November 14, 2003
Board of Directors
The New Haven Savings Bank
195 Church Street
New Haven, Connecticut 06502
Dear Members of the Board:
By letter dated July 21, 2003, a request was filed on behalf of The New Haven Savings Bank, New Haven, Connecticut (Bank or NHSB), for a waiver of the depositor voting requirement at 12 C.F.R. § 333.4(c)(2) of the FDIC's mutual-to-stock conversion regulations (Conversion Regulations) in connection with the Bank's proposed mutual-to-stock conversion. The Conversion Regulations are set forth in 12 C.F.R. Part 303, Subpart I and § 333.4.
The Bank's waiver request was determined appropriate for consideration by the FDIC under the "good cause" exception to the Conversion Regulations, 12 C.F.R. § 303.162(a)(2), rather than the "conflicts with State law" exception under 12 C.F.R. § 303.162 (a)(1), since the depositor vote requirement in the Conversion Regulations does not present a conflict with Connecticut law. Instead, the FDIC's depositor vote requirement is supplemental to Connecticut law and procedures for mutual-to-stock conversions.
The preamble to the Conversion Regulations addresses the standards under which a depositor vote waiver will be granted. The preamble states:
"…on a case-by-case basis, the Board will consider waiving the depositor voting requirement if it is demonstrated, to the Board's satisfaction, that the alternative voting mechanism established under the applicable state law satisfies the concerns expressed above about the need for a vote on the conversion by parties that are not insiders and do not have a potential conflict of interest in reviewing the proposed conversion." See 59 Fed. Reg. 61233, 61238 (November 30, 1994).
In 1995, the Connecticut Banking Commissioner issued corporator voting procedures for the mutual-to-stock conversion of state mutual savings banks. See Connecticut Department of Banking, Policy and Interim Requirements Concerning Conversions of Mutual Savings Banks to Capital Stock Banks and Reorganizations of Mutual Savings Banks to Mutual Holding Companies (1995).
A committee that consisted of three outside Bank directors nominated a group of non-director corporators for consideration by NHSB's board of directors. On February 25, 2003, NHSB's board of directors selected 20 non-director corporators for the institution. NHSB's non-director corporators consist of various corporate and community leaders from NHSB's market area which includes New Haven and Middlesex Counties.
The FDIC has determined that a majority of the Bank's corporators are not insiders and have no apparent potential conflict of interest. NHSB's board of directors used proper screening procedures to ensure that non-director corporators would not have a potential conflict of interest. The Bank provided these corporators with outside counsel who provided legal advice regarding the Bank's proposed plan of conversion and related merger applications. A majority of these independent corporators voted to approve the Bank's plan of conversion.
In addition to reviewing the depositor vote waiver request under 12 C.F.R. § 303.162(a), the FDIC also has reviewed the Bank's waiver request under the following criteria as set forth in 12 C.F.R. § 303.162(b):
the requested waiver, if granted, would not result in any effects that would be detrimental to the safety and soundness of the institution, entail a breach of fiduciary duty on part of the institution's management or otherwise be detrimental or inequitable to the institution, its depositors, any other insured depository institution(s), the federal deposit insurance funds, or to the public interest.
Based on the information available to the FDIC, including information presented by the Bank in connection with the waiver request, the FDIC approves the waiver of its depositor vote requirement. In reaching this decision, the FDIC has determined that this vote by the majority of the independent corporators constituted a sufficiently independent review of the Bank's plan of conversion for purposes of satisfying the above criteria and related supervisory concerns.
Please note that the FDIC is continuing to review the Bank's proposed plan of conversion, merger applications, and supporting documents. Our future decision whether to issue a letter of non-objection to the Bank's plan of conversion will constitute a separate agency action under the Conversion Regulations (see 12 C.F.R. § 303.162(d)). Similarly, we will be reviewing the Bank's merger applications under the Bank Merger Act, section 18(c) of the Federal Deposit Insurance Act, and implementing FDIC regulations in Part 303, Subpart D. In addition, the
Bank must satisfy the disclosure requirements for any offering materials currently under review by the FDIC's Accounting and Securities Disclosure Section.
