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**Comptroller of the Currency**

**Administrator of National Banks**

Washington, D.C. 20219

**Corporate Decision #2000-03**

> **April 2000**

**DECISION OF THE OFFICE OF THE COMPTROLLER OF THE CURRENCY**

**ON APPLICATIONS INVOLVING**

**FAMILY BANK, FSB, HAVERHILL, MASSACHUSETTS;**

**FIRST MASSACHUSETTS BANK, N.A., WORCESTER, MASSACHUSETTS;**

**BANK OF NEW HAMPSHIRE, MANCHESTER, NEW HAMPSHIRE;**

**FARMINGTON NATIONAL BANK, FARMINGTON, NEW HAMPSHIRE;**

**GRANITE SAVINGS BANK AND TRUST COMPANY, BARRE, VERMONT;**

**THE HOWARD BANK, N.A., BURLINGTON, VERMONT;**

**FRANKLIN LAMOILLE BANK, ST. ALBANS, VERMONT; AND**

**FIRST VERMONT BANK AND TRUST COMPANY, BRATTLEBORO, VERMONT**

> **March 8, 2000**
>
> **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

**I. INTRODUCTION**

> These applications involve certain of the subsidiary banks of Peoples
> Heritage Financial Group, Inc. (PHFG), and Banknorth Group, Inc.
> (Banknorth), registered bank holding companies. PHFG has applied to
> merge Banknorth into PHFG (Parent Merger).[^1] In these
> applications, the two holding companies subsidiary banks in
> Massachusetts, New Hampshire, and Vermont will be restructured and
> combined. The transactions in these applications will occur after the
> Parent Merger.
>
> Family Bank, FSB, Haverhill, Massachusetts (Family Bank), a federal
> savings bank, applied to the Office of the Comptroller of the Currency
> (\"OCC\") for approval to convert into a national banking association
> with the title Family Bank, National Association (Family Bank,
> N.A.) and to retain its branches after the conversion (the Family
> Bank Conversion). Family Bank operates branches in Massachusetts and
> four branches in Rockingham County in southeastern New Hampshire near
> the Massachusetts border.
>
> First Massachusetts Bank, National Association, Worcester,
> Massachusetts (First Massachusetts) applied to the OCC for approval,
> immediately after the Family Bank Conversion, to merge Family Bank,
> N.A., into First Massachusetts under First Massachusettss charter and
> title under 12 U.S.C.  215a & 1828(c) (the Family Bank Merger).
> Both institutions are members of the Bank Insurance Fund. First
> Massachusetts operates branches only in Massachusetts. First
> Massachusetts also requested OCC approval for the resulting bank to
> retain Family Bank, N.A.s main office and branches, as well as First
> Massachusetts branches, as branches after the merger under 12 U.S.C.
>  36(b)(2).
>
> Farmington National Bank, Farmington, New Hampshire (Farmington)
> applied to the OCC for approval to merge Bank of New Hampshire,
> Manchester, New Hampshire (BNH), a state-chartered bank, into
> Farmington under Farmingtons charter and with the title Bank of New
> Hampshire, National Association (BNHNA), under 12 U.S.C.  215a &
> 1828(c) (the BNH Merger). Both banks are members of the Bank
> Insurance Fund. Both banks operate branches only in New Hampshire. OCC
> approval is also requested for the resulting bank, BNHNA, to retain
> BNHs main office and branches, as well as Farmingtons branches, as
> branches after the merger under 12 U.S.C.  36(b)(2), and for BNHNA to
> exercise fiduciary powers under 12 U.S.C.  92a.
>
> The Howard Bank, National Association, Burlington, Vermont (Howard
> Bank), applied to the OCC for approval to merge Granite Savings Bank
> and Trust Company, Barre, Vermont (GSB), a state-chartered bank,
> into Howard Bank under Howard Banks charter and title, under 12
> U.S.C.  215a & 1828(c) (the GSB Merger). Both banks are members of
> the Bank Insurance Fund. Both banks operate branches only in Vermont.
> OCC approval is also requested for the resulting bank to retain GSBs
> main office and branches, as well as Howard Banks branches, as
> branches after the merger under 12 U.S.C.  36(b)(2).
>
> Franklin Lamoille Bank, St. Albans, Vermont (Franklin), a
> state-chartered bank, applied to the OCC for approval to convert into
> a national banking association with the title Franklin Lamoille Bank,
> National Association and to retain its branches after the conversion,
> under 12 U.S.C.  35 & 36(b)(1) (the Franklin Conversion). Franklin
> operates branches only in Vermont.
>
> First Vermont Bank and Trust Company, Brattleboro, Vermont (First
> Vermont), a state-chartered bank, applied to the OCC for approval to
> convert into a national banking association with the title First
> Vermont Bank and Trust Company, National Association and to retain
> its branches after the conversion, under 12 U.S.C.  35 & 36(b)(1)
> (the First Vermont Conversion). First Vermont operates branches only
> in Vermont.

**II. LEGAL AUTHORITY**

**A. The Family Bank Conversion.**

Family Bank may convert into a national bank. Regulations of both the
OCC and the Office of Thrift Supervision (OTS) permit the direct
conversion of a federal savings bank to a national bank.[^2] In
approving a conversion application, OCC regulations provide that a
conversion will be permitted if the financial institution can operate
safely and soundly as a national bank and in compliance with applicable
laws. 12 C.F.R.  5.24(d). A review of the application for the Family
Bank Conversion demonstrates that these criteria are met. Moreover, the
regulation provides that a conversion application may be denied if a
significant supervisory or compliance concern exists with regard to the
applicant; approval is inconsistent with law, regulation, or OCC policy;
the applicant fails to provide requested information; or the conversion
would permit the applicant to escape supervisory action by its current
regulator. 12 C.F.R.  5.13 & 5.24(d). A review of the record discloses
nothing that indicates that these factors provide a basis for denial of
the application.

