Decision relative to the petition of Chittenden Corporation, Burlington, Vermont to acquire Ocean National Corporation, Kennebunk, Maine

By the Division of Banks

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Chittenden Corporation (the "Petitioner" or "Chittenden"), Burlington Vermont has petitioned the Board of Bank Incorporation (the "Board") to acquire Ocean National ("Ocean National") Corporation, Kennebunk, Maine and indirectly Ocean National's bank subsidiary, Ocean National Bank (the "Bank"), Kennebunk, Maine. The transaction involves the merger of a subsidiary of Chittenden into Ocean National and the subsequent merger of Ocean National with and into Chittenden. Subsequent to the merger of the holding companies, the Bank will operate as a direct subsidiary of Chittenden. In the Commonwealth Chittenden is the bank holding company for Flagship Bank and Trust Company ("Flagship"), Worcester and The Bank of Western Massachusetts, Springfield, Massachusetts. The application was submitted pursuant to the provisions of sections 2 and 4 of chapter 167A of the General Laws.

Notice of the application was published and posted as directed by the Board, thereby affording opportunity for interested parties to submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The Board held a public hearing on the petition of Chittenden on January 9, 2002. The comment period on the proposed transaction ended January 16, 2002.

The Board has reviewed the application as well as the oral testimony received at the public hearing. The Board also considered the Petitioner's supplemental filing. That review focused on the statutory and administrative criteria which includes, among other things, whether competition among banking institutions will be unreasonably affected; whether public convenience and advantage would be promoted; and the record of performance under the Community Reinvestment Act ("CRA") by the involved subsidiary banks. The additional statutory requirements set out in sections 2 and 4 of said chapter 167A were also significant factors in the Board's deliberations on the matters before it. All such requirements are specifically addressed in the application documents.

One such statutory provision requires the Board to have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and the MHPF's various affordable housing loan programs. In the application documents and oral testimony, the Petitioner informed the Board of its contact with the MHPF in order to meet this requirement. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated January 17, 2002.

Chittenden owns a subsidiary bank in Vermont and in Maine as well as the two banks mentioned above in Massachusetts. At September 30, 2001, it had consolidated assets of $4 billion. Chittenden's subsidiary banks offer full lines of consumer and commercial services. It also has a mortgage company subsidiary. In Vermont, Chittenden's bank subsidiary is Chittenden Trust Company which has total assets of $2.9 billion. It operates over sixty banking offices in Vermont and New Hampshire. Both Flagship and The Bank of Western Massachusetts are trust companies chartered by the Commonwealth. At September 30, 2001, Flagship had total assets of $433 million and operated from six banking offices. The Bank of Western Massachusetts had total assets of $483 million. It operates from twelve banking offices.

In January 2001 the Petitioner, with the Board's approval, acquired Maine Bank & Trust Company ("Maine Bank") Portland, Maine. It has assets of approximately $260 million. Maine Bank operates a general retail banking business from sixteen banking offices.

Ocean National had total assets of $276 million at September 30, 2001. Its main business is to act as parent company for the Bank which had assets in the same amount at that same date. The Bank conducts a general commercial and retail banking business. It operates from eleven full service banking offices in Maine and New Hampshire.

At the public hearing the Petitioner's present plans for its operations in New Hampshire and Maine were described in detail. As stated in that testimony, if the acquisition of Ocean National is approved, the Bank will be retained as a separate subsidiary with its banking offices in New Hampshire increased through the combination of the New Hampshire offices of Chittenden Trust Company. At the hearing, it was noted that this acquisition would result in Chittenden's operations being about fifty percent in Vermont and the remainder in other states.

The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. That analysis states that consummation of the transaction will not result in undue concentration of banking resources in the specified banking markets in Massachusetts or in Maine or New Hampshire. It is the position of this 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 instead of by variously grouped markets. The Board's review recognizes that there is no overlap in the banking office networks of Flagship and The Bank of Western Massachusetts with the subsidiary bank of Ocean National or existing operations of the Petitioner. The Board's review recognizes that there is no overlap in the banking office networks of Flagship and The Bank of Western Massachusetts with the subsidiary bank of Ocean National or existing operations of the Petitioner. For that reason and other factors, the Board finds that competition among banking institutions will not be unreasonably affected.

Information has also been established on the record relative to the promotion of convenience and advantage which will result for the banking public as well as customers of all bank subsidiaries of Chittenden. The authority for each bank subsidiary to act as agent for each other and thereby allow customers of all such banks to conduct a wide variety of banking services at any subsidiary bank's offices was specifically mentioned. In the application and at the public hearing, the Petitioner emphasized that its operation of separate community banks in various markets serves the public convenience and advantage. Other factors are also set out in the application filing. The Board's review of these factors is supportive of the application.

Related to the issue of public convenience and advantage is the record of performance under the CRA by the subsidiary banks of the parties to this transaction. Such a review for a state-chartered bank includes examination by personnel of the Commonwealth's Division of Banks (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 Board looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency. The matter was specifically addressed in the application. The Board has noted that all four subsidiary banks of the Petitioner have "Outstanding" ratings in their most recent examinations of performance under CRA. Ocean National's subsidiary bank has a CRA rating of "Satisfactory". The Board's review of factors related to public convenience and advantage are consistent with approval.

The Board has considered the Petitioner's analysis of the "net new benefits" that would result from the proposed acquisition of Ocean National as required under section 4 of chapter 167A of the General Laws. The Petitioner's application and oral testimony address this issue in detail on matters of capital investments, job creation plans, consumer and business services and commitments to maintain and open branch offices. The financial structure of the transaction was also reviewed and addressed. It will be a cash transaction and the impact on the Petitioner's two Massachusetts bank subsidiaries were set out in a supplemental filing as well as in a subsequent document submitted to the Division.

The resulting capital ratios and projections for the Petitioner are satisfactory. 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 have been met.

The application, supporting documents, the supplemental filing and the comments received at the public hearing have established an extensive record on this petition, which has been reviewed consistent with statutory provisions and the policies of the Board. Based on the record of this matter considered in light of all relevant statutory and administrative requirements, the Board finds that public convenience and advantage will be promoted and that competition among banking institutions will not be unreasonably affected and that the records of performance under CRA by the subsidiary banks involved in this transaction are consistent with its approval. Having considered the record established on this application, the Board has found that the applicable statutory and administrative criteria have been met.

In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Chittenden to acquire Ocean National and its subsidiary bank, Ocean National Bank provided that the transaction is completed within one year of the date of this Decision.

Thomas J. Curry Commissioner of Banks
Alan L. LeBovidge Commissioner of Revenue	Board of Bank Incorporation
Shannon P. O'Brien Treasurer and Receiver-General
February 8, 2002 Date