By the Division of Banks


DECISION
RELATIVE TO THE MERGER OF
NUVO BANK & TRUST COMPANY, SPRINGFIELD, MASSACHUSETTS
WITH AND INTO
MERCHANTS BANK, SOUTH BURLINGTON, VERMONT


Merchants Bank, South Burlington, Vermont (Merchants Bank) has applied to the Division of Banks (Division) for authority to merge with NUVO Bank & Trust Company, Springfield, Massachusetts (NUVO) pursuant to Massachusetts General Laws chapter 167I, section 3 and chapter 167C, section 13 under the terms of an Agreement and Plan of Merger dated as of April 27, 2015 (Agreement).  The Agreement provides for the merger of NUVO with and into Merchants Bank under the Vermont banking charter, bylaws, and name of Merchants Bank.  The sole banking office of NUVO would be retained as a branch office of the continuing bank following the merger.  The merger application was filed in connection with a multi-step transaction in which Merchants Bancshares, Inc., South Burlington, Vermont (Merchants Bancshares) will acquire NUVO.      

Merchants Bank is a Vermont-chartered bank and is the sole banking subsidiary of Merchants Bancshares, Inc., a Delaware corporation and a registered bank holding company.  As of March 31, 2015, Merchants Bank had total assets of approximately $1.7 billion.  In addition to its main office located in South Burlington, Vermont, Merchants Bank operates thirty-one branch offices in Vermont.  Merchants Bank is a full-service commercial bank conducting lending operations as well as offering trust and wealth management services.  The deposits of Merchants Bank are insured up to allowable limits by the Federal Deposit Insurance Corporation (FDIC).       

NUVO is a Massachusetts-chartered trust company which operates exclusively from its main office in Springfield, Massachusetts.  NUVO is independently owned and does not have a parent company, nor any subsidiaries or affiliates.  As of March 31, 2015, NUVO had total assets of approximately $157.95 million.  As a Massachusetts-chartered trust company, NUVO’s deposits are insured up to allowable limits by the FDIC.  

The authority for a bank holding company to acquire control of a Massachusetts-chartered bank without the prior written approval of the Massachusetts Board of Bank Incorporation (Board) was established by Chapter 482 of the Acts of 2014 (Chapter 482) and is codified at Massachusetts General Laws chapter 167A, section 3.  The exemption from the requirement to obtain approval from the Board will apply if: (i) the acquired institution is merged simultaneously with the acquiring entity’s acquisition of the capital stock of such acquired institution; (ii) the acquired institution is not operated by the acquiring entity as a separate banking institution; and (iii) the transaction requires the approval of the Commissioner of Banks pursuant to the Massachusetts General Laws.  Information reported in the application establishes that: (i) the outstanding stock of NUVO will be cancelled simultaneously with the acquisition, at the effective time of the merger of NUVO with and into Merchants Bank; (ii) NUVO will not be operated as a separate banking institution following the merger; and (iii) the merger requires the approval of the Commissioner of Banks under Massachusetts General Laws chapter 167I, section 3 and chapter 167C, section 13.  This transaction is therefore exempted from the Board approval requirement.     

However, in reviewing the proposed transaction, the Division must receive notice from the Massachusetts Housing Partnership Fund (MHPF) that satisfactory arrangements have been made consistent with Massachusetts General Laws chapter 167A, section 4 and the MHPF’s various affordable housing loan programs.  The Division received notice from the MHPF that satisfactory arrangements had been made for this transaction in a letter dated September 15, 2015.

As an interstate transaction, the reciprocity of the law of Merchants Bank’s home state must be reviewed.  Under Massachusetts law, the determination of reciprocity of the laws of another state rests solely with the Commissioner of Banks.  I have determined that Vermont law is reciprocal and expressly authorizes a similar transaction by a Massachusetts bank under conditions no more restrictive than those imposed by Massachusetts General Laws chapter 167C, section 13.  Accordingly, the proposed transaction is permissible under the Commonwealth’s reciprocity requirements for interstate mergers and for the resulting establishment of a branch office in Massachusetts by an out-of-state bank.

Notice of Merchants Bank’s application was posted and published as directed by the Division thereby affording opportunity for interested parties to submit comments.  The period for filing comments has expired.  Accordingly, all documents and materials related to this transaction have been reviewed.  The Division reviewed the application in accordance with applicable statutory criteria which includes, among other considerations, whether competition among banking institutions would be unreasonably affected; whether public convenience and advantage as well as net new benefits would be promoted by approval of the proposed transaction; and the financial and managerial resources of each bank.  Both banks’ records of performance under the Community Reinvestment Act (CRA) were also considered by the Division.

Materials have also been submitted to address the issue of whether competition among banks will be unreasonably affected by the proposed transaction.  Merchants Bank’s branch offices and ATM network are located within Vermont, with no present locations in Massachusetts.  From its single office location in Springfield, Massachusetts, NUVO serves an assessment area that includes twelve Massachusetts municipalities located within Hampden County.  Since Merchants Bank and NUVO operate in separate banking markets and Merchants Bank will continue to operate from NUVO’s Springfield office location following the consummation of the merger, the proposed transaction will not unreasonably impact competition among banking institutions.