Family Bank currently exercises fiduciary powers. It has requested OCC
approval to exercise all permissible fiduciary powers under 12 U.S.C. 
92a after the conversion. Under section 92a, a national bank may be
granted the authority to act in the eight listed fiduciary capacities
and in any other fiduciary capacity permitted to state institutions,
when not in contravention of state law.[^3] Massachusetts and New
Hampshire (in view of Family Banks branches there, to the extent that
Family Bank conducts fiduciary activities at those branches) do not
prohibit their state banks from engaging in fiduciary activities;
indeed, each state permits its state banks to engage in a wide variety
of fiduciary activities.[^4] Thus, Family Bank, N.A., is authorized to
exercise fiduciary powers under section 92a after the conversion.

Family Bank currently operates branches in Massachusetts and four
branches in Rockingham County in southeastern New Hampshire near the
Massachusetts border. It has requested OCC approval to retain these
branches after its conversion. Family Bank, N.A.s authority to retain
the branches after the conversion is expressly permitted in a provision
in the Gramm-Leach-Bliley Act:

> Any Federal savings association chartered and in operation before the
> date of enactment of the Gramm-Leach-Bliley Act, with branches in
> operation before such date of enactment in 1 or more States, may
> convert, at its option, with the approval of the Comptroller of the
> Currency or the appropriate State bank supervisor, into 1 or more
> national or State banks, each of which may encompass 1 or more of the
> branches of the Federal savings association in operation before such
> date of enactment in 1 or more States, but only if each resulting
> national or State bank will meet all financial, management, and
> capital requirements applicable to the resulting national or State
> bank.

12 U.S.C.  1464(i)(5)(A), as added by the Gramm-Leach-Bliley Act  739.

This provision directly permits a national bank resulting from the
conversion of a federal savings association to retain its branches,
without regard to the geographic branching limits of 12 U.S.C.  36,[^5]
provided the federal savings association is covered by the provision and
the resulting national bank meets the listed requirements. Family Bank
is covered by section 1464(i)(5) since Family Bank was chartered and in
operation before the date of enactment of the Gramm-Leach-Bliley Act,
and it had branches in operation in one or more states before such date.
The resulting bank will encompass one or more of the branches in
operation before such date in one or more states. The OCC has determined
that Family Bank, N.A., the national bank resulting from this
conversion, will meet all applicable financial, management, and capital
requirements, and that Family Bank, N.A., will meet the capital
requirements

for branches contained in 12 U.S.C.  36(c). Thus, Family Bank, N.A.,
may retain the branches in Massachusetts and New Hampshire.

Accordingly, Family Banks application to convert into a national bank
and to retain its branches after the conversion is legally
authorized.[^6]

**B. The Family Bank Merger.**

In this transaction, Family Bank, N.A., an interstate national bank
whose home state is Massachusetts, will merge into another national
bank, First Massachusetts, whose home state is also Massachusetts. Thus,
while this merger includes an interstate bank, and an interstate
resulting bank, it does not come under the interstate merger provisions
of 12 U.S.C.  1831u because it is not a merger between banks with
different home states.[^7] However, mergers between an already existing
national bank and another national bank in one of the states in which
the interstate bank has offices are authorized under 12 U.S.C.  215a,
and the resulting bank may retain the offices of the banks under 12
U.S.C.  36(b)(2). The OCC previously has considered many such
applications under sections 215a and 36(b) both before and after the
Riegle-Neal Act. Accordingly, the Family Bank Merger does not raise new
issues, but only the application of established precedent for applying
sections 215a and 36(b) to interstate national banks.

**1. Family Bank, N.A., may merge into First Massachusetts under 12
U.S.C.  215a.**

Mergers of national banks, and of state banks into national banks,
generally are authorized under 12 U.S.C.  215a. Section 215a provides
in relevant part:

> One or more national banking associations or one or more State banks,
> with the approval of the Comptroller, under an agreement not
> inconsistent with this subchapter, may merge into a national banking
> association *located within the same State,* under the charter of the
> receiving association.

12 U.S.C.  215a(a) (emphasis added). In many prior decisions, both
before and after the Riegle-Neal Act, the OCC has interpreted and
applied section 215a in the context of a merger involving an existing
interstate national bank and concluded that a national bank with its
main office and branch offices in more than one state is \"located\" in
each such state, for the purpose of mergers with other banks in that
state under section 215a.[^8] Here, First Massachusetts has its main
office and branches in Massachusetts, and Family Bank, N.A., has its
main office and branches in Massachusetts, as well as four branches in
New Hampshire. Accordingly both Family Bank, N.A., and First
Massachusetts are located in Massachusetts for purposes of section 215a,
and so the Family Bank Merger is authorized under section 215a.[^9]

**2. The resulting bank may retain the offices of both banks after the
merger.**

First Massachusetts has also requested OCC approval for the bank
resulting from the merger (referred to in this subsection as \"First
Massachusetts-Resulting\" or \"the Resulting Bank\" to distinguish it
from First Massachusetts prior to the merger) to retain and operate the
main office and branches of Family Bank, N.A. in Massachusetts and New
Hampshire and the branches of First Massachusetts as branches of the
Resulting Bank after the merger. Branch retention in a merger under
section 215a is covered by 12 U.S.C.  36(b)(2). Section 36(b)(2)
applies different standards for the resulting banks retention of the
main office and branches of the bank(s) being acquired in the merger
(target

banks) and for its retention of the branches of the bank under whose
charter the merger is effected (the acquiring bank). In the Family Bank
Merger, the banks are combining under the charter of First
Massachusetts, and so Family Bank, N.A., is the target bank, and First
Massachusetts is the acquiring bank. Applying the various provisions of
section 36(b)(2) to the groups of branches involved in this merger, we
find that First Massachusetts-Resulting is legally authorized to retain
all the offices as branches.

