structures; certificates of deposit with flexible interest rate terms; and telephone banking services. Peoples also states that no branch closings or consolidations are anticipated in connection with the proposed merger.
The Board has carefully considered the lending records of Family FSB and SIS Bank in light of comments on the 1996 and 1997 data reported by the institutions pursuant to the HMDA. The data for 1996 and 1997 generally show that Family FSB and SIS Bank have assisted in meeting the credit needs of the communities they served with respect to HMDA-related loans, including the credit needs of minority and LMI borrowers and borrowers in LMI census tracts.
The Board has carefully considered the data in light of other information, including examination reports that provide an on-site evaluation of the compliance by Family FSB and SIS Bank with the fair lending laws and the overall lending and community development activities of the banks. The examinations revealed no evidence of prohibited or illegal credit practices at Family FSB and SIS Bank, and the institutions were in compliance with the substantive provisions of antidiscrimination laws and regulations, including the Equal Credit Opportunity Act, the Fair Housing Act, and the HMDA. Peoples states that Family FSB conducts annual CRA and fair lending training for all employees.
The Board has carefully considered all the facts of record, including the comments received, responses to those comments, and the CRA performance record of Family FSB and SIS Bank, including relevant reports of examination and other supervisory information. Based on a review of the entire record and for the reasons discussed above, the Board concludes that convenience and needs considerations, including the CRA records of performance of the institutions involved, are consistent with approval of the proposal.
The acquisition of SIS may not be consummated before the fifteenth calendar day after the effective date of this order, and the proposal may 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 Boston, acting pursuant to delegated authority.
By order of the Board of Governors,11 effective November 4, 1998.
(signed) Robert deV. Frierson
Robert deV. Frierson
1 Peoples also has requested Board approval to hold and exercise options to acquire up to 19.9 percent of the voting shares of SIS, if certain events occur. The options would not be exercised if the merger is consummated.
2 Asset and deposit data are as of June 30, 1998, unless otherwise noted.
3 See 12 U.S.C. § 1842(d).
4 A bank holding company's home state is that state in which the operation of the bank holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. 12 U.S.C. § 1841(o)(4)(C).
5 See 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Peoples is adequately capitalized and adequately managed, as defined in the BHC Act, and the subsidiary banks of SIS have been in existence and operated for the minimum periods of time necessary to satisfy age requirements established by applicable state law. See Mass. Gen. Laws Ann. ch. 167A, § 2 (West 1998) (three years); Conn. Gen. Stat. Ann. § 36a-412 (West 1998) (five years). Peoples also would not exceed applicable state law deposit limitations as calculated under state law. On consummation of the proposal, Peoples would control less than 10 percent of the total amount of deposits in insured depository institutions in the United States. All other requirements of section 3(d) of the BHC Act also would be met on consummation of the proposal.
6 The Board received a comment letter signed by several community groups ("commenters") which expressed concern that the acquisition of SIS by Peoples would adversely affect the positive impact SIS has had on the Springfield, Massachusetts, community. Commenters favorably noted some current programs of Peoples, but expressed concern about the record of Peoples in meeting the residential lending needs of low- and moderate-income and minority borrowers.
7 The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process. 54 Federal Register 13,742 and 13,745 (1989).
8 Immediately after consummation of the merger of SIS into Peoples Merger, Peoples anticipates that SIS Bank would merge with and into Family FSB. The merger of SIS Bank into Family FSB is subject to the prior approval of the OTS under the Bank Merger Act.
9 Peoples states that, as part of its Community Outreach Program, Family FSB offers mortgages with special terms for LMI borrowers, including an adjustable rate mortgage with discounted pricing based on the borrower's income level compared with the median income of the area, with the most favorable pricing reserved for borrowers earning less than 50 percent of the area's median income level; permitting up to 2 percent of the required 5 percent down payment to come from a gift, grant, or Family FSB unsecured loan with no interest for applicants earning less than 60 percent of the area's median income; and flexible requirements for debt-to-income ratios. Peoples also states that more than $6 million in mortgage loans have been made through its Community Outreach Program since the program began in late 1994.
10 For purposes of CRA, the assessment area of SIS Bank consists of the Springfield, Massachusetts, Metropolitan Statistical Area ("MSA") and some contiguous towns in the same census tracts as towns located in the Springfield MSA.
11 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Ferguson, and Gramlich. Absent and not voting: Governor Meyer.
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1998 Orders on banking applications