Fed Proposes Increase in "Small BHC" Limit to $500m.

On September 7, 2005, the Federal Reserve Board published for comment a proposal to amend its policy statement on small bank holding companies. The proposal would increase from $150 million to $500 million the maximum asset size for companies to be eligible for "small bank holding company" treatment. Under the Fed's policy statement, "small bank holding companies" are permitted to have debt-to-equity ratios as high as 300% and are exempt from the Fed's requirement that bank holding companies comply with regulatory risk-based capital guidelines on a consolidated basis. The primary purpose of the policy statement is to permit the use of holding company debt to facilitate transfers of ownership of small, often closely held banking organizations. Adoption of the proposal should benefit mutual holding companies by permitting a greater number of them to use of holding company debt to finance acquisitions of stock-form banks. The Fed has established a 60-day period for receipt of public comments on the proposal.

Connecticut MHC Announces Dividend on Minority Shares

SI Financial Group, Inc., a subsidiary of SI Bancorp MHC, Willimantic, CT, announced a dividend of $0.03 per share to be paid October 28, 2005 to holders of its outstanding common stock as of October 7, 2005. The company simultaneously announced that its parent mutual holding company plans to waive receipt of the dividend. SI Financial Group, Inc. is the parent holding company of Savings Institute Bank and Trust Company, Willimantic, Connecticut.

Salem Five Holding Company Application Withdrawn

The Federal Reserve Bank of Boston announced on its website (see link) that the application of Salem Five Bancorp, Salem, Massachusetts, to become a mutual holding company and to acquire Salem Five Cents Savings Bank was "withdrawn" August 25, 2005.

Hearings on Salem 5, Monson & Florence MHCs

Hearings were conducted this morning before the Massachusetts Board of Bank Incorporation on three pending mutual holding company reorganization applications -- those of Salem Five Cents Savings Bank, Salem, Monson Savings Bank, Monson, and Florence Savings Bank, Florence, Massachusetts. Only representatives of the applicants appeared to testify on the applications. Commissioner of Banks Steven L. Antonakes chaired the hearing panel. Also presiding at the hearings were Timothy Brooks, representing State Treasurer, Timothy Cahill and Donald Twomey, representing Commissioner of Revenue Alan LeBovidge.

In each case, the applicant's president and CEO spoke in favor of the application, describing the applicant and its reasons for forming a mutual holding company. In each case, Commissioner Antonakes asked about the bank's current CRA rating and regarding the adequacy of the bank's policies and procedures to combat money laundering. In the hearing on Florence Savings Bank's application, Donald Twomey asked Florence Savings Bank president and CEO John Heaps to what he attributed Florence Savings Bank's business success competing in western Massachusetts. Customer service, lower fees, and loss of market share by BankAmerica and its predecessors was the essence of Heaps' response.

Only one of the applicants -- Monson Savings Bank, the smallest of the three -- proposes to form a mid-tier holding company as part of its reorganization. One can only wonder what the reasons for this additional organizational complexity might be. At the hearing, Monson Savings Bank President and CEO Roland G. Desrochers seemed to suggest that this was to enable the mutual holding company to raise capital through an offering of trust preferred securities, although he indicated that Monson has no immediate plans to make any securities offering. Of course, a mid-tier holding company is not necessary for a mutual holding company to offer trust preferred securities, and in addition to cumbersome organizational complexity, in Massachusetts offers the additional disadvantage of another layer of state tax to be paid whenever capital is transferred by dividend or otherwise from the subsidiary bank to the parent mutual holding company. Curious . . .

The period for submission of public comments on all three applications ends September 12, 2005.

Mass. BBI Hearings on MHC Formations

The Massachusetts Board of Bank Incorporation will hold hearings Thursday, Sept. 8, at 10:30 a.m., 11:00 a.m., and 11:20 a.m., respectively, on the applications of Salem Five Cents Savings Bank, Monson Savings Bank, and Florence Savings Bank to form mutual holding companies. The hearings will be conducted in Hearing Room A on the Fifth Floor at One South Station, Boston, Massachusetts.

At the hearings, which are open to the public, representatives of the three banks are expected to testify regarding their reasons for reorganizing in mutual holding company form as well as their immediate business plans for the new holding companies.

Anyone opposing the holding company formations will also be afforded an opportunity to testify, and to submit a written statement on or before the close of the public comment period on the applications, Sept. 12, 2005.

The Board of Bank Incorporation ("BBI")is the official body empowered under Massachusetts law to charter new state chartered banking institutions and to approve holding company acquisitions. The BBI consists of the Commissioner of Banks, the Massachusetts State Treasurer and the Commissioner of Revenue, and is chaired by the Commissioner of Banks. Ordinarily, the State Treasurer and Commissioner of Revenue do not attend BBI hearings personally, but send top aids to sit in their stead.