Decision relative to the acquisition of CFX Corporation, Keene, New Hampshire by Peoples Heritage Financial Group, Inc., Portland, Maine
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 direct and indirect ownership and control of CFX Corporation, Keene, New Hampshire and its subsidiary banks. CFX Corporation is the holding company for Orange Savings Bank, Orange, Massachusetts and Safety Fund National Bank, Fitchburg, Massachusetts. It also controls CFX Bank, Keene, New Hampshire. The Petitioner controls Family Bank, FSB, Haverhill, Massachusetts as well as banks in Maine and New Hampshire. The application before the Board is part of a multi-step transaction involving the mergers of the subsidiary banks of Peoples Heritage and CFX Corporation. If approved upon the consummation of the transaction, Peoples Heritage would control and operate one bank in the Commonwealth, Family Bank, FSB.
Notice of the petition by Peoples Heritage was published as directed by the Board thereby affording opportunity for interested parties to submit comments. A public hearing relative to this application was held by the Board on January 29, 1998 and the period for filing comments expired on February 11, 1998. The Board reviewed the application, the numerous letters received during the open record of this matter, comments received at the public hearing and all related comments in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether any new net benefits as well as public convenience and advantage would be promoted by approval of the proposed transaction. The record of performance under the Commonwealth's Community Reinvestment Act ("CRA"), General Laws chapter 167, section 14 and its implementing regulations 209 CMR 46.00 et seq. by the subsidiary banks of Peoples Heritage and CFX Corporation were also factors considered by the Board.
One provision of law requires the Board to have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements for the proposed transaction have been made by Peoples Heritage pursuant to section 4 of chapter 167A of the General Laws and guidelines adopted by the MHPF. The Board has received notice from the MHPF, in a letter dated January 16, 1998, that arrangements satisfactory to it have been made for the transaction.
Peoples Heritage Financial Group, Inc., Portland, Maine is the holding company for three banks, one each in Maine, New Hampshire and Massachusetts. It operates 142 offices within these states. As of September 30, 1997, it had consolidated assets of $6.1 billion. Peoples Heritage Bank is a Maine state-chartered bank with assets of $3.0 billion. Bank of New Hampshire is a New Hampshire chartered commercial bank with assets of $2.0 billion. Family Bank, FSB ("Family Bank"), Haverhill, Massachusetts is a federally-chartered savings bank. Family Bank operates eighteen banking offices in Massachusetts and four in New Hampshire. It converted from a Massachusetts state charter in 1995 to avail itself of the ability to have branch offices instead of a subsidiary bank in New Hampshire. Family Bank has $1.1 billion in assets. It offers a wide array of banking products to consumer and commercial customers. Family Bank was acquired by Peoples Heritage in 1996 with the approval of the Board.
CFX Corporation, Keene, New Hampshire is also the holding company for three banks, one in New Hampshire and two in Massachusetts. It operates fifty-six offices in these two states. As of September 30, 1997, it had consolidated assets of $2.8 billion. CFX Bank is a New Hampshire chartered savings bank with assets of $2.4 billion. Orange Savings Bank ("Orange") is a Massachusetts-chartered savings bank. It operates from its main office in Orange and a branch office in Athol. Orange has assets of $89.1 million. It was acquired by CFX Corporation in 1995 with the Board's approval. Safety Fund National Bank ("Safety Fund") is a federally-chartered commercial bank which operates from a main office in Fitchburg and ten other banking offices. As of September 3, 1997, it had total assets of $439.4 million. Safety Fund was acquired in 1996 with the approval of the Board.
The Petitioner has submitted an analysis to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. That analysis demonstrates that consummation of this multi-step transaction will not result in undue concentration of banking resources in any banking market in Massachusetts. The Board is aware that it has approved, at separate times, the CFX Corporation's acquisition of both Orange and Safety Fund. The Board has also noted that the subsidiary banks of CFX Corporation do not operate in the same service areas in which Family Bank operates. Moreover, the Board's review has determined that a number of diverse banks and financial institutions will continue to provide competitive and deposit services in each of the areas serviced by the banks involved in this transaction. Accordingly, competitive factors support approval of this application.