Merchants Bank indicates that both existing and new customers will benefit in several ways from the proposed merger.  As a full-service commercial bank, Merchants Bank would expand upon NUVO’s current commercial lending activities and serve a larger customer base.  The continuing bank will also enhance the product offerings and services available to NUVO’s customers and the market area.  Merchants Bank will offer a broader range of residential mortgage loan products and individual retirement accounts and will also offer trust and wealth management services, health savings accounts, and government banking services that are not currently available to customers of NUVO.  As described in the submitted application, Merchants Bank indicates that the proposed transaction will produce a more diversified and competitive banking institution with an increased lending limit and expanded branch network to more efficiently serve the banking needs of the customers of both institutions.  The Division considered these factors and others cited in the submitted documents in determining that public convenience and advantage will be promoted by approval of this transaction.

In determining whether or not to approve a petition under the statutory criteria, the Commissioner is also required to consider a showing of net new benefits related to the transaction, including initial capital investments, job creation plans, consumer and business services, commitments to maintain and open branch offices, among other factors that the Commissioner may deem necessary.  Initial capital investments will be allocated to new signage and equipment upgrades at the NUVO office location to integrate operations with Merchants Bank’s existing systems.  According to Merchants Bank, as a result of the merger, the continuing institution will be able to compete more effectively in delivering a broader portfolio of products and services to its customers.  The submitted materials describe Merchants Bank’s intent to retain NUVO’s Springfield location as a branch office of the continuing institution to facilitate Merchants Bank’s expansion into the Massachusetts market.  Merchants Bank’s anticipates that their projected growth will generate additional employment in the future and opportunities for career advancement among current employees.  It is currently anticipated that the former NUVO banking office will operate as an unincorporated division of Merchants Bank under the name “NUVO Bank Division of Merchants Bank.”  Accordingly, the Division’s review of factors related to public convenience and advantage, including net new benefits, are consistent with approval of Merchants Bank’s application. 

Related to the issue of public convenience and advantage is the record of CRA performance by the banks which are parties to this transaction.  Such a review for a Massachusetts-chartered bank includes examination by personnel of the Division as well as analysis of concerns received by the bank’s community and its response to those concerns fairly raised.  For other institutions, the Division looks to the publicly available descriptive rating and evaluation by a federal or state bank regulatory agency.  The Division notes that both Merchants Bank and NUVO received a “Satisfactory” rating on their most recent CRA performance evaluations.  Accordingly, the Division’s review of factors related to public convenience and advantage are consistent with approval of Merchants Bank’s application. 

The application states that upon consummation of the transaction, one member of NUVO’s Board of Directors will be appointed to the Boards of Directors of Merchants Bank and Merchants Bancshares, Inc.   In addition, under the terms of the Merger Agreement, two of NUVO’s executive officers will become principal officers of Merchants Bank.  Opportunities for growth in the Springfield market area supported by the broader product offering of Merchants Bank and its higher lending limit are also described in the submitted documents.  Following consummation of this transaction, all regulatory capital standards will continue to be met.  Therefore, managerial and financial considerations support approval of this transaction.

Upon review of the application with reference to the relevant statutory and regulatory requirements, the Division finds that competition among banking institutions will not be unreasonably affected, that public convenience and advantage will be promoted by consummation of the proposed transaction, and that records of performance under CRA by the banks involved in this transaction are consistent with its approval.  On the basis of these considerations, approval is granted to merge NUVO with and into Merchants Bank under the charter and by-laws of Merchants Bank under the provisions of Massachusetts General Laws chapter 167I, section 3 and chapter 167C, section 13.   Approval is also granted for Merchants Bank to maintain the sole banking office of NUVO as a branch office pursuant to Massachusetts General Laws chapter 167C, section 13.

            The approvals granted herein are subject to the following conditions:

(1)        That the proposed merger shall not become effective until a certificate signed by the Presidents and Clerks, or other duly authorized officers of each bank, indicating that each such institution has complied with the provisions of Massachusetts General Laws chapter 167I, section 3 or other applicable statute has been returned with my endorsement thereon;

(2)        That the proposed merger shall not become effective until Articles of Merger with my           endorsement thereon are filed with the Secretary of State;

(3)        That in accordance with Massachusetts General Laws chapter 167C, section 13, the banking office of NUVO to be maintained as a branch office of the continuing institution shall be subject to the supervision of the Division and must comply with all provisions of the Community Reinvestment Act and all other consumer protection and fair lending statutes in the Commonwealth; and

(4)        That the proposed merger shall be consummated within one year of the date of this Decision.

November 3, 2015
_____________
Date


David J. Cotney
____________________
Commissioner of Banks