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The Federal Reserve Board today announced its approval of the application by North Fork Bancorporation, Inc., Melville, New York, to acquire New York Bancorp, Inc., Douglaston, New York, and its wholly owned subsidiary, Home Federal Savings Bank, Ridgewood, New York. Attached is the Board's Order relating to this action. |
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North Fork Bancorporation, Inc. |
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North Fork Bancorporation, Inc., Melville, New York ("North Fork"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), 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 all the voting shares of New York Bancorp, Inc., Douglaston ("Bancorp"), and thereby acquire Home Federal Savings Bank, Ridgewood ("Savings Bank"), both in New York.1 Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 63,344 (1997)). 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 4 of the BHC Act. North Fork, with total consolidated assets of approximately $6 billion, operates North Fork Bank, which has branches in New York.2 North Fork is the 16th largest depository institution in New York, controlling deposits of approximately $4.4 billion, representing approximately 1 percent of total deposits in depository institutions in the state ("state deposits").3 Bancorp is the 35th largest depository institution in New York, controlling deposits of approximately $1.5 billion, representing less than 1 percent of state deposits. On consummation of the proposal, North Fork would become the 14th largest depository institution in New York, controlling deposits of approximately $6 billion, representing approximately 1.5 percent of state deposits. The Board previously has determined by regulation that the operation of a savings association by a bank holding company is closely related to banking for purposes of section 4(c)(8) of the BHC Act.4 In making this determination, the Board requires that savings associations acquired by bank holding companies conform their direct and indirect activities to those permissible for bank holding companies under section 4 of the BHC Act. North Fork has committed to conform all of Savings Bank's activities to those permissible under section 4(c)(8) of the BHC Act and Regulation Y.5
Competitive Considerations North Fork and Bancorp compete directly in the Metropolitan New York-New Jersey banking market ("New York banking market").8 On consummation of the proposal, North Fork would become the 15th largest depository institution in the market, controlling deposits of approximately $6.6 billion, representing approximately 1.5 percent of total deposits in depository institutions in the market.9 Concentration in the New York banking market, as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines") would remain unchanged and unconcentrated at 627 points.10 In addition, numerous competitors would remain in the New York banking market. Based on these and all other facts of record, the Board concludes that the consummation of the proposal would not result in any significantly adverse effects on competition or on the concentration of banking resources in the New York banking market or any other relevant banking market.
Record of Performance under the Community Reinvestment Act North Fork indicates that it intends to implement the CRA programs and policies of North Fork Bank in the communities formerly served by Savings Bank after Savings Bank is merged with North Fork Bank. North Fork also intends to retain Savings Bank's programs that North Fork believes best assist in meeting the community development needs of the thrift's service community. In this light, the Board has given substantial consideration to the existing record of North Fork Bank, as reflected in its CRA and supervisory examinations, and the current programs and policies of North Fork Bank that help meet the credit needs of all its service communities, including LMI neighborhoods.
A. CRA Performance Examinations North Fork Bank received an overall rating of "satisfactory" from its primary federal supervisor, the FDIC, at its most recent evaluation for CRA performance, as of March 1997 ("1997 Examination"). In addition, as of the same date, the NYSBD rated North Fork Bank's CRA performance "satisfactory" pursuant to section 28-b of New York Banking law. Savings Bank also received an overall rating of "satisfactory" from its primary federal supervisor, the Office of Thrift Supervision, at its most recent evaluation for CRA performance, as of October 1995.
