Decision relative to the petition of Toronto-Dominion Bank, Toronto, Ontario, Canada to acquire control of Banknorth Group, Inc., Portland, Maine
By the Division of Banks
Toronto-Dominion Bank ("Toronto-Dominion" or the "Petitioner"), Toronto, Canada, has petitioned the Board of Bank Incorporation ("the Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 to acquire up to 70% of the voting shares of Banknorth Group, Inc., ("Banknorth") and its subsidiary bank, Banknorth, N.A., Portland, Maine. This transaction is subject to various U.S. regulatory approvals as well as Canadian regulatory authorities. Toronto-Dominion's initial application to the Board sought approval to acquire 51% of the voting shares of Banknorth. The application further provides that Toronto-Dominion may acquire additional shares up to 66 2/3% under terms set forth in a stockholders agreement. Further, the limitation of 66 2/3% may be increased up to 70% in connection with share repurchases completed by Banknorth. By letter dated January 14, 2005, Toronto-Dominion sought to amend its application to request approval to acquire up to 70% of the voting shares of Banknorth. Petitioner understands that should it intend to acquire amounts in excess of the 70% limitation, it would need to seek subsequent prior approval from the Board to do so.
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 January 20, 2005. Representatives of Toronto-Dominion and Banknorth offered testimony and responded to questions from the members of the Board. The Board received one written comment in opposition to the proposed acquisition. At the public hearing, questions were asked by the Board and responses were given about the issues raised in that submission. Following the hearing, the public comment period remained open so that interested parties could submit any additional comments. No additional comments were received. The comment period closed on January 27, 2005.
Toronto-Dominion and its subsidiaries are collectively known as TD Bank Financial Group. TD Bank Financial Group held consolidated assets at October 31, 2004 of $202 billion. It is the 8 th largest publicly traded commercial bank in the United States and Canada and has more than 51,000 employees in offices around the world. TD Waterhouse Bank, N.A., is Toronto-Dominion's U.S. bank subsidiary based in Jersey City, New Jersey and has no bank branches in Massachusetts. TD Financial Group offers a full range of financial products and services to approximately 13 million customers worldwide through three key business lines: personal and commercial banking; wealth management and wholesale banking.
Banknorth, a financial holding company registered under the Bank Holding Company Act of 1956, is headquartered in Portland, Maine, and is one of the 30 largest publicly-traded commercial banks in the country, with $29.3 billion in assets as of June 30, 2004. Banknorth's banking subsidiary, Banknorth, N.A., operates banking divisions in Connecticut, Maine, Massachusetts, New Hampshire, New York and Vermont. Banknorth, N.A. also operates subsidiaries and divisions in insurance, money management, merchant services, mortgage banking, government banking and other financial services and investment products in association with PrimeVest Financial Services, Inc.
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. For purposes of the International Banking Act, 12 U.S.C. § 3101 et seq., the home state of the Petitioner is New York. Similarly, under the Bank Holding Company act, 12 U.S.C. § 1841 et seq., and the test set out therein, New York is also the home state of Toronto-Dominion. The Commissioner of Banks has determined that the banking holding company laws of New York relative to reciprocity have been repealed. Accordingly, the Board will proceed to consider whether other statutory requirements are met by this application.
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. The Board received notice on February 22, 2005 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. In this transaction neither Toronto-Dominion nor its U.S. Bank subsidiary, TD Waterhouse Bank, N.A., have any bank branches in the Commonwealth. Petitioner states that the proposed transaction will have no adverse effects upon competition in any other banking markets outside of Massachusetts. Petitioner asserts that the proposed transaction will enhance competition because it will provide Banknorth with a strong financial partner, which will enable Banknorth to compete more effectively. Accordingly, the Board finds that banking competition will not be unreasonably affected by the proposed transaction.
Petitioner submitted information relating to the public convenience and advantage that will result from the proposed transaction. As a general matter, the Petitioner asserts that the principal way in which public convenience and advantage will be promoted by the proposed transaction is that it will provide Banknorth with a strong financial partner. The senior management and workforce of Banknorth will remain substantially the same. Petitioner stated that it will work with Banknorth to provide access to more and better products and services that are not presently available to Banknorth customers. As a result, Petitioner expects Banknorth will increase its capacity to compete with larger financial institutions in New England. By way of example, Petitioner asserts that Banknorth will have the opportunity to provide a broader array of brokerage mutual funds and financial planning products through an alliance with TD Waterhouse USA. In the long term, it is anticipated that the proposed transaction will result in increased growth by Banknorth, N.A. in Massachusetts and increased employment by Banknorth in Massachusetts.
As the record demonstrates that the customers of Banknorth will have access to 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 Banknorth, N.A., it received an "Outstanding" rating. Toronto-Dominion Waterhouse Bank, N.A. was organized to provide related financial services to the nationwide customer base of its affiliate, TD Waterhouse Investor Services, Inc., and bank products and services are marketed primarily to the TD Waterhouse customer base. While Toronto-Dominion Waterhouse Bank, N.A. has marketed itself principally as an online Internet bank, products and services are also available via telephone or mail. Based on the nature of its customer base and manner in which it delivers services, Toronoto-Dominion Waterhouse Bank, N.A adopted a strategic plan for purposes of meeting its CRA obligations in the United States. The current strategic plan for calendar years 2004 through 2006, was approved by the Office of the Comptroller of the Currency in February 2004. For the period January 2000 through December 2002, Toronto-Dominion Waterhouse Bank, N.A. received a CRA evaluation rating of "Satisfactory".
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 Toronto-Dominion to acquire up to 70% of the stock of Banknorth.
The approval granted herein is subject to the condition that the transaction to acquire up to 51% of the stock of Banknorth is completed within one year of the date of this Decision. The Petitioner is required to seek approval from the Board to acquire any shares of Banknorth in excess of the 70% maximum authorized by this decision.
| Steven L. Antonakes ___________________________ Commissioner of Banks | |
| Alan L. LeBovidge ___________________________ Commissioner of Revenue | Board |
| Timothy P. Cahill ___________________________ Treasurer and Receiver General | |
| February 28, 2005 _____________________ Date |