[A] publicly traded bank with branches across upstate New York is acquiring Merchants Bank, Vermont’s largest and only remaining state-based bank.
The boards of directors for Community Bank System, traded on the New York Stock Exchange as CBU, and Merchants Bancshares, traded on Nasdaq as MBVT, agreed to the merger sometime this month.
Community Bank is paying $304 million, or about $44 per share. Community Bank has 200 branches, $8.7 billion in assets, and a market capitalization of $2.1 billion.
Merchants Bank has grown to 31 locations in Vermont and one in Massachusetts since its founding in 1849 in Burlington. Merchants Bank has $1.9 billion in assets and $1.5 billion in deposits.
As part of the deal, Geoffrey Hesslink, the president and chief executive officer of Merchants Bank, will become the New England regional president of Community Bank.
“We are proud to become part of a long-standing, solid and complementary francise like Community Bank,” Hesslink said in a press release. “We will continue to provide our highly personalized experience to our customers, while providing them with an expanded set of products and services as a larger organization.
Mike Pieciak, the commissioner of the Department of Financial Regulation, called the merger “a big deal” because it was the last state-based bank and had 32 branches.
The last state-chartered bank to merge with a federally-chartered bank was Chittenden Bank, which became part of the Connecticut-based People’s United Bank on Jan. 1, 2008.
Pieciak said Vermont still has 6 other state-chartered banks, but they all serve small regions of the state. There are also 16 state-chartered credit unions and numerous federally-chartered banks.
Pieciak said banks across the nation are merging because the Federal Reserve has held interest rates low for several years for banks seeking to borrow. That means that the banks must charge low rates to consumers seeking loans, so they make less money.
“The economy Vermont and nationally hasn’t been growing very robustly … which means that the banks have to kind of steal business from each other,” he said. “To survive, to grow, means that you probably have to find a dancing partner and grow through merger or acquisition.”
Pieciak said the number of state-chartered banks, including community banks, hit its peak in the 1920s, when there were 59. The number was at 17 in 1995, he said.
