March 1, 2001
Vol. XXX, No. 3

FleetBoston-Summit Merger News

On February 12, the Federal Reserve Board of Governors ("Fed") approved the application by FleetBoston Financial Corp, Boston, MA, to acquire Summit Bancorp, Princeton, NJ. FleetBoston agreed to divest five New Jersey branches in the Fed's Atlantic City, NJ, banking market, to gain Fed approval for its planned acquisition of Summit. The bank would sell the greater of $100 million or the actual deposits in those branches at the divestiture date. According to the Fed, the Atlantic City market's Herfindahl-Hirschman Index ("HHI") would have risen 557 points to 1,917 without any divestitures, under the HHI guidelines laid out by the Department of Justice. Instead, the number will rise 161 points to 1,517. Sixteen competitors will remain in the market.

FleetBoston will close an estimated 85 branches as a result of a preliminary branch-proximity analysis. The closed branches will be in Connecticut and New Jersey. In closing branches, FleetBoston will have to be mindful of its community development agreement with two New Jersey community groups. Under the agreement, the branches will be divested within 180 days after completion of the merger, which is expected on or about March 1, and the two companies expect to being operating as a single entity sometime in the third quarter.

On February 15, the Banking Commissioner of Connecticut approved the applications of FleetBoston Financial Corp to acquire Summit Bancorp, to indirectly acquire Summit Bank, Norwalk, CT, and to merge Summit Bank with and into Fleet National Bank, Providence, RI. As of June 30, 1999, Summit Bancorp, Princeton, NJ, had total deposits of $594.7 million and ranked 17th among all commercial banking and thrift institutions in Connecticut.

On February 26, shareholders of Summit Bancorp approved the proposed merger with FleetBoston. On February 27, Summit Bancorp agreed to sell five branches in the Atlantic City, NJ, market to Richmond County Savings Bank, Staten Island, NY.
(Boston Globe, 2/28; CT Banking Commissioner Notice, 2/16; SNL Bank and Thrift Weekly, 2/20; Summit Bancorp Press Release, 2/26/01)

On January 31, Connecticut MHC, Winsted, CT, successor to Northwest MHC, Winsted, CT, merged with Litchfield MHC, Litchfield, CT. The transaction was part of a series which included the formation of Litchfield MHC as a mutual holding company through the acquisition of Litchfield Bancorp, Litchfield, CT, and the formation of Northwest MHC, Winsted, CT, as a mutual holding company through the acquisition of Northwest Community Bank, Winsted, CT. As of June 30, 1999, Northwest Community Bank had total deposits of $187.7 million and ranked 43rd among all commercial banking and thrift institutions in Connecticut. As of the same date, Litchfield Bancorp had total deposits of $106.7 million and ranked 60th.
(Internal Notice, 2/2/01)

On February 24, Fleet National Bank, Providence, RI, sold three Connecticut branches to form The Community's Bank, Bridgeport, Connecticut. The branches are located in Bloomfield, Bridgeport, and Hartford. The Community's Bank is held by Urban Financial Group, Inc., Bridgeport, CT. On February 8, the Fed approved the proposal of Urban Financial Group, Inc., to become a bank holding company through the acquisition of The Community's Bank.

The transaction represents the successful completion of FleetBoston's final divestiture as part of the 1999 merger agreement between Fleet Financial Group, Inc., Boston, MA, and BankBoston Corp, Boston, MA. As of June 30, 1999, Fleet Financial Group, Inc., Boston, MA, had total deposits of $42.2 billion and ranked first among all commercial banking and thrift organizations in New England. As of the same date, BankBoston Corp, Boston, MA, had total deposits of $34.6 billion and ranked second.

On February 24, South Shore Savings Bank, Weymouth, MA, purchased certain assets and liabilities associated with one branch from Cambridgeport Bank, Cambridge, MA. The branch is located in Quincy, MA. Cambridgeport Bank is a subsidiary of Cambridgeport Mutual Holding Company, Cambridge, MA, subsequently renamed Port Financial Corp. As of June 30, 1999, South Shore Savings Bank, Weymouth, MA, had total deposits of $444.3 million and ranked 38th among all commercial banking and thrift institutions in Massachusetts. As of the same date, Cambridgeport Mutual Holding Company had total deposits of $588.8 million and ranked 27th.
(Actions by the Board, 2/10; FleetBoston Press Release, 2/26; Internal Notice, 2/26/01)

On February 9, Northfield MHC, Northfield, VT, and Northfield Bancorp, Inc., Northfield, VT, became a mutual bank holding company and a bank holding company, respectively, through the acquisition of Northfield Savings Bank, Northfield, VT.
(Internal Notice, 2/2/01)

On February 8, Connecticut Bankshares, Inc., Manchester, CT, signed a definitive agreement to acquire First Federal Savings & Loan Association, East Hartford, CT. Under the terms of the agreement, Connecticut Bancshares will pay $37.50 in cash for each share of First Federal held. The transaction, subject to regulatory and shareholder approval, is expected to be completed in the second quarter. As of June 30, 1999, Connecticut Bankshares, Inc., had total deposits of $898.9 million and ranked 12th among all commercial banking and thrift institutions in Connecticut. As of the same date, First Federal Savings & Loan Association had total deposits of $603.2 million and ranked 15th.