B. Lending Record of North Fork Bank Mortgage loans on multi-family rental dwellings ("multi-family housing loans") are the predominate credit product offered by North Fork Bank in its service community.15 HMDA data for multi-family housing loans in 1995 show that North Fork Bank originated 51 percent of its multi-family housing loans by dollar volume in LMI census tracts within its service community, compared to 29 percent of such loans originated by lenders in the aggregate. Multi-family housing loans in LMI census tracts decreased by 3 percent to 48 percent in 1996. In Manhattan, North Fork Bank made 93 multi-family housing loans totalling $115.7 million in 1996, and approximately 38 percent of the dollar amount of these loans were in LMI census tracts. In the Bronx, the bank made 51 multi-family housing loans totalling $63 million in 1996 and approximately 74 percent of these loans were made in LMI census tracts.16 In Queens County, the bank made 11 multi-family housing loans in 1996 totalling $23.2 million. Four of the loans were made in LMI census tracts.17 HMDA data for North Fork Bank generally indicate, however, some disparities in the rate of loan originations, denials, and applications by racial group and income level.18 The Board is concerned when an institution's record indicates such disparities and believes that all banks are obligated to ensure that their lending practices are based on criteria that assure not only safe and sound banking, but also equal access to credit by creditworthy applicants regardless of race. The Board recognizes, however, that HMDA data alone provide an incomplete measure of an institution's lending in its community and have limitations that make the data an inadequate basis, absent other information, for concluding that an institution has engaged in illegal discrimination in making lending decisions.19 Because of the limitations of HMDA data, the Board has carefully reviewed other information, particularly examination reports that provide an on-site evaluation of compliance by the bank with fair lending laws. FDIC examiners found no evidence of prohibited discriminatory practices or of any practices intended to discourage applications for the types of credit set forth in the bank's CRA statement in the 1997 Examination.20 NYSBD examiners also found no evidence of practices that were intended to discourage applicants from the types of credit that North Fork Bank offers and no evidence of any prohibited discriminatory or other illegal credit practices in their 1997 CRA evaluation. Moreover, FDIC examiners concluded that North Fork Bank's management had demonstrated a commitment to making loans in LMI census tracts and to LMI individuals and favorably noted that the bank had a formal review process for all denied loan applications. North Fork Bank also has a number of programs to assist in meeting the housing-related credit needs of LMI individuals. For example, North Fork Bank participates in governmentally sponsored lending programs that offer affordable mortgage financing. The bank originates Federal Housing Administration ("FHA") loans on referrals from mortgage bankers. In 1995 and 1996, the bank made 323 FHA loans totalling $37 million.21 In addition, FDIC examiners noted that North Fork Bank had developed an in-house portfolio mortgage program for qualified LMI borrowers in 1996 that featured reduced closing costs and no mortgage insurance requirement for mortgages with a loan-to-value ratio less than 90 percent. North Fork made 66 loans under this program in 1996 totalling $6.6 million.22 The bank also participates in programs sponsored by the Federal National Mortgage Association Community Home Buyers ("Community Home Buyers") programs23 and the State of New York Mortgage Agency Affordable Housing Program.24 North Fork Bank also engages in small business lending. In 1996, the bank originated approximately 2200 small business loans, totalling approximately $260 million. More than 23 percent of the small business loans were made to businesses in LMI census tracts within North Fork Bank's service community. These include loans that were made in Queens, the Bronx, Brooklyn, and Manhattan. The 1997 Examination also concluded that North Fork Bank had a satisfactory record of ascertaining and helping to meet the credit needs of its entire service community, including LMI neighborhoods, in a manner consistent with its resources and capabilities. FDIC examiners found that the bank employed a number of methods to ascertain community credit needs, including personal contact with community organizations, non-profit development organizations and mortgage originators, officer call programs, and first-time home buyer seminars.25 The 1997 Examination also commended the bank's advertising and promotional plan as designed to reach, as directly as possible, LMI individuals who would benefit from the bank's products and services and as focused on a wide audience in LMI census tracts.
C. Branch Closings Each of the seven branches proposed to be closed would be merged into existing branches of North Fork Bank or Savings Bank. North Fork indicates that three of these branches are in LMI census tracts, and each is located less than one mile from another branch in the same LMI census tract that North Fork would continue to operate after the proposal. Thus, North Fork proposes to continue to operate branches in each of the LMI census tracts affected by the proposal. North Fork Bank currently operates approximately 20 percent of its branches in LMI areas and, following consummation of the proposal, would continue to operate approximately 20 percent of its branches in LMI census tracts. All branches would be closed pursuant to North Fork Bank's branch closing policy, moreover, which requires consideration of the community's needs and the impact of the closing on the neighborhood. The Board notes that the branch closing policy has been reviewed by FDIC examiners as part of their evaluations of CRA performance and found to be satisfactory. In addition to these factors, the Board has considered that federal banking law provides a specific mechanism for addressing branch closings. Federal law requires an insured depository institution to provide notice to the public and to the appropriate regulatory agency at least 30 days prior to closing a branch. The law does not authorize federal regulators to prevent the closing of any branch.26
D. Conclusion on CRA Performance Records
Other Considerations The record indicates that consummation of the proposal would result in benefits to consumers and businesses. The proposal would enable North Fork to provide Savings Bank customers with access to a broad array of products and services, including commercial bank products, throughout an expanded service area. Additionally, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies may make potentially profitable investments in nonbanking companies when, as in this case, those investments are consistent with the relevant considerations under the BHC Act, and from permitting banking organizations to allocate their resources in the manner they believe is most efficient. Based on all the facts of record, the Board has determined that consummation of this proposal can reasonably be expected to produce public benefits that would outweigh any likely adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act.
Conclusion This transaction 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 the Federal Reserve Bank of New York, acting pursuant to delegated authority. |
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By order of the Board of Governors,29 effective February 9, 1998.
