People's Bank Announces Switch to Federal Savings Bank (FSB) Charter to Pursue Business Expansion29 May 2006
People's Mutual Holdings and its subsidiary, People's Bank, currently a state-chartered mutual holding company (MHC) and savings bank, today announced their intention to file applications to switch to a federally-chartered MHC and a federal savings bank charter. The federal charter positions People's more competitively to pursue business expansion across state lines as it permits the bank to open new branches and expand its businesses in all states on the same terms as any federally-chartered bank.
Concurrently, People's announced plans to open at least 15 branches in Westchester County, New York in the next three years at locations to be announced.
"We believe a federal charter is an important component of People's continued growth and independence," said John A. Klein, chairman and CEO of People's. "Connecticut is, and will remain, our home. As a federally-chartered institution, however, the bank's ability to open new branches, make acquisitions and expand existing businesses in other states will be less complicated, less costly and much faster," he said. "Our plans to grow our geographic footprint, coupled with our experience in expanding our residential mortgage lending in New York and Massachusetts last year, convinced us that the federal charter is the right course for us to take to facilitate our continued growth."
People's will continue to operate in an MHC structure which the bank believes has served all of its constituencies well. The only change is that the bank will be regulated by the Office of Thrift Supervision (OTS) rather than by the Connecticut State Department of Banking, the Federal Deposit Insurance Corp. and the Federal Reserve. The OTS, which regulates more than 80 mutual holding companies, is the principal regulator of the vast majority of MHCs throughout the country.
"We made the decision to change to the FSB charter because it is the only federal charter that allows us to both continue under the MHC structure and significantly enhance our ability to expand out of state," Klein said. "While we have benefited from an excellent working relationship with all of our regulators, in particular the state Department of Banking, and from the powers conferred on state-chartered banks by the Connecticut General Assembly, the FSB charter gives us the flexibility to export our People's Bank model across state lines much more easily," he added.
"The decision to switch to a new charter serves to put a currently strong bank in an even stronger competitive position, which we believe will benefit both our commercial and consumer customers," Klein said. "People's remains completely committed to our customers, employees and communities as Connecticut's largest, independent bank in terms of market value."
There will be no changes to rates or fees as a direct result of the new charter and People's deposits will remain FDIC-insured.
People's will send a proxy to investors and call a special meeting of shareholders, at a date to be determined, to approve the application. Completion of the switch to a federal charter also requires approval of the OTS and the state Department of Banking.
Founded in 1842, People's Bank (peoples.com) is one of Connecticut's largest banks with assets of $11 billion, more than 240 ATMs and 154 branches, 71 of which offer convenient seven-day banking in Super Stop & Shop locations across the state. A diversified financial services company, People's Bank provides consumer, commercial, insurance, brokerage, financial advisory and trust services to personal and business banking customers. For more information about People's, its products and services, please call 800-772- 1090, visit peoples.com or any of People's branches.
QUESTIONS & ANSWERS
Q. What was People's announcement?
A. People's Mutual Holdings and its subsidiary, People's Bank, currently
a state-chartered mutual holding company (MHC) and savings bank, today
announced their intention to file applications to switch to a
federally-chartered MHC and a federal savings bank charter.
Concurrently, People's announced plans to open at least 15 branches in
Westchester County, New York in the next three years at locations to
be announced.
Q. What is the primary reason that People's is changing its charter?
A. The federal charter positions People's more competitively to pursue
business expansion across state lines as it permits the bank to open
new branches and expand its businesses in all states on the same terms
as any federally-chartered bank. We believe this is an important
component of People's continued growth and independence.
Q. Why did People's choose the FSB, not a national bank, charter?
A. The FSB charter is the only federal charter that allows us to both
continue under the MHC structure and significantly enhance our ability
to expand out of state.
Q. How does the new charter provide more flexibility for People's growth
strategy?
A. As a federally-chartered institution, the bank's ability to open new
branches, make acquisitions and expand existing businesses in other
states will be less complicated, less costly and much faster.
Branching into a new state is allowed under the federal charter, which
is not the case under the state charter. The acquisition process is
streamlined under the FSB charter as there is only one regulatory
agency, compared to the current charter which requires involvement
from three regulators for any acquisition.
