STEVEN L. ANTONAKES
Has concerns over funds
Connecticut’s second-largest locally based bank is poised to become the largest – and gain regional bank status – if Massachusetts regulators approve its acquisition of Vermont-based Chittenden Corp.
People’s United Bank First Vice President Susan D. Stanley and Chittenden Senior Vice President F. Sheldon Prentice appeared before Massachusetts’ three-member Board of Bank Incorporation on Nov. 29 requesting its permission for the merger. Chittenden’s subsidiaries include two banks in the Bay State.
Officials hope to close the transaction by Jan. 1.
People’s United Financial Inc., the holding company for Bridgeport, Conn.-based People’s United, and Chittenden first announced their plans on June 27.
Stanley, who also serves as corporate counsel for People’s United, told the board, “We’re very excited. This would be our first step out of our footprint in Connecticut,” where the $14 billion bank has 160 branches. People’s United also has two branches in Westchester County, N.Y.
People’s United Financial intends to pay $1.9 billion – $36.89 per share – to acquire Chittenden, which owns six banks in four New England states.
John Carusone, president of the Hartford, Conn.-based Bank Analysis Center, a management consulting firm, called that amount the “high-rent district of pricing,” and said it indicated to him People’s United was very eager to complete the deal.
“I am sure that Chittenden shareholders are very pleased,” he said. In fact, according to Prentice, 98 percent of them approved the transaction on Nov. 28.
Because People’s United is a federally chartered bank, the deal still needs approval from the Office of Thrift Supervision. Approval from the state of Connecticut is not required.
The proposed acquisition already has been approved in Maine, New Hampshire and Vermont, Stanley said at the Massachusetts hearing. New Hampshire’s was a “provisional” approval, she told the board.
Public comments were accepted on the proposed transaction through Dec. 5, but none had been received by that morning, according to board clerk Joseph A. Leonard Jr., who is also the Massachusetts Division of Banks’ general counsel.
Leonard said the board would make its decision in time to allow People’s United and Chittenden to complete their transaction by Jan. 1, if approval is forthcoming.
Chittenden Corp. has approximately $7 billion in assets. Its six bank subsidiaries – Chittenden Bank in Burlington, Vt.; Bank of Western Massachusetts in Springfield; Flagship Bank and Trust in Worcester; Ocean Bank in Portsmouth, N.H.; Merrill Bank in Bangor, Maine; and Community Bank and Trust Co. in Wolfeboro, N.H. – have 133 branches in those four states.
Both institutions are stock-owned; People’s United converted partially in 1988, and took the second step, to full conversion, this past April. It gained $3.44 billion in that transaction and is paying $1.9 billion to acquire Chittenden, leaving it “highly capitalized,” according to Massachusetts Bank Commissioner Steven L. Antonakes, who during the November hearing expressed concerns over what People’s United would do with the remaining funds.
‘Organic Expansion’
If the three-member Massachusetts board, which Antonakes chairs, approves the merger and the transaction closes as anticipated at the end of the month, People’s United would have approximately $22 billion in assets and, by that measure, would surpass Waterbury, Conn.-based Webster Bank, which has $17 billion.
“For any bank to proclaim primacy in one state is big for marketing purposes,” said Wellesley-based bank strategy consultant Jim Jones, owner of First Wellesley Consulting.
Others, however, said branch presence and deposit share are better measures of bank market presence. People’s United had $9.1 billion in deposits and 158 branches in Connecticut as of June 30, compared to Webster Bank’s $10.9 billion in deposits and 141 branches, said Suzanne Moot, owner of Milton-based bank consulting firm M & M Assoc., citing Federal Deposit Insurance Corp. data. By those measures, she said, they remain virtually “neck and neck” in Connecticut.
Only national chain Bank of America, with $15.2 billion in deposits in Connecticut, has more deposits in the state.
Carusone said People’s United’s only expansion alternative was to go out of state.
“They are in every market in [Connecticut],” he said. “That leaves them no alternative for expansion except outside.”
People’s United could not have acquired any other banks in Connecticut, which has “highly concentrated” markets, without raising antitrust concerns, he said.
After the hearing, Chittenden’s Prentice predicted the combined entity will be comparable to that of regional chain TD Banknorth.
People’s spokesman Brent DiGiorgio later said People’s United intends the acquisition to be “an important step in building what we believe will be the premier regional banking franchise in the Northeast.”
TD Banknorth began in the early 1990s when People’s Heritage Bank in Maine – the result of two prior mergers – began acquiring other area banks. In 2000, it acquired Vermont-based Banknorth, taking the Banknorth name. Today, the combined entity has $40 billion in assets and about 600 branches in Maine, New Hampshire, Massachusetts, Vermont, Connecticut, New York, New Jersey and Pennsylvania. Four hundred of those branches are in New England.
TD Banknorth spokeswoman Jennifer Carlson said the bank doesn’t comment on its competitors’ statements or activities.
The People’s United model is somewhat different from that of TD Banknorth and other regional entities such as Sovereign, insofar as acquired branches keep their own names. They also will keep their current boards and management.
“The banks will continue to operate with their local boards of directors, but will get benefits” such as increased Internet presence, and extended training and assistance in regulatory compliance, Stanley said at the hearing.
The two Massachusetts banks – Springfield’s Bank of Western Massachusetts and Worcester’s Flagship Bank and Trust – have been subsidiaries of Chittenden, which uses the same model, since 1995 and 1996, respectively. Both banks’ presidents and chief executive officers predicted the transition, if approved by Massachusetts regulators, will be seamless.
“For our customers and employees it will be a non-event. We remain an independent bank with an independent board, which has a responsibility to a different stockholder now: People’s [United] instead of Chittenden,” said Flagship President and Chief Executive Officer James Garvey.
Jones said keeping a local, personal feeling is important. As long as People’s United can maintain such a feeling among customers, things will go smoothly, he predicted, but if they lose it, customers will leave.
However, merging will benefit both institutions in terms of new products and services they’ll be able to offer customers – for example, the ability to make larger commercial loans, which are based on the amount of capital owned by a bank. Customers also benefit from a larger institution that offers more products and services, Jones said.
Timothy P. Crimmins Jr., president and chief executive officer of Bank of Western Massachusetts, said the increased lending capacity will help his bank – which, like Chittenden Corp. and People’s United, is “heavily involved in commercial banking activities.”
Stanley said People’s United predicts no job losses in Massachusetts as a result of the merger, as it is outside People’s United’s current market area and since many of the “back-office” support functions that typically would be at risk in a merger transaction already are conducted out of Chittenden’s Burlington, Vt., headquarters and not at local subsidiaries.
Asked at the hearing what People’s United would do with approximately $1.5 billion in capital, left over from its second-step stock conversion, once it completes the acquisition of Chittenden, Stanley said the bank will pursue “organic expansion” of the franchise.
“What we don’t want is to allow the fact that the capital is there to get us into lending that would be imprudent, merely to grow the bank,” she said.
DiGiorgio, the People’s United spokesman, declined to expand upon Stanley’s comments.
The Massachusetts Bankers Association declined comment on the proposed transaction, and the Connecticut Bankers Association did not return a call by press time.