**a. The Resulting Bank may retain and operate the main office and
branches of Family Bank, N.A., under subsection 36(b)(2)(A).**

First Massachusetts-Resulting may retain and operate the main office and
branches of Family Bank, N.A., under subsection 36(b)(2)(A). Under
section 36(b)(2)(A), the resulting bank may retain the branches or the
main offices of the target banks if the resulting bank could establish
them as new branches of the resulting bank under section 36(c). For
branching purposes under section 36(c), a national bank is \"situated\"
in any state in which it has a branch or main office and may establish
branches in each such state in the same manner as in-state national
banks.[^10] Thus, in order to apply the branch retention provisions of
section 36(b)(2)(A) in the context of mergers involving interstate
banks, it is necessary to determine in which state(s) *the resulting
bank* is situated. The OCC previously concluded that, for section
36(b) purposes, the resulting bank is situated in all of the states in
which the participating banks were situated in order to then apply the
section 36(b)(2)(A) and 36(c) standard for the retention of the target
banks branches, using each states law for the retention of branches
for the branches in that state.[^11] This necessarily follows from the
courts holdings regarding section 36(c) and the fact that
section 36(b)(2)(A) refers to section 36(c).[^12] In essence, we
determined that, when an interstate national bank merges with another
national bank in the same home state, the resulting bank is authorized
to continue to operate its predecessor banks branches, including
interstate branches, provided the retention was permitted under section
36(b) and no other federal law required otherwise.

We first considered the statute in this type of interstate context and
applied it in this way in 1990 in a decision involving the conversion of
an interstate state bank and its subsequent merger into a national bank
with the same home state as the interstate bank and in other decisions
before the Riegle-Neal Act.[^13] We have continued to apply it in many
subsequent merger decisions involving interstate banks after the
Riegle-Neal Act.[^14] Thus, the power of the resulting bank to retain
the target banks branches in each state is determined by reference to
that states laws for that states banks for mergers in the state.

In a merger under section 215a, the resulting bank is situated in each
state where the participating banks had a main office or branches for
purposes of applying the branch retention provisions of
sections 36(b)(2)(A) & 36(c). And so, in the Family Bank Merger, First
Massachusetts-Resulting is situated in Massachusetts and New Hampshire,
and it may retain, as branches, Family Bank, N.A.s main office and
branches in each state in the same way that other national banks
situated in each state could retain branches in that state in a merger
there under sections 36(b)(2)(A) & 36(c). Both Massachusetts and New
Hampshire permit their state-chartered banks to acquire branches in a
merger, or to establish branches *de novo*, without geographic limit
within the state.[^15] Thus, a national bank situated in Massachusetts
could acquire in a merger, and retain as branches under sections
36(b)(2)(A) and 36(c), the locations of Family Bank, N.A.s main office
and branches in Massachusetts; and a national bank situated in New
Hampshire could acquire in a merger, and retain as branches under
sections 36(b)(2)(A) and 36(c), the locations of Family Bank, N.A.s
branches in New Hampshire. Therefore, First Massachusetts-Resulting may
retain Family Bank, N.A.s main office and all its branches as branches
under sections 36(b)(2)(A) and 36(c).

**b. The Resulting Bank may retain and operate the branches of First
Massachusetts under subsection 36(b)(2)(C).**

In this merger, First Massachusetts is the acquiring bank. Section
36(b)(2)(C) authorizes the national bank resulting from a merger to
retain and operate as a branch any branch the acquiring bank had prior
to the merger, unless a state bank resulting from a merger in the state
would be prohibited by state law from retaining as a branch an
identically situated office of a state bank. Here, the acquiring banks
branches (First Massachusetts) are all in a single state,
Massachusetts. There is no provision in Massachusetts law that would
prohibit a Massachusetts state-chartered bank, following a merger with
another state bank in that state, from retaining its own similarly
situated branches in the state. Indeed, as noted above, Massachusetts
permits state-wide branching. Therefore, First Massachusetts-Resulting
may retain the branches of First Massachusetts under
section 36(b)(2)(C).

Accordingly, First Massachusetts-Resulting may retain and operate as
branches the main office and branches of Family Bank, N.A., and the
branches of First Massachusetts.[^16]

**3. The authority for national banks for mergers and branch retention
under 12 U.S.C.  215a & 36(b) continues after the Riegle-Neal Act.**

In the Family Bank Merger, the authority for the merger and branch
retention is based on longstanding provisions governing national banks,
12 U.S.C.  215a & 36(b). The Riegle-Neal Act did not change existing
authority under sections 215a and 36(b). The Riegle-Neal Act created a
new merger authority that allows mergers between banks with different
home states. However, in the Family Bank Merger, the banks have the same
home state, and so the Riegle-Neal Acts merger provisions do not apply
to this merger. Yet, one of the banks has interstate branches. More
generally, the Riegle-Neal Act did not directly address retention of a
banks existing interstate branches when it participates in a merger
with another bank that is not a Riegle-Neal Act merger.[^17]

Only one provision in the Riegle-Neal Act addresses the question of
exclusivity of branching authority and relationship to other laws and
could be thought to supersede other law for national banks regarding
mergers and branching.[^18] Thus, a branching transaction that is
authorized under other authority clearly continues to be authorized
under that authority, if it is consistent with section 36(e). Such is
the case here. In the Family Bank Merger, section 36(e) is complied with
because First Massachusetts-Resulting retains and operates its branches
under the authority of section 36(b), a part of this section referred
to in section 36(e)(1).

