Petition of Banknorth Group, Inc., Portland, Maine to acquire Foxborough Savings Bank, Foxborough, Massachusetts
By the Division of Banks
Banknorth Group, Inc. (the "Petitioner" or "Banknorth Group"), Portland, Maine, has petitioned the Board of Bank Incorporation ("the Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 to acquire Foxborough Savings Bank ("Foxborough"), Foxborough, Massachusetts. Banknorth Group's application before the Board is part of a multi-step transaction which will result in Foxborough being merged with and into an interim national bank which will ultimately be merged with and into Banknorth Group's banking subsidiary, Banknorth N.A., ("Banknorth"), Portland, Maine, pursuant to an Agreement and Plan of Merger dated November 25, 2003.
As directed by the Board, notice of the application was published and posted and a public hearing was held, thereby affording an opportunity for interested parties to attend or submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The public hearing was held on March 3, 2004. Representatives of Banknorth and Foxborough offered testimony and responded to questions from the members of the Board. Following the hearing, the public comment period remained open so that interested parties could submit any additional comments. No further public comments were received. The comment period closed on March 11, 2004.
Banknorth Group is a financial holding company headquartered in Portland, Maine and is one of the country's 50 largest commercial banking companies. As of September 30, 2003, it had total consolidated assets of approximately $25.7 billion. Banknorth, its banking subsidiary, is a national bank and a member of the Bank Insurance Fund administered by the Federal Deposit Insurance Corporation ("FDIC"). With approximately 360 offices located in Maine, New Hampshire, Massachusetts, Connecticut, Vermont, and New York, Banknorth, N.A. and its subsidiaries offer a range of commercial and consumer banking services and products, trust, investment advisory, and insurance brokerage services.
Foxborough Savings Bank is a Massachusetts chartered savings bank with a main office located in Foxborough, Massachusetts. As of September 30, 2003 it held approximately $248.8 million in total consolidated assets. Like Banknorth, N.A., Foxborough's deposits are insured by the FDIC. As a Massachusetts savings bank, Foxborough's deposits in excess of FDIC coverage are insured through the Depositors Insurance Fund ("DIF"). In addition to a main office in Foxborough, it has three full-service branch offices located in North Attleborough, Walpole, and Wrentham.
As an interstate transaction and pursuant to requirements of chapter 167A, the reciprocity laws of Petitioner's home state are subject to the review of the Commissioner of Banks. Specifically, the Commissioner must determine whether the proposed transaction is authorized under the laws of Maine for a Massachusetts-based holding company, under conditions no more restrictive than those imposed by Massachusetts. Based on a review of the applicable law, and consistent with previous rulings regarding the Petitioner and Maine's reciprocity laws, the Commissioner has concluded that the proposed transaction is permissible under the Commonwealth's Interstate Bank Act.
Prior to approving an application under chapter 167A, the Board must have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and MHPF's various affordable housing loan programs. On March 3, 2004, the Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction.
The Board's review of this transaction focuses on the applicable statutory and administrative criteria which include, among other things, whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In determining whether the public convenience and advantage are promoted by the proposed transaction, the Board considers, among other things, whether there has been a showing of "net new benefits." Net new benefits are defined as initial capital investments, job creation plans, consumer and business services, commitment to maintain and open branch offices within a bank's delineated local community, and such other matters as the Board may deem necessary or advisable. The Board also considers the record of performance of the banks involved in this transaction under the Community Reinvestment Act ("CRA") and any relevant public testimony or commentary submitted into the record.
On the issue of whether banking competition will be unreasonably affected by the proposed transaction, the Board considers, but does not rely exclusively on, the guidelines used by federal authorities to review bank mergers. Essentially, these guidelines define relevant markets and measure concentration, which is considered an important indicator of competitiveness. The starting point in the federal analysis is the Herfindahl-Hirschman Index ("HHI"), an arithmetic measure of market concentration that synthesizes the distribution of market shares and the number of banks in an affected market into a single value. In addition to that analysis, the Board considers the competitive impact of the proposed transaction on a community-by-community basis, as well as on the overall banking structure of the Commonwealth. In this case, and consistent with the relatively small market share of the involved banks, the HHI calculations do not indicate that the proposed transaction will result in an undue concentration of banking resources. Moreover there is no community in the Commonwealth in which Foxborough and Banknorth have banking offices. Furthermore, the Board is satisfied that consumers in the impacted banking markets will continue to have access to competitive products and services offered by a diverse number of commercial banks, savings banks, cooperative banks, credit unions and non-bank providers. At the public hearing the Board received testimony that competition from non-bank financial service providers was a consideration which weighed in support for the acquisition. Accordingly, the Board finds that banking competition will not be unreasonably affected by the proposed transaction.