(signed) Jennifer J. Johnson
Jennifer J. Johnson
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Footnotes 1 North Fork's wholly owned subsidiary bank, North Fork Bank, Mattituck, New York ("North Fork Bank"), would merge with Savings Bank and North Fork Bank would be the surviving institution. The merger is subject to approval by the Federal Deposit Insurance Corporation ("FDIC") under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(c)) ("Bank Merger Act") and by the New York State Banking Department ("NYSBD"). North Fork also has requested the Board's approval of an option to purchase up to 19.9 percent of the voting shares of Bancorp under certain circumstances. The option would expire on consummation of the proposal. 2 Asset data are as of September 30, 1997, and deposit data are as of June 30, 1997. 3 In this context, depository institutions include commercial banks, savings banks, and savings associations. 4 12 C.F.R. 225.28(b)(4). 5 Savings Bank engages in the sale of savings bank life insurance ("SBLI") and annuities. North Fork has committed to terminate SBLI activities within two years after consummation of the proposal. North Fork Bank would continue to sell annuities pursuant to state law. See Merchants National Corporation, 75 Federal Reserve Bulletin 388 (1989), aff'd sub nom. Independent Ins. Agents Ass'n v. Board of Governors, 890 F.2d 1275 (7th Cir. 1989), cert. denied, 111 S. Ct. 44 (1990). 6 12 U.S.C. § 1843(c)(8). 7 See First Hawaiian, Inc., 79 Federal Reserve Bulletin 966, 966-68 (1993). 8 The New York banking market includes New York City; Nassau, Orange, Putnam, Rockland, Suffolk, Sullivan, and Westchester Counties in New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Warren, and a portion of Mercer Counties in New Jersey; Pike County in Pennsylvania; and portions of Fairfield and Litchfield Counties in Connecticut. 9 Market share data are as of June 30, 1997. Market share data before consummation are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Because the deposits of Savings Bank would be acquired by a commercial banking organization under the proposal, Savings Bank's deposits are included at 100 percent in the calculation of the pro forma market share. See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); First Banks, Inc., 76 Federal Reserve Bulletin 669 (1990). 10 Under the revised DOJ Guidelines (49 Federal Register 26,823 (June 29, 1984)), a market in which the post-merger HHI is less than 1000 points is considered to be unconcentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Department of Justice has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders and other non-depository financial entities. 11 See Banc One Corporation, 83 Federal Reserve Bulletin 602 (1997). Inner City Press/Community on the Move ("Commenter") alleges that materials filed by North Fork with the Securities and Exchange Commission ("SEC") do not state that the Board was required to review the proposal under the CRA. Commenter contends that the failure of North Fork to acknowledge the Board's review of the proposal under the CRA is a material misstatement. A copy of Commenter's contentions were provided to the SEC for consideration. The adequacy of materials filed with the SEC is a matter within the special expertise of the SEC, and the Board is not authorized under the BHC Act to adjudicate disputes that arise under the federal securities laws. 12 Commenter contends that North Fork has a record of not improving the CRA performance records of institutions it acquires, and in fact diminishes acquired institutions' overall assistance in helping meet the credit needs of communities. The Board has reviewed this contention in light of all the facts of record, including satisfactory CRA performance evaluations that accounted for North Fork's recent acquisitions. 13 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). 14 LMI census tracts comprise approximately 24 percent of North Fork Bank's current service community. 15 Multi-family housing loans accounted for 77 percent in 1995, and 71 percent in 1996, of the total dollar amount of North Fork Bank's loans. 16 North Fork Bank had no branches in Brooklyn, but it made 50 loans totalling $64.2 million in Brooklyn in 1996 and approximately 70 percent of these loans were made in LMI census tracts. Brooklyn is not currently part of North Fork Bank's assessment area, but it would be added to the assessment area after consummation of the proposal. 17 Commenter maintains that North Fork Bank has not complied with a commitment to make a total of $20 million in loans in LMI census tracts in Nassau, Westchester and Rockland Counties over a three-year period ending in 1998. North Fork Bank has substantially met or significantly exceeded its annual interim lending goals in 1996 and 1997 for total amounts loaned and amounts loaned for multifamily housing and owner-occupied housing in Nassau and Westchester Counties. However, North Fork Bank has been unable to meet its interim annual lending goals for owner-occupied housing loans in Rockland County. The NYSBD considered North Fork Bank's efforts to meet this commitment in connection with its 1997 CRA evaluation of the bank and determined that the bank's record of performance was satisfactory. 