Moreover, we note that this result is not inconsistent with the overall
framework or underlying purposes of the Riegle-Neal Act and that it is
necessary in order to avoid absurd results. First, as noted above, the
Riegle-Neal Act does not cover mergers between two banks with the same
home states. If one of the banks already has branches in other states
from a prior transaction (*e.g.,* a Riegle-Neal merger, a Riegle-Neal
interstate *de novo* branch, or, as here, a conversion of an interstate
institution), it is inconceivable that Congress would have intended that
such a bank could not merge with another bank in *its own home state*,
without the resulting bank being required to surrender all its branches
in all the other states. But that is the result that could follow if
sections 215a and 36(b) are not applicable in the manner the OCC has
determined. Second, in this transaction, the Resulting Bank has the same
home state and operates the same branches in New Hampshire that Family
Bank, N.A., did before the transaction. There are no new branches being
operated in a new host state.[^19]

**4. Conclusion.**

The legal authority for the Family Bank Merger is similar to the
analysis in many prior OCC decisions. The merger is authorized under 12
U.S.C.  215a, and the Resulting Bank may retain and operate the
branches under the authority of 12 U.S.C.  36(b)(2) and consistent with
12 U.S.C.  36(e)(1). Accordingly, the Family Bank Merger is legally
authorized.[^20]

**C. The BNH Merger.**

Farmington applied for approval to merge BNH into Farmington. Both banks
have their main offices and all their branches in New Hampshire. Since
the two banks are located in the same state, their merger is authorized
under section 215a.[^21] BNH currently exercises fiduciary powers under
New Hampshire law, and the applicants have requested OCC approval for
the resulting bank, BNHNA, to exercise fiduciary powers under 12 U.S.C.
 92a. New Hampshire permits its state banks to engage in a wide range
of fiduciary activities. N.H. Rev. Stat. Ann. tit. 35,  390:13(I).
Thus, national banks may conduct fiduciary activities in New Hampshire
under section 92a. BNHNAs exercise of fiduciary powers after the BNH
Merger is authorized.

Farmington also requested OCC approval for the bank resulting from the
merger (BNHNA) to retain and operate the main office and branches of BNH
(the target bank) and the branches of Farmington (the acquiring bank) as
branches of BNHNA Bank after the merger. As discussed above, branch
retention following a merger under section 215a is covered by 12 U.S.C.
 36(b)(2). Here, the main office and all the branches of both banks are
in New Hampshire, and so the resulting bank is situated in New
Hampshire. New Hampshire permits its state-chartered banks to acquire
branches in a merger, or to establish branches *de novo*, without
geographic limit within the state.[^22] Thus, BNHNA may retain the main
office and branches of BNH under sections 36(b)(2)(A) and 36(c). And it
may retain the branches of Farmington under section 36(b)(2)(C).

**D. The GSB Merger.**

Howard Bank applied for approval to merge GSB, a Vermont state-chartered
bank, into Howard Bank. Both banks have their main offices and all their
branches in Vermont. Since the two banks are located in the same state,
their merger is authorized under section 215a.[^23] Howard currently
exercises fiduciary powers under 12 U.S.C.  92a and will continue to be
so authorized after the merger.

Howard Bank also requested OCC approval for the bank resulting from the
merger (referred to here as Howard-Resulting to distinguish it from
Howard Bank prior to the merger) to retain and operate the main office
and branches of GSB (the target bank) and the branches of Howard Bank
(the acquiring bank) as branches of Howard-Resulting after the merger.
As discussed above, branch retention following a merger under section
215a is covered by 12 U.S.C.  36(b)(2). Here, the main office and all
the branches of both banks are in Vermont, and so the resulting bank is
situated in Vermont. Vermont permits its state-chartered banks to
acquire branches in a merger, or to establish branches *de novo*,
without geographic limit within the state. Vt. Stat. Ann. tit. 8,  651.
Thus, Howard-Resulting may retain the main office and branches of GSB
under sections 36(b)(2)(A) and 36(c). And it may retain the branches of
Howard Bank under section 36(b)(2)(C).

**E. The Franklin Conversion and the First Vermont Conversion**.

Franklin, a Vermont state-chartered bank, applied to convert into a
national bank. First Vermont, a Vermont state-chartered bank, also
applied to convert into a national bank. State banks may convert into
national banks under 12 U.S.C.  35, which provides in pertinent part
that:

> Any bank incorporated by special law of any State or of the United
> States or organized under the general laws of any State or of the
> United States and having an unimpaired capital sufficient to entitle
> it to become a national banking association under the provisions of
> the existing laws may, by the vote of the shareholders owning not less
> than fifty-one per centum of the capital stock of such bank or banking
> association, with the approval of the Comptroller of the Currency be
> converted into a national banking association, with a name that
> contains the owrd national: *Provided, however,* That said
> conversion shall not be in contravention of the State law. . . . .

12 U.S.C.  35. *See also* 12 C.F.R.  5.24.

The proposals to convert Franklin and First Vermont to national banks
are permissible under 12 U.S.C.  35. Each banks capital at the time of
conversion will exceed the minimum amount required by 12 U.S.C.  51. It
also meets the requirements of 12 C.F.R. Parts 3 and 6. Each banks
holding company, its sole shareholder, has approved the transaction. The
conversion is not in contravention of state law. Vermont law authorizes
its state banks to convert to a national bank. Vt. Stat. Ann. tit. 8, 
1002. Neither bank has assets, or engages in activities, that are not
permissible for national banks. Franklin has no subsidiaries. First
Vermont has one subsidiary, a mortgage company that engages in
residential mortgage lending permissible for national banks. Neither
bank has fiduciary powers, and neither has requested fiduciary powers in
its conversion.

