Decision relative to the application of Peoples Heritage Financial Group, Inc. Portland, Maine to acquire SIS Bancorp, Inc. Springfield, Massachusetts
By the Division of Banks
Peoples Heritage Financial Group, Inc. ("Peoples Heritage" or the "Petitioner") Portland, Maine has petitioned the Board of Bank Incorporation (the"Board") pursuant to the provisions of Massachusetts General Laws chapter 167A sections 2 and 4 to acquire SIS Bancorp, Inc. Springfield, Massachusetts. The transaction would involve the merger of SIS Bancorp, Inc. with and into an existing corporate subsidiary of Peoples Heritage. In the Commonwealth, SIS Bancorp, Inc. is the holding company for Springfield Institution for Savings ("SIS") Springfield, Massachusetts. In the Commonwealth, Peoples Heritage is the holding company for Family Bank FSB ("Family Bank") Haverhill, Massachusetts. In conjunction with this transaction SIS would merge with and into Family Bank under the provisions of federal law. Upon consummation of the transaction, if approved, Peoples Heritage would control one bank in the Commonwealth, Family Bank.
Notice of the petition by Peoples Heritage was published and posted as directed by the Board thereby affording opportunity for interested parties to submit comments. A public hearing relative to the application was held by the Board on November 10, 1998 and the period for filing comments expired on November 20, 1998. The Board reviewed the application, numerous written comments received during the pendency of this matter, the extensive testimony received at the public hearing and supplemental filings. All such documents have been considered in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether net new benefits as well as public convience and advantage will be promoted by approval of the proposed transaction. The record of performance under the Commonwealth's Community Reinvestment Act ("CRA") by the bank subsidiaries involved in the transaction are also factors considered by the Board. The additional requirements of the Commonwealth's 1996 Interstate Banking and Branching Act were also significant factors considered by the Board.
One provision of the law requires the Board to have received notice from the Massachusetts Housing Partnership Fund ("MHPF") that satisfactory arrangements for the proposed transaction have been made by Peoples Heritage pursuant to section 4 of said Chapter 167A and guidelines adopted by the MHPF. The Board has received notice from the MHPF in a letter dated October 30, 1998, that satisfactory arrangements had been made for this transaction.
As an interstate transaction, the reciprocity of the laws of Peoples Heritage's home state must be considered. Under Massachusetts law, the determination of reciprocity of the laws of another state rests solely with the Commissioner of Banks. The Commissioner has previously ruled in transactions involving Peoples Heritage, that Maine law is reciprocal and does expressly authorize a similar transaction by a Massachusetts bank holding company under conditions no more restrictive than those imposed by Chapter 167A. That ruling remains in effect. Accordingly, the proposed transaction is permissible under the Commonwealth's Interstate Banking Act and therefore, the Board will proceed to consider whether other statutory requirements are met by this application.
The record of this transaction includes approximately three dozen comments, including five from public officials. Most of the comments were letters from various entities acknowledging the supportive actions of either SIS or Family Bank. The most extensive comments were submitted by several non-profit community based organizations providing affordable housing and community economic development activity in Hampden and Hampshire Counties as well as two regional and one statewide organization. The Petitioner's responses are also part of the record of this transaction.
Peoples Heritage is the bank holding company for three banks in three New England states. The bank subsidiaries are Peoples Heritage Bank, Portland, Maine, Bank of New Hampshire, Manchester, New Hampshire and Family Bank FSB, Haverhill, Massachusetts. At June 30, 1998 Peoples Heritage had consolidated assets of approximately $9.8 billion dollars. It has four direct and numerous indirect subsidiaries. Peoples Heritage operates from one hundred ninety-one banking offices in the three cited states. Family Bank converted from a state-chartered bank to a federally-chartered bank in 1995. It was acquired by People's Heritage, with the Board's approval, in 1996. Family Bank offers a wide arrange of residential, consumer and commercial loans as well as numerous deposit products. Its deposits continue to be insured above federal limits by the Deposit Insurance Fund.
SIS Bancorp, Inc. is the holding company for SIS and Glastonbury Bank and Trust Company ("Glastonbury Bank"), Glastonbury, Connecticut. At June 30, 1998 it had consolidated assets of $1.8 billion. SIS Bancorp, Inc.'s only direct subsidiaries are the two banks for which it is the holding company. Its Massachusetts subsidiary, SIS operates from twenty-five banking offices in the Commonwealth. It converted to stock form in 1995 and reorganized into a holding company structured in 1996. SIS provides a full range of banking services. Its deposits in excess of federal insurance coverage are insured by the DIF.
The Board has reviewed the transaction to determine that competition among banks will not be unreasonably affected by the proposed acquisition. It is the position of the Board to consider a transaction in light of its impact on the citizens, communities and banking structure in the Commonwealth on a community by community basis. As set out in the application there is no overlap in the banking offices of SIS and Family Bank. As a result of Peoples Heritage acquisition of CFX Corporation earlier this year, Family Bank now has several banking offices in Worcester County and one branch office in Franklin County. Those banking offices were formerly the offices of CFX Corporation's Massachusetts bank subsidiaries, Orange Savings Bank and Safety Fund National Bank, which were merged with and into Family Bank. The banking offices of SIS are in Hampden and Hampshire Counties. Due to the proximity of offices and other factors there are some retail and commercial loan and deposit accounts derived by Peoples Heritage's bank subsidiaries from the service area of SIS. The extent of that activity is set out in the application and is not found to be significant. Upon review the Board does not find that the transaction will unreasonably affect competition.
