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Speedy bank deal sparks questions on M&A regulatory approval process

Some bank industry observers speculate that the timeline for closing larger M&A deals could shorten, after federal regulators quickly approved Associated Banc-Corp's merger with Bank Mutual Corp. despite unresolved community group protests.

Others say it may be too early to tell.

On Jan. 4, the Office of the Comptroller of the Currency approved the $482 million deal although three community groups had concerns regarding Associated Bank NA's Community Reinvestment Act and fair lending record. Most banks attempt to mitigate community lending concerns by signing a community investment plan with protesting groups, but Associated opted to stand on its word that it would fulfill its CRA obligations and did not sign an agreement prior to regulatory approval. Citing previous CRA examinations and studies of branch presence and home mortgage data, the OCC found that the public comments were not enough to persuade the agency to deny the application.

On Jan. 23, the Federal Reserve followed suit in approving the deal and included a footnote reiterating that "neither the CRA nor the federal banking agencies' CRA regulations require depository institutions to make pledges or enter into commitments or agreements with any organizations." Associated completed the merger Feb. 1, less than four months after Bank Mutual shareholders approved the deal.

Historically, protests to a bank merger have delayed regulatory approval. Sullivan & Cromwell LLP's H. Rodgin Cohen has said that a protest can extend the typical waiting time from about two months to as many as nine months, especially if the deal is large.

Law firm Wachtell Lipton Rosen & Katz published a note Jan. 23 arguing that the Associated transaction is a step toward "a faster and more predictable regulatory approval process." Watchell speculated that the OCC's quick approval reverses the prior administration's unspoken policy of requiring institutions to enter community agreements.

A spokesperson for the OCC declined to comment.

Warren Traiger, senior counsel with Buckley Sandler LLP, points out that the OCC is actively trying to amend CRA regulations, which may explain the softening approach to resolving CRA matters in M&A deals. But Traiger warned that while there may be less pressure from regulators to enter agreements with community groups, there have not been enough mergers without community agreements to say if there is a trend.

"I didn't see the regulators demanding [community agreements] for every M&A deal, even under the Obama administration," Traiger said in an interview.

Community groups also say the Associated deal is not an indicator of changing regulatory approaches to the approval process. The National Community Reinvestment Coalition, which bands together with local community groups to file protests, says Associated is not the first bank to receive regulatory approval without resolving CRA matters. Jesse Van Tol, COO of the NCRC, said in an interview that there are too many factors, like anti-trust considerations, that go into the approval process to conclude that changes in considerations to CRA are speeding up the M&A timeline.

Van Tol added that the Associated deal does not mean that banks are trying to circumvent CRA agreements; he said the NCRC is close to an agreement with Associated, even though the company already completed the merger. A spokesperson for Associated did not confirm or deny a possible agreement.