Look, Up in New Jersey: It's a Bank, It's a Thrift, It's a First Fidelity Subsidiary
Fraust, Bart, American Banker
Look, Up in New Jersey: It's a Bank, It's A Thrift, It's a First Fidelity Subsidiary
To the Federal Reserve Board, the Morris County Savings Bank is a bank. To the state of New Jersey, it's a thrift. To First Fidelity Bancorp., it will soon be a subsidiary.
This latest bit of confusion comes care of the Federal Reserve Board in its decision this week permitting the Newark-based First Fidelity to acquire Morris County Savings, a state-chartered stock savings bank based in Morristown, N.J.
Fed Governor Emmett J. Rice issued a separate concurring statement that also addressed the issues raised by bank holding company acquisitions of thrift institutions.
According to the unanimous ruling, Morris County Savings is a bank for purposes of the Bank Holding Company Act, and thus a permissible acquisition target for First Fidelity.
However, according to a footnote to the Fed ruling, Morris County Savings is a thrift for purposes of a New Jersey law that prohibits any banking institution from holding more than 20% of commercial bank deposits in the state.
If Morris County had been ruled a bank under New Jersey law, completion of the acquisition would have moved First Fidelity past the 20% ceiling.
First Fidelity and Morris County Savings have combined deposits of $10.7 billion, or 21.2% of New Jersey's $50.3 billion in commercial bank deposits at yearend 1985, according to data compiled by Lyons, Zomback & Ostrowski Inc., a New York bank consulting firm.
If savings bank deposits were included in the calculation, First Fidelity's ability to make future acquisitions in New Jersey would have been restricted.
Upon completion of the Morris County Savings acquisition, First Fidelity will control 8.6% of total New Jersey deposits, including commercial banks, stock and federal savings banks, as well as savings and loan associations.
This is not the first time the Fed has ruled that a bank holding company can buy a state-chartered savings bank.
In decisions since 1983 allowing thrift acquisitions by BankVermont Corp., the Frankford Corp., One Bancorp, Amoskeag Bank Shares, and First NH Banks, the Fed has allowed bank-savings bank combinations on condition that the thrift accepts demand deposits, makes commercial loans, and its deposits are insured by the Federal Deposit Insurance Corp. …