In acting upon an application submitted under sections 2 and 4 of said Chapter 167A the Board must also consider whether public convenience and advantage will be promoted by the proposed transaction. The Petitioner's application and testimony at the public hearing offered reasons why this criteria is met. Under the broadest view the Petitioner states that the commitment to serving the banking needs of local communities as exemplified, on a daily basis by Peoples Heritage and SIS Bancorp, Inc., will only be enhanced by this transaction and new benefits will result for the banking public. The community banking operations of the two holding company's subsidiaries result in many similar services or products being offered. The application, however, also details additional products and services which will become available to the customers of SIS and Glastonbury Bank. Moreover, the banking offices of SIS will be retained as branch offices of Family Bank providing, after systems integration, for a network that covers western, central and northern Massachusetts, as well as the three other New England states in which Peoples Heritage's banks operates. The deployment by SIS of additional electronic branches ("ATMs") will occur as planned by that institution. All such factors relative to public convenience and advantage to be promoted and benefits to result from the proposed transaction are consistent with the approval of the application.
The record of performance under CRA by the subsidiary banks in a bank holding company transaction is also considered by the Board. For financial institutions not directly under the jurisdiction of the Commonwealth, the Board initially looks to the publicly available descriptive rating and evaluation by federal or another state's banking regulatory agency. Such review for state-chartered banks such as SIS includes examination by personnel of the Division as well as analysis of concerns received from a bank's community and a bank's response to those concerns fairly raised. The Board has noted that Family Bank has an "Outstanding" rating from its primary regulator, the Office of Thrift Supervision and, SIS has an "Outstanding" rating in their most recent performance under CRA. The Board is also aware that Peoples Heritage's bank subsidiary in Maine received an "Outstanding" rating from the Federal Deposit Insurance Corporation ("FDIC") and that the FDIC had also rated the New Hampshire bank subsidiary of Peoples Heritage as "Satisfactory". It is also significant to the Board that prior to converting to a federally chartered bank Family Bank had also received an "Outstanding" CRA rating from its then primary regulator, the Commonwealth's Division of Banks. Additionally SIS has received numerous "Outstanding" CRA ratings from regulators over an extended period of time.
The entities which submitted several joint comments expressed the position that written commitments should be made by the Petitioner to address the needs of the communities served by SIS. They acknowledge the fine CRA record of SIS. The nature, extent and necessity of the commitments sought were also the subject of inquiry by the Board at the public hearing. One commenter offered that the need for written commitments was necessary since the concerned community groups would be able to expect future actions based on what they could currently inspect in writing.
From the Board's perspective documents exist which can be reviewed. The Board has addressed this matter in a prior transaction. (See Decision Relative To The Application Of Bank of Boston Corporation, Boston Massachusetts To Acquire BayBanks, Inc. Boston, Massachusetts, July 26, 1996). In that Decision, the Board stated the following on page 12. "As it has in the past, the Board again states its position that planned or future CRA related activities or loan and investment commitments do not substitute for a record of past performance in meeting the credit needs of an applicant's community or service area. It is to that record as well as available and timely performance ratings from the government regulatory agencies that this Board will give the greatest weight in its deliberations on a proposed transaction. Accordingly, an applicant, regardless of size, with such an established record under CRA may rely on that fact to meet this part of the Board's analysis." Just prior to the end of the comment period the Board received additional jointly signed letters whereby the several entities acknowledged the productiveness of the proceedings and wished SIS Bancorp, Inc. well in concluding the regulatory process and the merger of SIS with and into Family Bank. The Board's view of this factor is consistent with approval.
The application states that upon consummation of the merger of SIS with and into Family Bank the Board of Directors of Family Bank will consist of seven of the current directors of SIS, six of the current directors of Family Bank as well as its president. Additionally one current non-employee director of SIS Bancorp, Inc. will become a director of Peoples Heritage. The President of SIS Bancorp, Inc. will also be retained as an Executive Vice President of Peoples Heritage. Testimony at the public hearing in response to the Board's inquiry indicated that some of Family Bank's management team would be located in the Springfield area. Moreover, a separate local loan committee would make decisions on applications from that area. Based on testimony presented, a concern of the Board over the potential for customer confusion on the status of SIS upon consummation of the transaction was raised at the public hearing. At the Board's subsequent request, the matter was clarified in a supplemental filing. After the merger, the banking offices of SIS will be referred to as being a Division of Family Bank. Upon completion of systems integration, no reference to SIS as a bank will continue. Economies and service capabilities which would result from the transaction are set out in the submitted documents. Following the transaction, all regulatory capital standards will continue to be met and Peoples Heritage will remain a source of strength to its bank subsidiaries should that be necessary. Upon review, financial, managerial and operational considerations support the petition.
Based on the record on this matter including the extensive testimony received at the public hearing considered in light of all relevant statutory and administrative requirements, the Board 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. Therefore, in accordance with these findings and pursuant to the statutory authority cited herein, the Board hereby approves the application and authorizes Peoples Heritage to indirectly acquire up to one hundred percent of the stock of SIS Bancorp, Inc.
The approval herein are subject to the condition that all related transactions are completed within one year of date of this Decision.
| Thomas J. Curry Commissioner of Banks | |
| Bernard Crowley Acting Commissioner of Revenue | Board |
| Joseph D. Malone Treasurer and Receiver-General | |
| December 7, 1998 Date |