O

Comptroller of the Currency

Administrator of National Banks

Northeastern District

1114 Avenue of the Americas, Suite 3900

New York, New York 10036-7780

**Corporate Decision #2000-15**

**September 2000**

**DECISION OF THE COMPTROLLER OF THE CURRENCY ON THE APPLICATION TO
MERGE BSB BANK & TRUST COMPANY, BINGHAMTON, NEW YORK WITH AND INTO NBT
BANK, NATIONAL ASSOCIATION, NORWICH, NEW YORK, UNDER THE CHARTER NUMBER
OF THE LATTER AND WITH THE TITLE OF NYSTAR BANK, NATIONAL ASSOCIATION.**

**2000-NE-02-0021**

**August 28, 2000**

## Introduction

On June 30, 2000, an application was filed with the Office of the
Comptroller of the Currency ("OCC") for approval to merge BSB Bank &
Trust Company, Binghamton, New York, ("BSB Bank") with and into NBT
Bank, National Association, Norwich, New York ("NBT Bank") under 12
U.S.C. § 215a. This application was based on an agreement completed
between the parties on April 19, 2000.

**Participating Financial Institutions**

As of March 31, 2000, NBT Bank had assets of approximately \$1.4 billion
and deposits of approximately \$1.1 billion. As of that same date, BSB
Bank had assets of approximately \$2.2 billion and deposits of
approximately \$1.9 billion. NBT Bank is a wholly owned subsidiary of
NBT Bancorp, Inc., Norwich, New York,, which also owns LA Bank, National
Association, Lake Ariel, Pennsylvania. BSB Bank is a wholly owned
subsidiary of BSB Bancorp, Inc., Binghamton, New York. NBT Bank and BSB
Bank are members of the Bank Insurance Fund ("BIF").

**The Bank Merger Act.**

The Bank Merger Act, 12 U.S.C. § 1828(c), requires the OCC's approval
for mergers between insured institutions where the resulting institution
will be a national bank. Under the Act, the OCC generally may not
approve a merger that would substantially lessen competition. In
addition, the Act also requires the OCC to take into consideration the
financial and managerial

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resources and future prospects of the existing and proposed
institutions, and the convenience and needs of the community to be
served. For reasons stated below, we find the merger involved may be
approved under section 1828(c).

**Competitive Analysis**

The OCC reviewed the impact of the proposed transaction on competition
for the cluster of products and services offered by depository
institutions in the areas surrounding the branches NBT Bank is
acquiring. There are two relevant geographic markets for this proposal,
which are discussed below. The OCC finds that the markets are delineated
in such a way as to accurately measure any adverse competitive effects
from the proposed transaction and the effects of the proposed
transaction, as now structured, will not result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize the business
of banking in any part of the United States, and will not substantially
lesson competition in any part of the country, or tend to create a
monopoly, and will not be in restraint of trade. In making this
determination, the OCC carefully considered the report of the Department
of Justice, which similarly found the proposed transaction would not
have a significant adverse effect on competition. [^1]

**Oneonta Banking Market**

This market includes Delaware and Otsego Counties, New York, plus
portions of Chenango County, New York (Bainbridge, Columbus, German,
Guilford, Linklaen, McDonough, New Berlin, North Norwich, Norwich city
and town, Otselic, Oxford, Pharsalia, Pitcher, Plymouth, Preston,
Sherburne, and Smyrna). This is where BSB Bank's Norwich branch derives
the bulk of its deposits, and where competition between NBT Bank and BSB
Bank is direct and immediate. As a result of NBT Bank's proposed
divestiture of BSB Bank's Norwich branch, the OCC finds that this
transaction will have no or minimal adverse competitive effects in the
Oneonta Banking Market.

**Binghamton Banking Market**

This market includes the City and Town of Binghamton, the towns of
Union, Vestal, Dickinson, Kirkwood, Conklin, Windsor, Colesville,
Fenton, Chenango, Maine and Nanticoke in Broome County, New York, plus
the towns of Owego and Newark Valley in Tioga County, New York, and the
townships of Great Bend, Oakland and Susquehanna in Susquehanna County,
Pennsylvania. This is where BSB Bank's Broome County and Tioga County
branches derive the

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bulk of BSB Bank's deposits, and where competition between NBT Bank and
BSB Bank is direct and immediate.[^2]

Within this market, eleven banks compete for approximately \$2.8 billion
in deposits. NBT Bank is the sixth largest depository institution with
approximately two- percent of the market's total deposits. BSB Bank is
the largest depository institution with approximately fifty-one percent
of the market's deposits. The proposed merger would create the largest
depository institution in the market with approximately fifty-four
percent of the market's deposits. The second largest bank holding
company is M&T Bank Corp. with approximately twenty-five percent of the
markets deposits.

While the proposed transaction would eliminate some direct competition
in the relevant geographic market, any adverse effects would be
mitigated by the presence of numerous other banking alternatives.
Therefore, consummation of this proposal would not have a significantly
adverse effect on competition in the Binghamton Banking Market.