Lisa K. Roy
Board of Directors
New Haven Savings Bank
195 Church Street
New Haven, Connecticut 06510
Board of Directors:
The notice of intent to convert from mutual to stock form filed on behalf of New Haven Savings Bank, New Haven, Connecticut (NHSB) has been reviewed by the Federal Deposit Insurance Corporation (FDIC) pursuant to the FDIC's regulations at 12 C.F.R. Sections 303.160 and 333.4.
This notice was filed in connection with NHSB's "Plan of Conversion for the New Haven Savings Bank" (Plan). Pursuant to the Plan, NHSB will convert to a Connecticut-chartered stock savings bank and become a wholly-owned subsidiary of newly formed NewAlliance Bancshares, Inc. (NewAlliance), a Delaware corporation. Concurrently with the reorganization, NewAlliance intends to offer for sale its common stock on a priority basis to qualified depositors and an employee stock ownership plan. In addition, NewAlliance will fund a charitable foundation (Foundation) in the amount of $40,000,000, funded 100% by the contribution of shares of common stock.
The FDIC has relied on information provide in NHSB's notice of conversion and the accompanying business plan in reaching its decision regarding the notice. Management of NHSB has also represented that, for three years after the closing of the conversion, the FDIC will be given at least thirty (30) days prior written notice before any material deviation from the business plan, such as a return of capital, is implemented. Management has further represented that, for twelve (12) months following the conversion, NewAlliance will not make any distribution to stockholders that represents a return of capital without the FDIC's prior written consent.
Based on the information provided and representations made, the FDIC plans to issue a letter of non-objection to the proposed conversion transaction provided that NHSB satisfies the following conditions:
1. The Foundation's board of directors shall commit to the following oversight provisions:
a. Common stock of NewAlliance held by the Foundation shall be voted by the Foundation at the same ratio as the shares voted on each and every proposal considered by the shareholders of NewAlliance;
b. The Foundation shall be subject to examination by the FDIC;
c. The Foundation shall comply with all supervisory directives imposed by the FDIC;
d. The Foundation shall operate in accordance with written policies adopted by the Foundation's board of directors, including the adoption of a conflict of interest policy acceptable to the FDIC;
e. The Foundation shall not engage in self-dealing, and will comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code; and
f. The Foundation shall provide a final proposed operating plan prior to conversion, and annual reports to the FDIC describing the grants made, and the grant recipients.
2. NHSB must submit final disclosure materials acceptable to the Accounting & Securities Disclosure Section of the FDIC's Division of Supervision and Consumer Protection.
3. NHSB must advise this office of the results of the subscription offering, and deliver an updated appraisal that:
a. Takes the results of the subscription offering into account;
b. Discusses any material occurrences during the subscription period; and
c. Explains any orders that may have been rejected.
4. NHSB must receive the necessary approvals from the Connecticut Banking Department for its conversion and establishment as a Connecticut-chartered stock savings bank, and from the Federal Reserve for the establishment of NewAlliance as a bank holding company, and for NewAlliance to acquire control of NHSB; and
5. NHSB shall have received all required approvals for its merger with Connecticut Bancshares, Inc. and Alliance Bancorp of New England, Inc.
Provided that NHSB meets the foregoing conditions, and the FDIC is satisfied with the appraiser's determination in the updated appraisal that the results of the subscription offering represent the fair value for NewAlliance, the FDIC will issue a letter of non-objection to the proposed conversion transaction.
John M. Lane
FEDERAL DEPOSIT INSURANCE CORPORATION
New Haven Savings Bank
New Haven, Connecticut
Applications for Consent to Merge, Establish 38 Branches,
and Participate in an Optional Conversion Transaction
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Section 18(c) and other provisions of the Federal Deposit Insurance (FDI) Act, an application has been filed on behalf of New Haven Savings Bank (NHSB), New Haven, New Haven County, Connecticut, currently an insured state-chartered, mutually-owned nonmember bank and Bank Insurance Fund (BIF) member with total resources of $2,536,636,000 and total deposits of $1,829,278,000 as of December 31, 2003, for the Corporation's consent to merge with The Savings Bank of Manchester (SBM), Manchester, Hartford County, Connecticut, an insured state-chartered BIF member with total resources of $2,551,658,000 and total deposits of $1,638,799,000 as of
December 31, 2003, and to merge with Tolland Bank (Tolland), Vernon, Tolland County, Connecticut, an insured state-chartered BIF member with total resources of $436,207,000 and total deposits of $339,279,000 as of December 31, 2003, and to establish the 28 offices of SBM and the 10 offices of Tolland as branches of the resulting bank. The merger will be consummated under NHSB's charter as a state-chartered stock nonmember savings bank subsequent to its conversion from mutual form, and with the new name of NewAlliance Bank (Resultant Bank). Notice of the proposed transaction, in a form approved by the Corporation, has been published pursuant to the FDI Act. There will be no insurance fund conversion concurrent with the proposed transaction and assessments will continue to be paid to the BIF.
