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Chittenden Corporation, Burlington, Vermont ("Chittenden" or the "Petitioner") 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 Community Bank & Trust Company, ("Community Bank") Wolfeboro, New Hampshire. Community Bank is a New Hampshire chartered trust company. In the Commonwealth, Chittenden is the holding company for The Bank of Western Massachusetts, Springfield, Massachusetts and Flagship Bank and Trust Company, Worcester, Massachusetts. The Bank of Western Massachusetts and Flagship Bank and Trust Company are Massachusetts chartered commercial banks. The transaction structure will include the formation by Chittenden of a de novo New Hampshire trust company. The ownership of the trust company by Chittenden also requires the approval of the Board under chapter 167A, sections 2 and 4. However, the final step in this multi-step transaction resulting in Community Bank merging with and into Chittenden's subsidiary, Ocean Bank, Portsmouth, New Hampshire will not require the approval of either the Board or the Division of Banks.
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 on August 22, 2007. At the hearing, testimony was presented by a representative of Chittenden. The public comment period on the application ended August 30, 2007. The Board received no additional comments. However, the Board received supplemental filings to reflect that the de novo trust company will now be established under Chittenden and not Ocean Bank. At the public hearing, a representative of Petitioner made brief comments about Chittenden's proposed acquisition by People's United Financial Inc. An application for that transaction has been filed with the Board.
Petitioner is a Vermont bank holding company which controls six banks with banking offices in Vermont, New Hampshire, Maine and Massachusetts. In addition to The Bank of Western Massachusetts and Flagship Bank and Trust Company, the Petitioner controls Chittenden Trust Company, a Vermont chartered commercial bank with its principal office in Burlington, Vermont. Chittenden's other bank subsidiaries are Ocean Bank, a New Hampshire chartered trust company headquartered in Portsmouth, New Hampshire which operates thirty-three banking offices in New Hampshire as well as eight banking offices in Maine; Maine Bank & Trust Company, a Maine-chartered bank headquartered in Portland, Maine which operates thirteen banking offices in southern Maine; and Merrill Merchants Bank, a Maine chartered commercial bank headquartered in Bangor, Maine which operates twelve banking offices. Petitioner had total consolidated assets of approximately $6.6 billion as of March 31, 2007. Through these subsidiaries, Petitioner offers a wide variety of banking and financial services.
Community Bank is a New Hampshire trust company founded in 1990. It engages in a wide range of commercial and personal banking activities, including accepting deposits, making secured and unsecured loans to businesses and consumers and originating commercial and residential mortgage loans. Community Bank is headquartered in Wolfeboro, New Hampshire. It maintains six full service banking offices in Wolfeboro, Exeter, Plaistow, Hampton, Derry and Nashua, New Hampshire. As of March 31, 2007, Community Bank had total assets of approximately $426.3 million.
The Board has reviewed the application and oral testimony received at the public hearing. That review focused on the statutory and administrative criteria which include, 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") of the subsidiary banks of the parties involved in the transaction. 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 matter before it. All such requirements are specifically addressed in the record of this transaction.
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 Chittenden consistent with statute and the MHPF's various affordable housing loan programs. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated August 3, 2007.
The Petitioner has submitted information to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. 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 Community Bank or the other existing operations of the Petitioner. The Board's review also recognizes that the transaction will occur outside of the Commonwealth. For that reason and other factors, the Board finds that competition among banking institutions will not be unreasonably affected.
The Board has also considered the record of this application to determine whether public convenience and advantage will be promoted by this transaction. The proposed acquisition, the Petitioner states, will permit it to continue to provide high quality community based banking services. According to the application, the transaction will permit the integration of various functional areas including, but not limited to, audit, legal compliance, loan review, investor relations, and insurance activities. This integration will generate cost savings that neither Chittenden nor Community Bank could realize individually, which will strengthen the financial standing of Chittenden's consolidated organization and augment Chittenden's ability to serve as a source of strength for its subsidiary banks, including its Massachusetts-based banks. The combined capital and other resources of Chittenden and Community Bank can be expected to provide Chittenden with more favorable access to the capital markets and, thus, provide a platform for future growth as well as enhanced ability to respond to changing market incentives.
In determining whether or not to approve a transaction under the statutory criteria the Board is also required to determine that the transaction will result in net new benefits. As set out herein that term includes a showing of initial capital investments, job creation plans, consumer and business services as well as commitments to maintain and open branch offices. In the Board's analysis net new benefits is a subset of the public convenience and advantage test. The Board's past consideration of these statutory criteria makes clear that such benefits may be immediate or prospective.
The proposed transaction is expected to generate certain operational advantages. For example, Petitioner cites that pursuant to certain provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, banks affiliated under a single holding company may act as agent for one another. Accordingly, Chittenden may provide its customers with the added convenience of being able to conduct certain transactions at all of the banking offices of the combined entity as well as at any of its affiliated banks in New England.
Chittenden anticipates limited branch closings as a result of the transaction. It is anticipated that one branch of Community Bank will consolidate with a branch office of Ocean Bank and one branch office of Ocean Bank will consolidate with a branch of Community Bank. Chittenden also anticipates that the products and services to be offered by Chittenden's existing subsidiary banks will be substantially similar to those it presently offers. The transaction will not have an impact from an employment perspective in Massachusetts. The Board has considered the application and testimony submitted by the Petitioner and finds that consideration of public convenience and advantage including net new benefits weighs in favor of approving the proposed transaction.
Related to the issue of public convenience and advantage is the record of performance under CRA by the banks which are parties to this transaction. Such review for a Massachusetts state-chartered bank includes examination by personnel of the Division of Banks as well as analysis of concerns received from the bank's community and its response to those concerns fairly raised. Bank of Western Massachusetts, Flagship Bank and Trust Company, as well as each of Chittenden's other subsidiary banks have received "Outstanding" ratings at their last examinations of performance under the CRA provisions with two exceptions. Ocean Bank has received a "Satisfactory" rating in its last examination of performance under the CRA provisions. Additionally, Merrill Merchants Bank which was acquired only a few months ago also has received a "Satisfactory" rating. The Board has noted that the institution to be acquired, Community Bank also received a "Satisfactory" CRA rating.
The financial aspects and tax consequences from the structure of the transaction were also considered by the Board. Management factors reviewed were also found supportive of approval. Additionally, all other requirements of statute relating to a bank holding company transaction have been met.
The application and testimony presented at the public hearing have established the 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 application and authorizes Chittenden to acquire Community Bank as well as the ownership and control of the de novo bank for the purpose of effecting the transaction provided that all such action is completed within one year of the date of this Decision.
October 25, 2007
Steven L. Antonakes
Commissioner of Banks
Commissioner of Revenue
Timothy P. Cahill
Treasurer and Receiver-General