Decision on the application of Banknorth Group, Inc., Burlington, Vermont to become a bank holding company in Massachusetts
By the Division of Banks
Banknorth Group, Inc. ("Banknorth" or the "Petitioner"), Burlington, Vermont has petitioned the Board of Bank Incorporation (the "Board") pursuant to the provisions of Massachusetts General Laws chapter 167A, sections 2 and 4 to become a bank holding company in the Commonwealth. Banknorth would become a holding company through its acquisition of First Massachusetts Bank, N.A. (in Organization) (the "Bank") which will have its main office in Worcester, Massachusetts. The Bank is being established by Banknorth to acquire thirteen branch offices in communities in central and western Massachusetts being divested as part of the transaction whereby Fleet Financial Group ("Fleet") acquired Shawmut National Corporation ("Shawmut") and its bank subsidiary, Shawmut Bank, N.A. All thirteen branch offices are currently banking offices of Shawmut Bank, N.A. which now operates under the name of Fleet National Bank of Massachusetts. The application to charter the Bank is a matter before the Office of the Comptroller of the Currency, the federal agency which regulates national banks.
Notice of the petition was published as directed by the Board thereby affording opportunity for interested parties to submit comments. A public hearing relative to the matter was held by the Board on February 6, 1996 and the period for filing comments after the hearing has ended. The Board's hearings on that day also included another transaction involving a Worcester based bank and its acquisition by another Vermont based bank holding company. Each of the hearings provided the Board with substantive comments on the availability of banking services and competition in the Worcester area and other affected municipalities in the Commonwealth. These transactions and the comments and filings supporting them were of additional interest to the Board in light of the Fleet/Shawmut transaction. The Board reviewed the application, comments received at the public hearing, and all related documents. That review focused on the statutory and administrative criteria which includes among other thing, whether competition among banking institutions will be unreasonably affected; whether public convenience and advantage would be promoted; as well as the record of performance under the Community Reinvestment Act ("CRA") by the banking subsidiaries of the Petitioner. The additional requirements of the Commonwealth's 1990 Nationwide Banking Act, which were added to sections 2 and 4 of said chapter 167A, were also significant factors in the Board's deliberations on this application.
As an interstate transaction, the reciprocity of the law of Banknorth's home state, Vermont, must be reviewed under the provisions of said chapter 167A. That statute rests such a determination of reciprocity solely with the Commissioner of Banks. The Commissioner has previously ruled on prior transactions that Vermont law is reciprocal and authorizes a similar transaction as that proposed here. Moreover, the Petitioner offers arguments that the transaction is directly authorized by provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. Since the proposed transaction is permissible under the Commonwealth's Nationwide Banking Act, the Board will proceed to consider whether the other statutory requirements are met by this application.
One such statutory provision added in 1990 requires the Board to have received notice from the Massachusetts Housing Partnership Fund ("MHPF") that satisfactory arrangements have been made by the Petitioner consistent with MHPF's various affordable housing loan programs and the provisions of section 4 of said chapter 167A of the General Laws. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated February 5, 1996. The Board has also received assurances from the Petitioner that the other requirements of that 1990 Act have been met, including the requirement that a resident of the Commonwealth serve as an executive officer of the Bank, upon the completion of its formation.
Banknorth is a bank holding company within the meaning of federal law. It currently controls six bank subsidiaries, five of which are located in Vermont and one which has its headquarters in New Hampshire. As of September 30, 1995, Banknorth had consolidated assets of $1.9 billion. It also has two non-bank subsidiaries and is in the process of forming a limited purpose trust company to offer trust services on an integrated basis to customers of its bank subsidiaries.
In addition to having its main office in Worcester, the Bank would acquire three other branch offices in that city. The Board has noted that the main office would be located at the banking office on Park Avenue, Worcester. This matter was the subject of specific comment at the public hearing. At the time of the Fleet/Shawmut transaction concern for the continued operation of a banking office at that site was expressed to the Board. The Bank would also purchase the assets and assume the deposits and other liabilities of branch offices in nine other municipalities in central and western Massachusetts. In total, the Bank would assume approximately $635 million in deposits at the acquired branch offices.
The Petitioner has submitted extensive materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. That analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources in the affected communities or banking markets. The Petitioner also offers that its acquisition of the thirteen divested banking offices required by the Fleet/Shawmut transaction was the result of federal and state requirements to mitigate the anti-competitive effects that would have resulted from that merger. Moreover, Banknorth emphasizes that its introduction into these Massachusetts communities will result in a new and vigorous competitor for both credit and other banking services. For these reasons, the Petitioner argues strongly that its establishment of the Bank will not unreasonably affect competition and will likely stimulate increased competition, which will benefit the banking public.
The Board has also considered whether public convenience and advantage will be promoted by this transaction. The Petitioner's application and oral testimony offered several reasons why this criteria would be met. Banknorth states that the Bank will offer a full line of retail and commercial deposit and credit products and services. It notes that these products and services are equivalent to those currently being offered through these branch offices by Shawmut. The continuation of the availability of banking services from these thirteen sites is also noted as a convenience to the banking public. Moreover, consistent with statutory requirements, the Petitioner details various ways in which net new benefits to the Commonwealth will result from the transaction. In particular, the Petitioner has emphasized and the Board has noted the commitments to employ existing personnel at the thirteen banking offices.
Related to the issue of public convenience and advantage is the record of performance under CRA by the existing bank subsidiaries of the Petitioner. This matter was specifically addressed at the public hearing. In response to questions, the Petitioner testified that its six bank subsidiaries have public CRA ratings of "Outstanding" or "Satisfactory". The Board holds a bank holding company, such as the Petitioner, responsible for the CRA performance of its bank subsidiaries in the consideration of this factor in the application process.
The Board's review of all such considerations relative to competition, public convenience and advantage as well as financial and managerial factors are consistent with approval of this transaction.
Having considered this petition with reference to relevant statutory and regulatory requirements, the Board finds that competition among banking institutions will not be unreasonably affected; that public convenience and advantage will be promoted; and that the record of performance under CRA by the Petitioner's existing bank subsidiaries weigh in support of approval of this transaction. The Board has also found the benefits from this transaction to be significant, particularly to the banking public in Worcester.
In accordance with the findings expressed herein, the Board hereby approves the petition and authorizes the Petitioner to become a bank holding company, through its formation and control of the First Massachusetts Bank, N.A. This approval is subject to the following conditions:
- that all requirements are met to form First Massachusetts Bank, N.A.; and
- that the proposed transaction be consummated to meet the requirements set out in the Fleet/Shawmut transaction and in no event more than one year from the date of this Decision without an extension of time from the Board.
|Thomas J. Curry |
Commissioner of Banks
|Frederick A. Laskey |
Senior Deputy Commissioner of Revenue
|Joseph D. Malone |
Treasurer and Receiver-General
|February 13, 1996 |