Household International Inc. will close far fewer branches than planned after its merger with Beneficial Corp. and is offering Beneficial's chief executive a $23.7 million severance package.
In response to recent criticism by Inner City Press/Community on the Move, a Bronx, N.Y.-based community group, Household said it would cut branch closings by one-third.
"Nationwide, we originally projected we would close more than 300 branches," wrote Paul Shay, Household's assistant general counsel, in a May 28 letter to Inner City Press. "Today the number of anticipated closings is less than 200."
Household, Prospect Heights, Ill., will maintain at least 100 of the merger partners' 123 New York State branches and at least 23 of the 30 in New York City, the letter said.
In addition, Household will commit $150 million to low- and moderate- income borrowers in the next three years, said Kenneth H. Robin, senior vice president and general counsel at Household, in a May 28 letter to Ellen Seidman, director of the Office of Thrift Supervision.
The community group recently complained to the New York State Department of Banking and the Office of Thrift Supervision about Household's community investment commitments and consolidation plans.
The group's objections came as outsiders are increasingly questioning the community responsibilities of nonbank finance companies, which have not traditionally been dictated by any federal agency.
Inner City Press has asked the OTS to deny Household's application to convert its bank charter to a thrift charter, saying the company has a poor record of community investment and no plan to commit funds nationally to such needs.
Household has argued that the three states where its Household Bank has operations - Delaware, Florida, and Illinois - are the only ones subject to Community Reinvestment Act requirements.
Household Financial Corp., the company's branch network, and other finance company subsidiaries of Household "follow different business strategies from those of banks," Mr. Robin wrote. "While their lending activities - subprime or otherwise - are, and will continue to be, subject to numerous laws and regulations ... they are not part of the applications before the OTS."
In addition, HFC is not subject to CRA requirements, he said.
Separately, Household said that Beneficial chief executive Finn M.W. Caspersen will get a compensation and severance package totaling $23.7 million, including $2.5 million a year for the two years he is to be a consultant to the merged companies and options to buy 700,000 shares of stock, according to a recent Securities and Exchange Commission filing.
Mr. Caspersen's package is part of $240 million in severance and "change of control" payments that Household is to make to employees in completing the merger.