On February 12, Citigroup, Inc., New York, NY, signed a definitive agreement to acquire European American Bank, New York, NY, a unit of ABN Amro Bank NV. Citigroup will pay $1.6 billion in equity for the bank, in addition to the assumption of $350 million in preferred stock. The transaction, subject to regulatory approval, is expected to close in mid-2001.

On February 13, North Fork Bancorp, Inc., Melville, NY, signed a definitive agreement to acquire Commercial Bank of New York, New York, NY. Under the terms of the agreement, North Fork will exchange $32 in cash for each share of Commercial held. The deal, subject to regulatory and shareholder approval, is expected to close in the third quarter. On February 21, the chairman of Commercial Bank of New York and his wife agreed to vote their 68.43 percent stake in the bank in favor of the proposed merger with North Fork Bancorp, Inc.
(Citigroup, Inc. Press Release, 2/12; SNL Bank and Thrift Weekly, 2/12; 2/20; 2/26/01)

On February 9, Brookline Bancorp MHC, Brookline, MA, filed preliminary proxy materials with the Securities and Exchange Commission ("SEC") in connection with its plan to convert to a federal corporation regulated by the Office of Thrift Supervision ("OTS"). The holding company, formed in 1998 as a Massachusetts corporation regulated by the Massachusetts Division of Banks and the Fed, owns savings banks Brookline Savings Bank, Brookline, MA, and Lighthouse Bank, Waltham, MA, the latter being an Internet savings bank. Brookline Bancorp expects the conversion, subject to regulatory and shareholder approval, to be completed in the second quarter.
(SNL Bank and Thrift Weekly, 2/12/01)

On February 8, State Street Corp, Boston, MA, completed its acquisition of a 75 percent interest in Bel Air Investment Advisors, LLC, Los Angeles, CA. Under the terms of the agreement, the investment advisor will continue to operate as an independent company. Both Bel Air and State Street's unit, State Street Global Advisors, Tacoma, WA ("SsgA"), specialize in wealth management services for high net worth individuals.
(SNL Bank and Thrift Weekly, 2/12; State Street Corp News Release, 2/8/01)

On February 9, the Federal Reserve Bank of Boston ("FRB Boston") approved the proposal of UFS Bancorp, Whitinsville, MA, to retain Tommark, Inc., Whitinsville, MA (doing business as Sterling Associates). Tommark acts as a broker for loans, primarily for the purchase of boats and mobile homes.

On February 14, the FRB Boston approved the proposal of Boston Private Financial Holdings, Inc., Boston, MA, to acquire investment advisor E.R. Taylor Investments, Inc., Concord, NH.
(Actions by the Board, 2/17; Internal Notice, 2/16/01)

On February 9, the division of research and statistics at the Federal Deposit Insurance Corporation ("FDIC") issued a study finding that bank consolidation is linked to lower rates of growth in small-business lending. The study, conducted by economists Robert Avery and Katherine Samolyk, analyzed branch-level deposit data and regional merger activity to calculate "the distribution of bank small-business loans across urban and rural markets." The researchers also compared geographic loan estimates to geographic loan originations under the Community Reinvestment Act. Avery and Samolyk found that essentially all growth in small-business lending between 1995 and 1997 came from banks that were not engaged in merger activity. Based on these findings, the FDIC maintained that " scrutiny of proposed mergers, from a small-business lending perspective, remains justified."
(SNL Bank and Thrift Weekly, 2/12/01)

On January 31, the Fed, OTS, Office of the Comptroller of the Currency ("OCC"), and the FDIC issued guidance intended to strengthen examination and supervision of institutions with significant subprime lending programs.

For purposes of the guidance, "subprime lending" refers to programs that target borrowers with poor credit, including those with delinquent payments, charged-off loans, judgments, or bankruptcies. The guidance, intended for use by bank examiners, specified borrower characteristics that may signal that an institution is targeting subprime credits. It also identified potentially predatory or abusive lending practices.

The guidance also attempted to draw a distinction between subprime and "predatory" lending, urging examiners to highlight loans that appear predatory. Characteristics of such loans generally include deceptive lending practices, repeated refinancings, and loans based on the assets of the borrower rather than on the borrower's ability to repay.
(SNL Bank and Thrift Weekly, 2/5/01)

NOTE: Items in this publication focus on developments affecting banking structure in New England. The items are condensations of articles from a selected group of daily newspapers and press releases of federal and state financial regulatory agencies. Their reproduction does not imply our endorsement of the accuracy, opinions or policies reflected in the subject matter. BankNotes is available without charge. To be added to the electronic mailing list or to the paper distribution list, send an e-mail message to Boston.BankNotes@bos.frb.org. If unable to do so, call (617) 973-2860. To access BankNotes on the Web, check the Boston Fed's web site at www.bos.frb.org/economic/banknote/index.htm. For updated banking structure information, check the Boston Fed's web site at www.bos.frb.org/bankinfo/struct/index.htm.