Petitioner submitted a variety of materials relating to the public convenience and advantage that will result from the proposed transaction. As a general matter, the Petitioner asserts that the cost savings and increased efficiency resulting from the transaction will enable its continued growth and investment in Massachusetts. More specifically, it maintains that Foxborough customers will have access to a greatly expanded branch and ATM network and a broader range of banking products and services. With respect to branches, the Petitioner asserts that Foxborough customers will gain access to the 112 Banknorth branch offices located throughout Massachusetts and the more than 360 branches located in neighboring states. It also notes that Foxborough customers will have free ATM use at Banknorth's 200 proprietary ATMs located in Massachusetts and at more than 500 proprietary ATMs located throughout New England and upstate New York. The Petitioner points out that because Banknorth is a member of the SUM network, Foxborough customers will continue to have access to SUM ATMs. In addition to the much larger service area, the Petitioner maintains that Foxborough customers will benefit from Banknorth's expanded deposit products, small business products, commercial lending capabilities, and free internet banking services. Foxborough customers will also have access to the diverse range of non-traditional banking products and services offered by Banknorth, it asserts, which include financial planning and investment services and insurance products. Finally, the Petitioner points out that the community currently served by Foxborough will benefit from its many community development programs and services.
At the hearing, a representative of Foxborough Bank indicated that the proposed transaction was prompted, in part, by Foxborough's awareness that, in the absence of a substantial investment in facilities, technology, and staffing, it would be disadvantaged in the increasingly competitive marketplace. Foxborough further informed the Board that, in evaluating its strategic options, it had concluded that the proposed acquisition would best accommodate the needs of its current and future customers.
As the record demonstrates that the customers of Foxborough will have access to a significantly expanded service area and an expanded array of traditional and non-traditional banking products and services, the Board's review weighs in favor of the finding that the public convenience and advantage will be promoted. The Board further concludes that the criteria for net new benefits has been established.
The Board's review of this transaction includes an assessment of the subsidiary banks' performance under the Community Reinvestment Act ("CRA"). Such assessment for a state-chartered bank includes examination by Division of Bank personnel, as well as an analysis of the legitimate concerns raised by the community and the bank's response to those concerns. For other institutions, the Board reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency . Here, the relevant evaluations were submitted as part of Petitioner's application materials. In its most recent CRA examination of Foxborough, performed by the FDIC on September 11, 2002, it received a Satisfactory rating. On May 10, 2000, People's Heritage Financial Group, Inc. acquired and changed its name to Banknorth Group, Inc which operated a bank subsidiary in the Commonwealth named First Massachusetts Bank N.A. The only CRA examination of First Massachusetts Bank, N.A. was conducted on April 10, 2001, and it resulted in a "Satisfactory" rating. The OCC also performed the most recent examination, on July 9, 2001, of Banknorth as People's Heritage Savings Bank, of Portland, Maine, and it received an "Outstanding" rating. On January 1, 2002, First Massachusetts Bank, N.A. was merged with and into Banknorth, N.A. It should be noted that under the provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, host state CRA, consumer protection, and fair lending laws "apply to any branch in the host State of an out-of-State national bank to the same extent as such State laws apply to a branch of a bank chartered by that State. (See 12U.S.C. 36(f).) Based on its review of these ratings, the Board concludes that the banks involved in this transaction were adequately meeting the credit needs of their respective communities at the time of their most recent CRA examinations. However, in the absence of a recent CRA evaluation of Banknorth, N.A., including an evaluation of its compliance with the Massachusetts CRA statute by its Massachusetts branches, it is difficult to make a complete determination of its CRA compliance within the Commonwealth at this time.
Finally, the Board reviews the financial structure, tax consequences, and operational aspects of the transaction. It has reviewed the consolidated financial statements of the parties and the details of the proposed transaction, and is satisfied with the Petitioner's capital ratios and projections. Information regarding the tax consequences of the proposed transaction was also provided by Petitioner and considered by the Board. Additionally, the Board is aware of a number of acquisitions by the Petitioner which generally involved a smooth transition of its systems and account information.
Conclusion
Based on the record of this matter and considered in light of all relevant statutory and administrative requirements, the Board concludes that competition among banking institutions in the Commonwealth will not be unreasonably affected and that the transaction will promote the public convenience and advantage. The Board also finds that the banks involved in this transaction have a satisfactory record of performance under CRA. In accordance with these findings and pursuant to the statutory authority cited herein, the Board approves the application and authorizes Banknorth Group to acquire 100% of the stock of Foxborough Savings Bank.
The approval granted herein is subject to the condition that all related transactions are completed within one year of the date of this Decision.
| Steven L. Antonakes ___________________________ Commissioner of Banks | |
| Alan L. LeBovidge ___________________________ Commissioner of Revenue | Board |
| Timothy P. Cahill ___________________________ Treasurer and Receiver General | |
| April 20, 2004 _____________________ Date |