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The Federal Reserve Board assessed a $17,000 penalty against Easthampton Savings Bank – known by its brand name bankESB – for violations involving the National Flood Insurance Program.
The Fed said in an enforcement action announcing the penalty yesterday that it had found a “pattern or practice of violations of Regulation H,” which implements the National Flood Insurance Act.
The act covers regulated lenders, including banks, that provide mortgages in areas that the Federal Emergency Management Agency has designated as flood zones. Banks must comply with regulations relating to requiring flood insurance, notifying borrowers about flood insurance and placing amounts paid by the borrower for flood insurance premiums into an escrow account before paying the insurance provider.
Easthampton Savings Bank did not admit or deny the allegations in the enforcement action, and the penalty was ordered “solely for the purpose of settlement of this matter without a formal proceeding being filed and without the necessity for protracted litigation or extended hearings,” the enforcement action said.
Matthew Sosik, president and CEO of bankESB, told Banker & Tradesman that the bank admitted no fault and decided to move on by taking the settlement as “a matter of convenience, both financial and otherwise.”
“Both parties agreed that it made more sense to just settle the matter, admit no fault, and move on in a good-natured, amicable relationship, obviously, that we have with the Federal Reserve,” Sosik said.
Easthampton Savings Bank is one of three banks within the mutual holding company Hometown Financial Group. Sosik, who is also Hometown Financial Group’s CEO, said the settlement did not affect the other banks, Abington Bank and Oxford-based bankHometown.
When the Fed receives the funds for the penalty, the money will be sent to FEMA’s National Flood Mitigation Fund, which provides grants to states and communities to assist with planning and mitigating projects that reduce the risk of flood damage.
The Fed issued an enforcement action last year for another Massachusetts bank, Weymouth-based South Shore Bank, related to the National Flood Insurance Act. The settlement with South Shore Bank involved a $71,000 penalty.
