Wayne-based Valley National Bank Gets Ok To Acquire Florida Bank

The Record ( — Tuesday, October 21, 2014

The Record

Wayne-based Valley National Bank has received conditional approval for its pending acquisition of a smaller commercial bank in Florida, contingent upon adherence to a plan to make more loans to low- and moderate-income borrowers.

The bank said Monday it has received all regulatory and shareholder approvals for the acquisition of Boca Raton-based 1st United Bank. Valley's primary federal regulator, the Office for the Comptroller of the Currency, made its approval contingent on Valley's compliance with terms of a community reinvestment plan the bank submitted to the agency last month, in response to criticisms of its lending record in poorer neighborhoods.

The combination of Valley National with 1st United will mark Valley National's first branch expansion outside of the Northeast. The deal will create an institution with $18 billion in assets and 224 branches spread throughout northern and central New Jersey and parts of New York City, Long Island, and southeast and central Florida.

1st United Bank has 20 branches, about $1.7 billion in assets and $1.4 billion in deposits.

The bank's community reinvestment performance and complaints from non-profit groups that opposed the merger "identified areas of concern," the OCC said in the Oct. 3 approval letter to Alan D. Eskow, Valley's chief financial officer. The concerns were "particularly with regard to Valley National's provision of products and services to low-and moderate-income individuals and in low-and moderate income geographies," said the letter, which was obtained Monday by The Record.

Valley has promised to earmark $30 million for a first-time home buyer program with lower down payments, less restrictive credit underwriting requirements, and a homebuyer education requirement, and the program will be marketed to low- and moderate-income individuals, the letter said.

Valley National also pledged to beef up its commercial lending efforts in the Bronx and has committed to make its community reinvestment plan available on the bank's website and to report progress to its board and the OCC.

The regulator's approval comes after non-profit community groups from New Jersey, New York and Florida tried to block the deal by filing complaints with the OCC alleging that Valley has made too few loans to minority and low- and moderate-income borrowers and should not be allowed to expand unless it commits to making improvements in those areas.

Community reinvestment has been a rallying cry for community activists and affordable housing advocates since the federal Community Reinvestment Act of 1977 required banks to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.

The law was enacted in response to redlining, a practice in which banks would draw lines on maps around the poorest neighborhoods where they would take deposits but not approve loans.

The OCC's review of Valley's merger application "has not resulted in findings of discrimination," the letter said. The OCC also denied requests from some who challenged the application to hold a public hearing on the matter. Requests to extend a public comment period on the application also were denied.

Making the approval conditional on community reinvestment initiatives was "a very positive step by the regulators," said Phyllis Salowe-Kaye, executive director of Newark-based New Jersey Citizen Action, which was one of the groups to object to the merger application. "It is unusual to get this kind of thing," she said.

Newark-based Citizen Action has teamed up over the years with a number of banks to help make more housing and business loans available in lower-income neighborhoods, but has never entered into a so-called community reinvestment agreement with Valley National.

Valley did not immediately respond Monday to questions about the conditions set by the OCC. Valley did not sign any agreements with individual non-profits to win OCC approval, a bank spokesman said.

The stock transaction was valued at $312 million when first announced in May. Shareholders of 1st United will receive 0.89 shares of Valley stock for each of their 1st United shares, subject to adjustment if Valley's average stock price falls below $8.09 or rises above $12.13 prior to closing.

Shareholders of 1st United Bancorp, the largest bank based in Palm Beach County, approved the deal last month. Valley spokesman Marc Piro said the transaction will be completed "sometime in the fourth quarter."

Shares in Valley National Bank's holding company rose 5 cents Monday and finished the traditional trading day at $9.40.

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