And, in terms of expanding existing businesses, People's presently
must conform to the laws of each host state that it enters. When the
bank expanded its residential mortgage lending in New York and
Massachusetts last year, it had to conform to Connecticut, New York
and Massachusetts state laws. This was an expensive and lengthy
process that negatively affected our speed to market. It will not be
the case under the FSB charter.
Q. Where are you going to grow out-of-state?
A. In addition to our announcement today regarding new Westchester
branches, we will be looking at growth opportunities in contiguous and
near-contiguous markets, as we've consistently stated.
Q. Does this change your focus on growth in Connecticut as well as growth
through acquisition?
A. Not at all. People's remains committed to its current growth strategy
of organic growth within and outside of the state of Connecticut as
well as expansion through acquisitions. The federal charter provides
us with more flexibility in pursuing our growth strategy in other
states.
Q. How will this affect consumer or commercial banking customers'
relationships with People's?
A. The decision to switch to a new charter serves to put a currently
strong bank in an even stronger competitive position, which we believe
will benefit both our consumer and commercial customers. People's
remains completely committed to our customers, employees and
communities as Connecticut's largest, independent bank in terms of
market value.
Q. Will this make it easier for me to bank out of state?
A. People's announced plans to open at least 15 branches in Westchester
County, New York over the next three years, which will allow customers
to bank more conveniently outside of Connecticut (as does our
Advantage Plus Premier account, which is tailored for customers who
often travel outside of Connecticut and which offers rebates on out-
of-state ATM fees). We also will continue to seek prudent
opportunities to expand outside of Connecticut, organically in all of
our business lines and through acquisitions. This will be less
complicated, less costly and faster under the FSB charter.
Q. In what towns will People's New York branches be located?
A. We have not yet announced the locations of our Westchester branches.
Q. Will this affect my rates and fees?
A. There will be no changes to rates or fees as a direct result of the
new charter and People's deposits will remain FDIC-insured.
Q. Is there any intention of selling the bank?
A. Absolutely not. The members of the bank's Board of Directors are
committed to maintaining People's independence and making the bank a
stronger institution both now and in years to come.
Q. Will there be any change in People's Mutual Holding's ownership level
following the charter switch?
A. No. Our mutual holding company will continue to own 58% of the
outstanding shares of People's Bank following the completion of the
charter switch.
Q. Is the bank planning a second-step conversion?
A. Neither the bank nor People's Mutual Holdings has current plans to
undertake a second-step conversion. We are very comfortable with the
mutual holding company structure and the returns it has provided
shareholders since we went public. Since People's initial public
offering on July 6, 1988, for example, the bank has provided investors
with a 20% compounded annual rate of return with dividends reinvested
as of the end of 2005. Additionally, we are well capitalized at the
present time and our immediate challenge is to make effective use of
our existing capital.
It is possible, of course, that changes in the competitive environment
and other factors could cause the bank to contemplate a second-step
conversion in the future. In such an event, the FSB charter has
specific regulations governing second-step conversions that are clear,
understandable and reliable. In fact, most second-step conversions
have taken place under the FSB charter.
Q. Why would you convert to a FSB charter if you want to grow the
commercial business?
A. As noted earlier, we simply are switching from a state savings bank
charter to a federal savings bank charter. The federal charter
provides us with substantially greater ability to expand outside of
Connecticut than our current state charter while maintaining our MHC
structure. We are confident we can grow our commercial business in a
way that will meet FSB requirements while maintaining our present
business objectives. Furthermore, we believe that the FSB charter
requirements pertaining to commercial growth are more flexible than
perceived.
Q. Will the new charter involve any other changes?
A. People's now will have only one regulator - the Office of Thrift
Supervision (OTS) - rather than its current regulatory relationship
with three separate entities; the State of Connecticut Department of
Banking, the Federal Deposit Insurance Corp. (FDIC) and the Federal
Reserve.
While we have benefited from an excellent working relationship with
all of our regulators, in particular the Connecticut State Banking
Department, and from the powers conferred on state-chartered banks by
the Connecticut General Assembly, the FSB charter gives us the
flexibility to export our People's Bank model across state lines much
more easily.
People's Bank. It's Possible @ People's
Source: prnewswire
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