Academic journal article Federal Reserve Bulletin

Community Bank System, Inc. DeWitt, New York

Academic journal article Federal Reserve Bulletin

Community Bank System, Inc. DeWitt, New York

Article excerpt

Order Approving the Acquisition of a Bank Holding Company FRB Order No. 2017-12 (April 26, 2017)

Community Bank System, Inc. ("Community"), Dewitt, New York, a financial holding company within the meaning of the Bank Holding Company Act of 1956 ("BHC Act"), (1) has requested the Board's approval under section 3 of the BHC Act (2) to acquire Merchants Bancshares, Inc. ("Merchants"), and thereby indirectly acquire Merchant's subsidiary bank, Merchants Bank, both of South Burlington, Vermont. Following the proposed acquisition, Merchants Bank would be merged into Community's subsidiary bank, Community Bank, N.A. ("Community Bank"), Canton, New York. (3)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (81 Federal Register 92814 (December 20, 2016)). (4)The time for submitting comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 3 of the BHC Act.

Community, with consolidated assets of approximately $8.7 billion, is the 142nd largest insured depository organization in the United States. Community controls approximately $7.1 billion in consolidated deposits, which represent less than 1 percent of the total amount of deposits of insured depository institutions in the United States. (5)Community controls Community Bank, which operates in New York and Pennsylvania.

Merchants, with consolidated assets of approximately $2.0 billion, is the 406th largest insured depository organization in the United States, controlling approximately $1.5 billion in deposits, which represent less than 1 percent of the total amount of deposits of insured depository institutions in the United States. Merchants controls Merchants Bank, which operates in Vermont and Massachusetts.

On consummation of the proposal, Community would become the 122nd largest insured depository organization in the United States, with consolidated assets of approximately $10.7 billion, which represent less than 1 percent of the total assets of insured depository organizations in the United States. Community would control total deposits of approximately $8.6 billion, which represent less than 1 percent of the total amount of deposits of insured depository institutions in the United States. In Vermont, Community would become the 3rd largest insured depository organization, controlling deposits of approximately $1.3 billion, which represent approximately 11.1 percent of the total deposits of insured depository institutions in that state. (6) In Massachusetts, Community would become the 84th largest insured depository organization, controlling deposits of approximately $92.7 million, which represent less than 1 percent of the total deposits of insured depository institutions in that state.

Interstate and Deposit Cap Analysis

Section 3(d) of the BHC Act generally provides that, if certain conditions are met, the Board may approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of the bank holding company without regard to whether the transaction is prohibited under state law. (7) Under this section, the Board may not approve an application that would permit an out-of-state bank holding company to acquire a bank in a host state if the bank has not been in existence for the lesser of the state statutory minimum period of time or five years. (8) In addition, the Board may not approve an interstate application if the bank holding company controls or, upon consummation of the proposed transaction, would control more than 10 percent of the total deposits of insured depository institutions in the United States or, in certain circumstances, the bank holding company upon consummation would control 30 percent or more of the total deposits of insured depository institutions in any state in which the acquirer and target have overlapping banking operations. …

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