Information has also been established on the record relative to the promotion of convenience and advantage which will result for the banking public in the Commonwealth. In particular, the Petitioner has committed to retaining all the banking offices in Massachusetts of CFX Corporation's bank subsidiaries for customer convenience. In addition, upon consummation of all related transactions, customers of Orange and Safety Fund will obtain the benefit of additional services such as free checking options for retail customers, commercial lease financing and asset based lending as well as various investment products and services for municipalities. The Petitioner also notes that after its acquisition of Family Bank, that institution increased lending, opened two supermarket branch offices and its customers obtained access to twenty-four hour telephone banking. This pattern of expanded and enhanced lending and retail banking services will continue after the proposed transaction according to the Petitioner. These factors weigh in favor of approval of the transaction.
Related to the issue of public convenience and advantage is the record of performance under the Community Reinvestment Act ("CRA") by the banks which are the parties to this multi-step transaction. Such review for a state-chartered bank includes examination by personnel of the Board as well as analysis of concerns received by the bank's community and its response to those concerns fairly raised. For other institutions, the Board looks to a publicly available descriptive rating and evaluation by a federal or state regulatory agency. The matter was specifically addressed at the public hearing by the Board. The Board noted that two of Peoples Heritage bank subsidiaries have "Outstanding" ratings and the other a "Satisfactory" in their most recent examinations of performance under CRA. Similarly, two of CFX Corporation's bank subsidiaries have "Outstanding" ratings and one has a "Satisfactory" rating. Of the three banks in the Commonwealth involved in this transaction, two have "Outstanding" ratings one has a "Satisfactory" rating. The Board's review of factors related to public convenience and advantage are consistent with approval.
The financial structure and managerial aspects of the transaction were reviewed and addressed. As detailed in the submitted documents, the shareholders of CFX Corporation will receive shares of Peoples Heritage in exchange for their stock. The resulting capital ratios and projections for the Petitioner are satisfactory and allow it to remain a source of strength to its subsidiary banks should that be necessary. Management factors reviewed in consideration of the proposed transaction before the Board are also supportive of its approval. Additionally, all other requirements of statute relating to a bank holding company acquisition, including net new benefits, have been met. The Board is aware that the shareholders of both Peoples Heritage and CFX Corporation voted in favor of the acquisition on February 9, 1998.
The Board received a significant number of letters on this matter. Each was reviewed, analyzed and became part of the record for this application. The Board is aware that such correspondence was also sent to other banking regulatory agencies which must also pass upon parts of this multi-step transaction.
In general, letters, either supported this transaction in light of Family Bank's strong commitment to the communities it serves which have continued after its acquisition by Peoples Heritage or raised concerns about the loss of a bank and local ties to the North Quabbin area of the Commonwealth. At the public hearing, no one testified before the Board in opposition to the application. Subsequent to the hearing, the Board received written confirmation that the concerns raised relative to the North Quabbin area had been resolved.
Having considered this petition with reference to relevant statutory and regulatory requirements, this Board finds that competition among banking institutions will not be unreasonably affected and that public convenience and advantage will be promoted by consummation of the proposed acquisition of CFX Corporation and its subsidiary banks by Peoples Heritage.
In accordance with its finding and pursuant to statute, the Board hereby approves the application and authorizes Peoples Heritage to directly and indirectly acquire and control up to 100% of the stock of CFX Corporation and its subsidiary banks; provided, that the transaction is completed within one year of the
| Thomas J. Curry Commissioner of Banks | |
| Mitchell Adams Commissioner of Revenue | Board |
| Joseph D. Malone Treasurer and Receiver-General | |
| March 9, 1998 Date |