When they convert, each bank may retain its branches. When a state bank
converts into a national bank, the authority of the resulting national
bank to retain the branches of the state bank is provided by 12 U.S.C. 
36(b)(1). The resulting bank may retain branches if: (A) the branch
might be established as a new branch under section 36(c); (B) the branch
is grandfathered (*i.e.*, it was a branch on February 25, 1927); or (C)
a similarly situated state bank resulting from a conversion of a
national bank would not be prohibited by state law from retaining the
branch. 12 U.S.C.  36(b)(1)(A) - (C). As discussed above, under
section 36(c), a national bank may establish and operate new branches
within the state in which it is situated to the same extent that state
law authorizes state banks to establish and operate such branches.
Vermont permits its state-chartered banks to establish or acquire
branches without geographic limit within the state. Vt. Stat. Ann. tit.
8,  651. Here, after its conversion, Franklin could establish new
branches at all the existing locations of its branches under section
36(c); and so it may retain those branches under section 36(b)(1).
Similarly, after its conversion, First Vermont could establish new
branches at all the existing locations of its branches under section
36(c); and so it may retain those branches under section 36(b)(1).

**III. ADDITIONAL STATUTORY AND POLICY REVIEWS**

**A. The Bank Merger Act.**

The Bank Merger Act, 12 U.S.C.  1828(c), requires the OCC\'s approval
for any merger between insured banks where the resulting institution
will be a national bank. Under the Act, the OCC generally may not
approve a merger which would substantially lessen competition. In
addition, the Act also requires the OCC to take into consideration the
financial and managerial resources and future prospects of the existing
and proposed institutions, and the convenience and needs of the
community to be served. For the reasons stated below, we find that
Family Bank Merger, the BNH Merger, and the GSB Merger may be approved
under section 1828(c).

**1. Competitive Analysis.**

The OCC has reviewed the competitive effects of the Family Bank Merger,
the BNH Merger, and the GSB Merger by using its standard procedures for
determining whether these business combinations clearly have minimal or
no adverse competitive effects. The OCC finds that the proposed mergers
satisfy its criteria for business combinations that clearly have no or
minimal adverse competitive effects. The resulting bank in the Family
Bank Merger will become the third largest depository institution of
thirty-six institutions in the Worcester County, Massachusetts, market
and expand into the Essex County, Massachusetts, market as the seventh
largest depository institution of forty-eight institutions. The
resulting bank in the BNH Merger will become the second largest
depository institution of six institutions in the Strafford County, New
Hampshire, market and expand into the Hillsborough, New Hampshire,
market as the second largest depository institution of fourteen
institutions. The GSB Merger represents a merger of affiliates in the
Washington County, Vermont, market. The resulting bank of this merger
will become the second largest depository institution of six
institutions in the market. In connection with the Parent Merger the
Federal Reserve System will consider the competitive effects of that
transaction as it relates to the resulting parent holding company. The
Department of Justice has also concluded that the bank mergers discussed
in this proposal clearly have no or minimal adverse competitive effects.

**2. Financial and Managerial Resources.**

The financial and managerial resources of the banks involved in the
Family Bank Merger, the BNH Merger and the GSB Merger are presently
satisfactory. PHFG expects the proposed transactions will result in
substantial cost savings through the elimination of duplicative
corporate overheads and administrative functions. The future prospects
of the existing institutions, individually and combined, are favorable.
Thus, we find the financial and managerial resources factor is
consistent with approval of the merger applications.

**3. Convenience and Needs.**

Family Bank Merger, the BNH Merger, and the GSB Merger will not have an
adverse impact on the convenience and needs of the communities to be
served. The resulting bank in each merger will continue to serve the
same areas that it and the bank being acquired now serve. There will be
no reductions in products or services as a result of the mergers. The
Parent Merger will broaden the range of products and services available
to customers of the Banknorth subsidiary banks, including those in these
mergers. Customers of Family Bank will become customers of a
full-service commercial bank. In the Family Bank Merger and the BNH
Merger, because the combining banks have overlapping branch systems, the
resulting bank in each merger plans to close or consolidate several
branches. The required notices were provided, and the OCC received no
comments. Accordingly, we believe the impact of the transactions on the
convenience and needs of the communities to be served is consistent with
approval of these applications.

**B. The Community Reinvestment Act.**

The Community Reinvestment Act (\"CRA\") requires the OCC to take into
account the applicants\' record of helping to meet the credit needs of
their entire communities, including low- and moderate-income
neighborhoods, when evaluating certain applications, including
conversions and mergers. *See* 12 U.S.C.  2903; 12 C.F.R.  25.29. The
OCC considers the CRA performance evaluation of each depository
institution involved in the transaction. Under the CRA regulation, the
OCC evaluates performance of most large banks using criteria relative to
the bank\'s lending, investments, and services. In these evaluations,
the OCC considers the institution\'s capacity and constraints, including
the size and financial condition of the bank and its subsidiaries.

A review of the record of these applications and other information
available to the OCC as a result of its regulatory responsibilities
revealed no evidence that the applicants record of helping to meet the
credit needs of their communities, including low- and moderate-income
neighborhoods, is less than satisfactory. We further note that all of
the institutions involved in these transactions, except First
Massachusetts, received Satisfactory or Outstanding CRA ratings as of
their most recent examinations. (First Massachusetts does not yet have a
CRA rating.) No public comments were received by the OCC relating to
these applications, and the OCC has no other basis to question the
banks\' performance in complying with the CRA.

The transactions are not expected to have an adverse effect on the CRA
performance of the resulting bank in each transaction. Each resulting
bank will continue to serve the same communities that its predecessor
institutions served. In the mergers, the assessment area of the target
bank will be added to that of the resulting bank. As a general matter,
the resulting bank in each transaction will have the same commitment to
helping meet the credit needs of all the communities it serves as the
parties have today as separate institutions. With respect to the Family
Bank Merger, the resulting banks operation of interstate branches does
not alter its obligation to help meet the credit needs of its
communities in both of the states it serves. We find that approval of
the proposed transactions is consistent with the Community Reinvestment
Act.

