Stoking Hearths; New England Is Not Likely to Rush into Nationwide Banking Relationships

Article excerpt

Stoking Hearths

New England is not likely to rush into nationwide banking relationships.

WHEN BANK OF NEW ENGLAND Corp. announced its merger with CBT Corp. in June 1983, a Bank of New England official said, "Interstate regional banking is here.'

Actually, there was a two-year wait. But today, regional banking is firmly in place and has spread beyond New England to the Southwest, the Midwest, and parts of the West.

As the oldest of the banking regions, New England is arguably the most mature in terms of development, though the Southeast is not far behind. The major players in New England--Bank of Boston Corp., Bank of New England, Hartford National Corp., and the Fleet Financial Group Inc.--have positioned themselves with acquisitions in the key New England states. And the number of attractive, relatively large bank holding companies has dwindled.

Nevertheless, New England banking observers say that Massachusetts and Connecticut, the key states in the region, are still a few years away from increasing the number of potential bidders by opening their doors to banks from beyond the region. Among bank holding companies, five or six attractive takeover candidates remain in Massachusetts and Connecticut, according to securities analysts who follow New England banking.

In addition, thrift institutions, once off-limits to bank holding companies, provide a new pool of takeover candidates. And two New England states, Vermont and New Hampshire, have yet to pass legislation allowing interstate banking in any form. Thus, banks from those two states may become available for purchase over the next few years.

So far, there have been only 11 purely New England deals signed, of which seven have been completed. In contrast, Banc One Corp., a Columbus, Ohio bank holding company, itself has signed 10 deals in the fledgling midwestern region.

Christmas Gift Arrived Late

Just before Christmas 1982, the Massachusetts House and Senate approved by voice vote the nation's first regional interstate banking bill. "Bankers in Massachusetts are getting a head start on bankers in other states,' Paul Foley, president of the Massachusetts Bankers Association, said at that time. Within the next six months, the Connecticut and Rhode Island legislatures followed with passage of similar bills. But court challenges to those laws delayed their implementation for two and a half years.

While Massachusetts was the first state to pass a regional bill, it was not the first New England state to pass an interstate law. Since 1975, Maine has allowed banks from anywhere in the nation to buy its banks. In February 1984, Maine eliminated a requirement that the home states of the buyers allow entry into their states by Maine banks.

The Massachusetts and Connecticut statutes are virtually identical, permitting the purchase of their banks by banks from within the New England region on a reciprocal basis. The Rhode Island law is different in that Rhode Island was the first state to include a national "trigger' provision. Under the trigger, beginning in July 1987, banks from anywhere in the nation will be allowed to buy Rhode Island banks, provided the home states of the buyers treat Rhode Island banks reciprocally.

The major players in the New England region declared themselves early on. The merger of the Boston-based Bank of New England and the Hartford-based CBT is the only deal so far between two like-sized institutions. Bank of New England later signed up Maine National Corp. in Portland. Other pioneers were:

Bank of Boston Corp., which signed agreements to buy Casco-Northern Corp. in Portland, Maine; Colonial Bancorp in Waterbury, Conn.; and RIHT Financial Corp. in Providence, R.I.

Hartford National Corp., which agreed to buy Arltru Bancorp in Lawrence, Mass.

The Fleet Financial Group Inc., Providence, R. …