18 Commenter contends that North Fork Bank only offers multi-family housing loans in the bank's LMI urban communities and does not make mortgage loans on 1-4 family dwellings ("owner-occupied housing loans") in those areas. North Fork Bank does make owner-occupied housing loans in suburban communities. Commenter alleges that North Fork Bank's geographic distribution of multi-family and owner-occupied housing loans shows illegal lending practices. The CRA provides banks with substantial flexibility in developing specific CRA-related policies and programs and does not require a bank to engage in any particular type of lending. As discussed in this order, moreover, FDIC and NYSBD examiners found no evidence of prohibited discriminatory practices or of any practices intended to discourage applications for any type of credit set forth in the bank's CRA statement in their most recent evaluations. The Board notes, however, that NYSBD examiners encouraged North Fork Bank to increase the number of owner-occupied loans to LMI borrowers, particularly in Rockland and Westchester Counties and a portion of Manhattan. The Board expects the bank to address these matters. 19 The data, for example, do not provide a basis for an independent assessment of whether an applicant who was denied credit was, in fact, creditworthy. Credit history problems and excessive debt levels relative to income (reasons most frequently cited for a credit denial) are not available from HMDA data. 20 FDIC examiners noted apparent technical violations of fair lending laws and HMDA reporting requirements during the 1997 Examination, but stated that these matters were addressed by the bank's management during the examination. The Board has considered supervisory information from the FDIC on the nature of the apparent violations and the steps taken by North Fork Bank to address these matters. 21 The 1997 Examination noted that, as of March 31, 1997, North Fork Bank had originated 64 loans totalling $7.8 million. 22 Examiners noted that 31 loans were made under the program in January and February 1997 totalling $3.2 million. 23 The Community Home Buyers program offers flexible underwriting criteria for conforming fixed-rate purchase mortgages on 1-4 family residential properties. 24 Under this program, a bank makes fixed rate loans to qualified LMI borrowers with reduced down payment requirements (as low as 3 percent) and at below-market rates. The loans are purchased by the State of New York. 25 The 1997 Examination noted that community contacts included a community preservation corporation, local development corporations, and a local housing alliance and partnership. 26 Section 42 of the Federal Deposit Insurance Act (12 U.S.C. § 1831r-1, as implemented by the Joint Policy Statement Regarding Branch Closings (see 58 Federal Register 49,083 (1993)) ("Section 42"). Commenter contends that North Fork's reasons for closing Savings Bank's branches are inadequate and that North Fork has mischaracterized the closings as consolidations. As noted, the Board considered confidential information from North Fork regarding the branch closings, and the number and locations of branches to be closed in LMI census tracts. Moreover, Section 42 requires that a bank provide the public at large with at least 30 days notice and the primary federal supervisor and branch customers with at least 90 days notice before the date of the proposed branch closing. The bank also is required to provide reasons and other supporting data for the closure, consistent with the institution's written policy for branch closings. The notice requirements of Section 42 apply to all closings, however characterized, that are not relocations involving short distances (generally less than 1,000 feet) unless occurring in less densely populated areas. 27 See 12 C.F.R. 225.26. 28 Commenter has requested the Board to arrange an informal meeting between Commenter and North Fork. The Board's Rules of Procedure allow a Reserve Bank to hold a private meeting to provide a forum for narrowing issues and resolving differences between an applicant and commenter, if appropriate. See 12 C.F.R. 262.25(c). North Fork has indicated that it does not want to meet with Commenter. Commenter also has requested that the Board hold a public hearing or meeting on the notice, including Commenter's contentions that both institutions have disparate lending records, that North Fork's managerial record raises adverse considerations, and that North Fork's justifications for few owner-occupied loans in LMI urban census tracts are inadequate. The Board's rules provide for a hearing on notices under section 4 of the BHC Act if there are disputed issues of material fact that cannot be resolved in some other manner. See 12 C.F.R. 225.25(a)(2). The Board also may, in its discretion, hold a public hearing or meeting if a hearing is necessary to clarify factual issues related to the proposal and to provide an opportunity for testimony, if appropriate. See 12 C.F.R. 225.16(e). In the Board's view, Commenter had ample opportunity to submit its views, and has submitted substantial written comments that have been carefully considered by the Board in acting on the notice. Commenter's request fails to demonstrate why its written presentation does not adequately present its evidence, allegations, and views. After a careful review of all the facts of record, moreover, the Board has concluded that Commenter disputes the weight that should be accorded to and the conclusions that the Board should draw from the facts of record, but does not identify disputed issues of fact that are material to the Board's decision. For these reasons, and based on all the facts of record, the Board has determined that a public hearing or meeting is not required or warranted in this case. Accordingly, the requests for a public hearing or meeting on the proposal are hereby denied. 29 Voting for this action: Vice Chair Rivlin and Governors Kelley, Phillips, Meyer, Ferguson, and Gramlich. Absent and not voting: Chairman Greenspan. |
1998 Orders on banking applications
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