**IV. CONCLUSION AND APPROVAL**

For the reasons set forth above, including the representations and
commitments of the applicants, we find that the Family Bank Conversion,
the Family Bank Merger, the BNH Merger, the GSB Merger, the Franklin
Conversion, and the First Vermont Conversion are legally authorized, the
resulting bank in each transaction may retain and operate branches as
described in the analysis above, each transaction meets the other
statutory criteria for approval, and there are no supervisory or policy
concerns. Accordingly, these applications are hereby approved.

[/s/]{.underline} [03-08-00]{.underline}

Julie L. Williams Date

First Senior Deputy Comproller

and Chief Counsel

Application Control Numbers:

2000-NE-01-0004, 2000-NE-01-0005, 2000-NE-01-0006

2000-NE-02-0003, 2000-NE-02-0004, 2000-NE-02-0005

[^1]:
    > An application for approval for the Parent Merger is pending with
    > the Federal Reserve System.

[^2]: 12 C.F.R.  5.24; 12 C.F.R.  552.2-7. The OCC has approved many
    such conversions. *See, e.g.,* Decision on the Applications by TCF
    Financial Corp. to convert Federal Savings Banks Located in
    Minnesota, Michigan, Illinois, and Wisconsin into National Banks
    (OCC Corporate Decision No. 97-13, February 24, 1997). Recently,
    Congress added a provision to the Home Owners Loan Act that
    confirmed this authority, while also addressing branch retention,
    for those federal savings association into national bank conversions
    covered by the new provision. *See* 12 U.S.C.  1464(i)(5), as added
    by the Gramm-Leach-Bliley Act, Pub. L. No. 106-102,  739,
    113 Stat. 1338, 1480 (November 12, 1999) (discussed further below).

[^3]: *See generally* OCC Interpretive Letter No. 872 (October 28,
    1999); OCC Interpretive Letter No. 866 (October 8, 1999); OCC
    Interpretive Letter No. 695 (December 8, 1995).

[^4]: Mass. Gen. L. ch. 167G,  3; N.H. Rev. Stat. Ann. tit. 35, 
    390.13(I). While Family Bank, N.A.s authority to conduct fiduciary
    activities in New Hampshire is based on section 92a and does not
    depend on state law addressing out-of-state banks, *see, e.g.,*
    letters cited in note 3, we note that New Hampshire permits certain
    out-of-state banks, including Family Bank, to exercise trust powers
    in New Hampshire and establish places of business for the conduct of
    trust activities. N.H. Rev. Stat. Ann. tit. 35,  384:63-a(I) &
    390:13(II). We further note that, while Family Bank has the
    authority, it generally does not conduct fiduciary activities for
    New Hampshire customers. Instead, it refers them to its affiliate,
    BNH.

[^5]: The branch retention authority of section 1464(i)(5) is clearly
    intended to operate independently of section 36. First, the
    provision stands on its own, without a reference to section 36.
    Second, if the various geographic limitations of section 36 also
    applied, then no new authority would in fact be granted under
    section 1464(i)(5), which is clearly contrary to its language.
    Third, if section 36 also applied, then national banks and state
    member banks that resulted from a conversion of a federal savings
    association would be treated differently than state nonmember banks
    resulting from a similar conversion. There is no evidence of an
    intent to treat the types of banks differently. In particular, with
    respect to Family Banks branches in New Hampshire, the resulting
    national banks retention of branches in a conversion under
    section 1464(i)(5) is not affected by section 36(e)(1), which states
    that a national bank may not acquire, establish, or operate a branch
    in a new state unless it is authorized under one of the provisions
    listed in section 36(e)(1). First, a converting institutions
    retention of its own branches does not fall within section 36(e)(1)
    because it does not constitute the acquisition or establishment of a
    branch in a new state; the converting institution is the same entity
    as before, and it already has the branch in that state. Second, if
    such branch retention would fall within section 36(e)(1), then there
    is a conflict between section 36(e)(1) and section 1464(i)(5). We
    believe that, in the event of such conflict, section 1464(i)(5)
    controls because it was later in time and is more specifically about
    retaining existing branches in a conversion. In effect, section
    1464(i)(5) is an implied amendment of section 36(e)(1), such that
    branches allowed under 1464(i)(5) are added to the 36(e)(1) list.

[^6]: Family Bank has several subsidiaries that it will retain after the
    conversion. These subsidiaries will become subsidiaries of First
    Massachusetts as a result of the immediately following Family Bank
    Merger. They are discussed below in connection with the merger.

[^7]: Section 1831u(a) provides:

    > \(1\) In General. \-- Beginning on June 1, 1997, the responsible
    > agency may approve a merger transaction under section 18(c) \[12
    > U.S.C.  1828(c), the Bank Merger Act\] between insured banks with
    > different home States, without regard to whether such transaction
    > is prohibited under the law of any State.

    12 U.S.C.  1831u(a)(1) (section 44 of the Federal Deposit Insurance
    Act, as added by section 102(a) of the Riegle-Neal Interstate
    Banking and Branching Efficiency Act of 1994, Pub. L. No. 103-328,
    108 Stat. 2338 (enacted September 29, 1994) (\"the Riegle-Neal
    Act\").