In connection with the proposed merger, NHSB has filed a mutual-to-stock conversion notice, which is being dealt with in a separate action.
A review of available information, including the Community Reinvestment Act (CRA) performance of the proponents, discloses no inconsistencies with the purposes of the CRA. The resultant institution is expected to continue to meet the credit needs of its entire community, consistent with the safe and sound operation of the institution.
In connection with the merger application, the Corporation has taken into consideration the competitive effects of the proposed transaction as measured by the Herfindahl-Hirschman Index (HHI). There are four relevant geographic markets in which the proponent banks have offices. The first is the Federal Reserve Banking Market of Hartford, Connecticut (which consists of the Connecticut Counties of Hartford and Tolland), where SBM and Tolland have a combined 36 full-service offices. The two-county market is moderately concentrated with an HHI of 2,355 before consummation of the merger and will remain moderately concentrated with an HHI of 2,399 following consummation (an increase of 44). In this market area, as of June 30, 2003, Fleet Bank's 45.70% market share is almost three times the market share of the next largest competitor. SBM and Tolland's share is third (at 4.84%), while NHSB does not compete in this market. There are 32 competitors overall in the market area, 12 of which held a market share in excess of 1%. The second relevant geographic market is the Federal Reserve Banking Market of Danielson, Connecticut (which consists of the Connecticut County of Windham), where only SBM competes. SBM held 2.30% of the deposits in this market as of June 30, 2003. There will be no change in the HHI of 1,701 as a result of this merger. The third geographic market is the Federal Reserve Banking Market of New Haven, Connecticut (which consists of the Connecticut County of New Haven), where only NHSB competes. NHSB held 10.17% of the deposits in this market as of June 30, 2003. There will be no change in the HHI of 1,274 as a result of this merger. The fourth relevant market is the Federal Reserve Banking Market of Old Saybrook, Connecticut (which consists of the Connecticut County of Middlesex), where only NHSB competes. NHSB held 10.49% of the total deposits in this market as of June 30, 2003. There will be no change in the HHI of 1,457 as a result of this merger. The post-merger market share of deposits is less than 11% in each Federal Reserve Banking Market in which the Resultant Bank will be located after the merger (4.84% in Hartford/Tolland Counties). These analyses fall within Department of Justice guidelines, with HHI increase of less than 100 in one moderately concentrated market and support the conclusion of no adverse effect on competition.
The FDIC has also taken into consideration the financial and managerial resources and future prospects of the proponent banks and the Resultant Bank; the convenience and needs of the community to be served; and the effectiveness of the insured depository institutions involved in the proposed merger transaction in combating money laundering activities. Having found favorably on these statutory factors and having considered other relevant information, including any reports on the competitive factors furnished by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Director of the Office of Thrift Supervision, and the Attorney General of the United States, it is the Corporation's judgment that the merger should be and hereby is approved.
The approval of this application is subject to the following conditions:
1. That the transaction shall not be consummated before the fifteenth calendar day following the date of this ORDER, or later than six months after the date of this ORDER, unless such period is extended for good cause by the Corporation;
2. That all necessary and final approvals shall have been received from all
3. That, until the proposed transaction becomes effective, the Corporation shall
have the right to alter, suspend, or withdraw its approval should any interim development be deemed to warrant such action.
By Order of the Associate Director of the Division of Supervision and Consumer Protection pursuant to delegated authority of the Board of Directors.
Dated at Washington, D.C. this day of February, 2004.
Lisa K. Roy