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By Matthew R. Lee

NEW YORK, March 13 – At what point does bank executives' spin to investors and the media become more than misleading? Take Community Bank System (NYSE: CBU), which has now received on March 13 consumer lending questions on top of the nine earlier questions from the Federal Reserve on its proposal to acquire Merchants, after its CEO derided issues Fair Finance Watch raised about the proposal.

 On March 13, the Fed asked CBU: "In connection with the application by Community Bank System, Inc. (“Community”), DeWitt, parent company of Community Bank, National Association (“Community Bank”), Canton, both of New York, to merge with Merchants Bancshares (“Merchants”), and thereby acquire Merchants Bank, both of South Burlington, Vermont, pursuant to section 3(a)(5) of the Bank Holding Company Act of 1956, 12 U.S.C. § 1842(a)(5), Federal Reserve staff requests the following additional information:
 
1.       Provide an update on Community Bank’s Community Reinvestment Act (“CRA”) activities and efforts since its July 27, 2016 CRA Performance Evaluation.  In your response, address the activities in the bank’s assessment areas under each of the lending, investment, and service tests.
 
2.       Regarding consumer lending products:

a.       reconcile page iv of the Bank Merger Act (“BMA”) application, which states that Merchants Bank currently offers consumer loans, with page xiv of the BMA application, which states that Merchants Bank does not currently offer consumer lending products and services; and

b.      explain how the consumer lending products and services offered by Community Bank, including overdraft lines of credits, are enhanced compared to Merchants Bank’s offerings."

  On its last proposal, CBSI bad-mouthed a Community Reinvestment Act protest even as it had to delay its Oneida deal. First, CBSI's "Hal Wentworth said that Inner City Press is not a local group and pointed out that letter was the only one filed on the Oneida deal. 'This activist does not do business with either Oneida or Community Bank, but nonetheless made vague allegations regarding Community,' Wentworth said. 'These allegations were entirely without merit and will be fully addressed by Community Bank and Oneida Savings in the application process.'" Then the deal was significantly delayed, with CBSI pushing the date back.

  More spin:  CFO Scott Kingsley told the media that FFW's protest "is not the sole reason. We have other things that have to sequentially happen to get to the technological conversion in July. When we did not have a definitive answer from the Fed or other parties last week, that put the technological conversion at risk, so we opted not to go ahead.”

  This time, it went to the CEO Mark Tryniski, who in January 2017 told stock analysts that "despite the baseless protest filed with the Fed Reserve by a serial activist, we expect to close in the second" question. We'll see. Among the nine questions: "Community Bank states that, to the extent it does not intend to continue to offer certain loan products and services offered by Merchants Bank post-merger, it does not believe that not offering such products and services would have a significant impact on the target bank's communities. As an example, Community Bank cites the fact that Merchants Bank would no longer accept applications for FHA/VA loans (on behalf of a mortgage company), but that Community Bank would offer loan products and programs which are not currently offered by Merchants Bank that Community Bank believes are comparable and 'equally valuable' to its communities, such as FNMA's Home Ready Program, Community Bank's Affordable Housing Program, and the USDA loan program. Compare the features of FHA and VA loans for which applications are presently taken by Merchants Bank with the features of the products and programs that Community Bank asserts are comparable, including any features of FHA and VA loans that are not covered by Community Bank's offerings."  Watch this site.

   With Capital One failing in its proposal to acquire the "World's Foremost Bank," another bank merger challenged by Fair Finance Watch failed. In December it was Astoria's proposed take over by NY Community Bancorp, here.

   In January, disparate lender Investor Bancorp, on which Fair Finance Watch previously got a condition imposed saw its proposal with Bank of Princeton fall apart.

  And now it's Capital One - Cabela, on which Inner City Press commented: "In the New York City MSA in 2015, the most recent year for which HMDA data is available, for conventional home purchase loans Capital One denied the applications of whites 23% of the time, while denying African Africans fully 45% of the time, and Latinos even more, 46% of the time. This is unacceptable.

  Meanwhile, Capital One is “closing branches in Laurel, Gaithersburg, Frederick and Merrifield.”

   Capital One came back with snark, as has Simmons National -- but then announced including to NCRC that  it will withdrawn its application. Onward.

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