[^8]: *See, e.g.,* Decision on the Application to Merge NationsBank of
    Texas, N.A., Dallas, Texas, into NationsBank, N.A., Charlotte, North
    Carolina (OCC Corporate Decision No. 98-19, April 2, 1998) (*OCC
    Texas Merger Decision*); Decision on the Applications of Bank
    Midwest of Kansas, N.A., and Bank Midwest, N.A. (OCC Corporate
    Decision No. 95-05, February 16, 1995), *reprinted in* Fed. Banking
    L. Rep. (CCH)  90,474 (\"*OCC Bank Midwest Decision*\"); other OCC
    decisions cited in the *OCC Texas Merger Decision*. In litigation
    challenging the *OCC Texas Merger Decision,* the federal district
    court agreed with the OCCs position that the merger was authorized
    under 12 U.S.C.  215a and that such mergers continue to be
    authorized after the Riegle-Neal Act and independently of that Act.
    *See* *Ghiglieri v. NationsBank of Texas, N.A.,* No. 3:97-CV-2897-P,
    1998 U.S. Dist. LEXIS 6637 (N.D. Texas filed May 6, 1998)
    (memorandum opinion and order denying preliminary and permanent
    injunction).

[^9]: Family Bank has several subsidiaries and service corporations that
    will become subsidiaries of Family Bank, N.A., in the Family Bank
    Conversion and then will become subsidiaries of First Massachusetts
    in the Family Bank Merger. Subject to the limitations discussed
    here, these subsidiaries are engaged in activities permissible for
    national banks, and Family Bank, N.A.s and First Massachusetts
    ownership of them is approved. Bradford Investment Corp. holds
    bank-permissible investment securities. CFX Investments, Inc., owns
    all the common stock and a substantial majority of the preferred
    stock of CFX Preferred Capital Corp., a real estate investment trust
    which holds bank-permissible residential mortgage loans,
    participations, and mortgage-backed securities. Another subsidiary
    holds a portfolio of loans secured by real estate that are
    bank-permissible. It no longer originates loans, and its portfolio
    is decreasing as loans are paid off. The remaining subsidiaries hold
    real estate, either directly or through limited partnership
    interests. Most of the real estate investments are permissible for
    national banks: bank premises and real estate obtained in
    satisfaction of debts previously contracted permissible under 12
    U.S.C.  29, or community development and public welfare investments
    permissible under 12 U.S.C.  24(11) and 12 C.F.R. Part 24. The
    community development and public welfare investments will be
    included in First Massachusetts holdings subject to the aggregate
    investment limits of Part 24, and the subsidiaries that hold these
    investments will become community development corporations when
    owned by First Massachusetts. A few of the properties are real
    estate investments permissible for a federal savings bank, but not
    permissible for national banks. Family Bank no longer engages in
    this activity, and Family Bank, N.A., and First Massachusetts will
    not engage in it. The existing real estate investments not
    permissible for national banks will be brought into conformance, or
    disposed of, within a reasonable time.

[^10]: *See* *Seattle Trust & Savings Bank v. Bank of California, N.A.,*
    492 F.2d 48, 51 (9th Cir. 1974), *cert. denied,* 419 U.S. 844 (1974)
    (an interstate national bank is \"situated\" in each state in which
    it has offices for purposes of establishing additional branches
    under section 36(c)). *See also* *Ghiglieri v. Sun World, N.A.,*
    117 F.3d 309, 315-16 (5th Cir. 1997) (*Sun World*) (same, agreeing
    with *Seattle Trust*).

[^11]: For purposes of section 36(b) and section 36(c) of the McFadden
    Act, the state law that is incorporated is state law dealing with
    branching by that state\'s banks within the state. State laws
    pertaining to the activities of the state\'s banks outside the state
    or to the activities of out-of-state banks within the state are not
    the state laws these sections of the McFadden Act refer to. *See,
    e.g.,* *OCC Bank Midwest Decision* (Parts II-B, II-C-2, II-D,
    III-B-1-b).

[^12]: *See, e.g.,* *OCC Texas Merger Decision* (Part II-A-2-a) (pages
    9-10); *OCC Bank Midwest Decision* (Part II-C-2-a). *See also*
    *Ghiglieri v. NationsBank of Texas, N.A.,* *supra* note 8, slip op.
    at p. 7

[^13]: *See* Decision on the Application of State Savings Bank,
    Southington, Connecticut, to Convert into a National Banking
    Association and Merge into Connecticut National Bank, Hartford,
    Connecticut (OCC Merger Decision No. 91-07, April 8, 1991 (approved
    December 14, 1990)) (*OCC Shawmut Decision*) (both banks owned by
    Shawmut National Corporation; at the time of conversion, State
    Savings Bank had branches in Rhode Island). *See also* Decision on
    the Applications of First Fidelity Bank, N.A.(Pennsylvania) and
    First Fidelity Bank, N.A. (New Jersey) (OCC Corporate Decision No.
    94-04, January 10, 1994) (also included grandfathered branches);
    Decision on the Applications of American Security Bank, N.A.,
    Washington, D.C., and Maryland National Bank, Baltimore, Maryland
    (OCC Corporate Decision No. 94-05, February 4, 1994) (also included
    grandfathered branches); Decision on the Applications to Merge
    NationsBank of D.C., N.A., Maryland National Bank, and NationsBank
    of Maryland, N.A. (OCC Corporate Decision No. 94-22, April 29, 1994)
    (Part II-B-2) (same).

[^14]: *See, e.g.,* Decision on the Applications of First Fidelity Bank,
    N.A. (New York) and First Fidelity Bank, N.A. (OCC Corporate
    Decision No. 94-42, October 20, 1994); Decision on the Application
    to Merge Chase Savings Bank into The Chase Manhattan Bank, N.A. (OCC
    Corporate Decision No. 95-08, February 10, 1995); Decision on the
    Applications of PNC Bank, Northern Kentucky, N.A. and PNC Bank,
    Ohio, N.A. (OCC Corporate Decision No. 95-13, March 14, 1995);
    Decision on the Application to Merge First Bank N.A., Minneapolis,
    Minnesota, and First National Bank of East Grand Forks, East Grand
    Forks, Minnesota (OCC Corporate Decision No. 97-68, July 10, 1997).
    *Cf.* Decision on the Application of Republic Bank for Savings, New
    York, New York (OCC Corporate Decision No. 95-32, July 25, 1995) (in
    conversion of state-chartered savings bank with branches in New York
    and Florida, resulting national bank is considered situated in
    both states for purposes of applying branch retention provisions of
    12 U.S.C.  36(b)(1)).