In addition, there are six credit unions operating in the Binghamton
market. Collectively, credit unions account for roughly twenty-five
percent of combined bank-credit union deposits. The largest of these,
Visions Federal Credit Union ("Visions") has approximately \$855 million
in deposits in the Binghamton RMA. Visions is open to all people and
businesses in Broome and Tioga counties. Visions offers an extensive
array of financial products and services and is in the process of
expanding its business lending operations. Visions is implementing a
program to offer mortgage loans for commercial real estate and
commercial term installment loans, as well as SBA guaranteed loans.
Recent legislative changes indicate an increased potential for credit
unions to act as competitors with banks and thrifts. On August 7, 1998,
the President signed into law the Credit Union Membership Access Act
(\"CUMAA\")[^3] The CUMAA expanded the field of membership requirements
so that credit unions could accommodate new members, and promoted the
creation of \"multiple common-bond\" credit unions. [^4] While
quantitative data on the long run effects are not yet available,
legislative and regulatory changes may result in an increased
competitive presence from credit unions. Based on an analysis of these
competitive factors, the merger application may be approved under
section 1828(c). [^5]

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**Banking Factors**

The Bank Merger Act requires the OCC to consider "\...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." We find that the financial and managerial resources of NBT Bank
and BSB Bank do not raise significant concerns that would cause the
application to be disapproved. The future prospects of the proponents,
individually and combined, are thus considered favorable and the
resulting bank is expected to meet the convenience and needs of the
community to be served.

**Convenience and Needs.**

The merger will not have an adverse impact on the convenience and needs
of the communities to be served. The resulting bank will continue to
serve the same areas that it now serves. There will not be a reduction
of products or services as a result of the merger. The resulting bank is
expected to meet the convenience and needs of the community to be
served. While the resulting bank will consolidate one overlapping branch
as a result of the transaction, current NBT Bank and BSB Bank customers,
as customers of the resulting bank, will have a greater number of
branches at which to bank. Accordingly, we believe the impact of the
merger on the convenience and needs of the communities to be served is
consistent with approval of the application.

**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
the community, including low-and moderate-income neighborhoods, when
evaluating certain applications. 12 U.S.C. §§ 2903;

12 C.F.R. 25.29(a). The OCC considers the CRA performance evaluation of
each institution involved in the transaction. Under the CRA regulations,
the OCC evaluates performance of most large banks using the lending
investment, and service criteria. 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 this application and other information
available to the OCC as a result of the 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 NBT Bank
received a "Satisfactory" CRA rating as of December 7, 1998. BSB Bank
received a "Satisfactory" CRA rating as of April 13, 1998. We received
no public comments on this application.

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The transaction is not expected to have an adverse effect on the
resulting bank's CRA performance. The resulting bank will continue to
serve the same communities the NBT Bank and

BSB Bank currently serves. The resulting bank will continue its current
CRA programs and policies. We find that approval of the proposed
transaction is consistent with the Community Reinvestment Act.

**Conclusion**

The legal, policy and procedural requirements for the proposal are
satisfied. The banks are in satisfactory condition and their performance
under the Community Reinvestment Act is rated at least satisfactory. We
have analyzed this proposal pursuant to 12 USC §§215 a, the Bank Merger
Act 12 USC 1828(c) and 12 CFR 5.33. Accordingly, the application is
approved subject to the following condition:

The resulting bank must comply with the divestiture agreement between
the Department of Justice, NBT Bank, and BSB Bank dated August 15, 2000.

This condition of approval is a condition "imposed in writing by the
agency in connection with the granting of any application or other
request" within the meaning of 12 USC § 1818. As such the condition is
enforceable under 12 USC § 1818.

**[-signed-]{.underline}**

Stephen Lybarger

Acting Licensing Manager

Dated: [**08-28-00**]{.underline}

Application Control Number: 2000 NE 02 021

[^1]: In reaching this conclusion, the Department of Justice relied on
    commitments by NBT Bank to divest one BSB Bank branch in Norwich,
    New York. This was stipulated in the divestiture agreement between
    the Department of Justice, NBT Bank and BSB Bank, dated August 15,
    2000. NBT Bank agreed that it would not consummate the merger until
    a contract with a competitively suitable purchaser as determined by
    the Department of Justice is signed by NBT Bank and BSB Bank for the
    sale of the divested branch.

[^2]: LA Bank, National Association, Lake Ariel, Pennsylvania ("LA
    Bank"), wholly owned by NBT Bancorp. Inc. filed an application with
    the OCC to acquire two Sovereign Bank branches in the Binghamton, NY
    banking market. The OCC reviewed the competitive effects of LA
    Bank's proposed acquisition of Sovereign Bank's branches in
    conjunction with the proposed merger of NBT Bank and BSB Bank.

[^3]: 12 U.S.C. §§ 1751-1795.

[^4]: [Id.]{.underline} at 1759(b).

[^5]: The Federal Reserve Bank of New York, acting on behalf of the
    Board of Governors of the Federal Reserve System, reported that the
    merger could have a substantially adverse effect on competition,
    although it qualified its report by noting that it had not examined
    all the economic factors that may be relevant to the competitive
    effects of the proposal.