[^15]: Mass. Gen. L. ch. 167C,  3; N.H. Rev. Stat. Ann. tit. 35, 
    384-B:2(I), 384-B:2(II) & 388:16.

[^16]: First Massachusetts and Family Bank exercise fiduciary powers.
    After the merger, First Massachusetts-Resulting will continue to be
    authorized to exercise fiduciary powers under 12 U.S.C.  92a, it
    will succeed to the fiduciary appointments of both as a result of
    the merger, and it will be authorized to engage in all activities
    permissible for national banks, including fiduciary activities, at
    its main office and branches in both states in which it operates.
    *See, e.g.,* 12 U.S.C.  215a(e) (the resulting national bank in a
    merger succeeds to all the rights, franchises and interests,
    including fiduciary appointments, of the merging banks): Decision on
    the Applications of Bank One Wisconsin Trust Company, N.A., and Bank
    One Trust Company, N.A. (OCC Corporate Decision No. 97-33, June 1,
    1997) (national banks may engage in fiduciary business at trust
    offices and branches in different states); OCC Letters cited in note
    3 above (same). *Cf.* 12 U.S.C.  36(f) (general provisions for host
    state laws applicable to branches in the host state of out-of-state
    national banks).

[^17]: It may be addressed for some banks in some situations in 12
    U.S.C.  1831u(d)(2). Section 1831u(d)(2) addresses the authority of
    a Riegle-Neal Act interstate bank to establish or acquire additional
    branches. Among other things, it in effect codifies the *Seattle
    Trust* cases approach and the OCCs related interpretation of
    sections 215a and 36(b) and 36(c) for Riegle-Neal interstate
    national banks for situations covered by the provision. *See also*
    12 U.S.C.  36(g)(2)(B) (applying section 1831u(d)(2) for subsequent
    branches when a national bank entered a state initially with a
    Riegle-Neal *de* *novo* branch). Thus, it is consistent to also
    apply sections 215a, 36(b), and 36(c) in interstate transactions
    that the Riegle-Neal Act does not expressly address.

[^18]: *See* Riegle-Neal Act  102(b)(1)(B) (adding new subsection 12
    U.S.C.  36(e)(1) on exclusive authority for additional branches for
    national banks). Section 36(e)(1) provides:

    > Effective June 1, 1997, a national bank may not acquire,
    > establish, or operate a branch in any State other than the banks
    > home State (as defined in subsection (g)(3)(B)) or a State in
    > which the bank already has a branch unless the acquisition,
    > establishment, or operation of such branch in such State by such
    > national bank is authorized under *this section* or section 13(f),
    > 13(k), or 44 of the Federal Deposit Insurance Act.

    12 U.S.C.  36(e)(1) (emphasis added). The term this section
    refers to Revised Statutes  5155, 12 U.S.C.  36. A similar
    provision was added for state banks. *See* 12 U.S.C.  1828(d)(3).
    In addition, subsection 36(e)(2) (along with new subsection 30(c))
    affects prior law regarding branch retention in interstate main
    office relocations. The Family Bank Merger does not involve a
    relocation, and so that provision is not involved here.

[^19]: Moreover, we note that the banks here could have structured the
    transaction differently and reached the same result under the
    Riegle-Neal Act. Family Bank could have changed the location of its
    main office to one of the branch locations in New Hampshire under
    OTS procedures for a federal savings bank to change its main office
    location. Then Family Bank would convert to a national bank and
    retain its branches under section 1464(i)(5), Then Family Bank,
    N.A., could merge into First Massachusetts under the Riegle-Neal Act
    (since the banks would then have different home states), and the
    resulting bank would retain branches in both states under the
    Riegle-Neal Act. The alternative structure involves an extra step
    and may raise additional issues. Moreover, such alternatives may not
    be available in all instances, and so the continuing applicability
    of section 36(b) as outlined is needed.

[^20]: In addition, we note, because a portion of the deposits of Family
    Bank, though a Bank Insurance Fund member, are insured by the
    Savings Association Insurance Fund as a result of prior
    transactions, this transaction satisfies the requirements of 12
    U.S.C.  1815(d)(3). The resulting bank will meet all applicable
    capital requirements.

[^21]: BNH is a New Hampshire state-chartered bank. It does not have
    assets or engage in activities not permissible for national banks.
    It has two subsidiaries \-- one that holds DPC real estate and
    another that services, and holds interests in, securitized lease
    pools comprised of bank-permissible lease-financing assets \-- that
    will become subsidiaries of BNHNA as a result of the merger. The
    merger is not in contravention of state law for purposes of
    12 U.S.C.  215a. The merger of a New Hampshire-chartered bank into
    a national bank is expressly authorized by New Hampshire law. N.H.
    Rev. Stat. Ann. tit. 35,  389:1. In addition, we note, because a
    portion of the deposits of BNH, though a Bank Insurance Fund member,
    are insured by the Savings Association Insurance Fund as a result of
    prior transactions, this transaction satisfies the requirements of
    12 U.S.C.  1815(d)(3). The resulting bank will meet all applicable
    capital requirements.

[^22]: N.H. Rev. Stat. Ann. tit. 35,  384-B:2(I), 384-B:2(II) &
    388:16.

[^23]: GSB is a Vermont state-chartered bank. It does not have assets or
    engage in activities not permissible for national banks. It has no
    subsidiaries. The merger is not in contravention of state law for
    purposes of 12 U.S.C.  215a. The merger of a Vermont-chartered bank
    into a national bank is expressly authorized by Vermont law. Vt.
    Stat. Ann. tit. 8,  1002.