Maine's Peoples Heritage Agrees To Buy Bank of New Hampshire

Northeastern New England, which has been virtually unscathed by the merger frenzy sweeping the nation's largest banks, is about to see its first big merger.

Portland-based Peoples Heritage Financial Group, Maine's largest independent bank, has agreed to buy Manchester-based Bank of New Hampshire Corp., the Granite State's second-largest bank, for more than $160 million.

The deal, worth about twice Bank of New Hampshire's Sept. 30 book value, will create a new regional powerhouse with about $4.2 billion in assets. That will make Peoples Heritage a major rival for Providence, R.I.-based Fleet Financial Group Inc. and Cleveland-based Keycorp in Northeastern New England.

"It makes us a bigger player and we're real excited," said Peoples Heritage spokesman Brian Arsenault. "It gives us a chance to really compete for market share because we're in southern New Hampshire now and we simply weren't before."

As part of the transaction, Peoples Heritage's New Hampshire subsidiary, First Coastal Banks Inc., will be merged into Bank of New Hampshire, which will remain a separate subsidiary with about $1.7 billion of assets.

That will make it the third-largest bank in the Granite State, behind Bank of Ireland subsidiary First NH Bank and Fleet. The state also has a $1.8 billion-asset bank subsidiary of nonbank holding company Providian Corp.

The deal will give Peoples Heritage a significant statewide branch presence and will double its market coverage to about 80% of the state's population. It also increases People's share of the deposit market to 11.6%, behind Fleet with 23% and First NH with 21.6%.

Peoples Heritage officials expect to cut costs by about 20% by consolidating several branches and moving all back-office operations to Maine.

Gary Ford, bank analyst at H.C. Wainwright in Boston, praised the deal, raising his 1996 earnings estimate to $2.35 per share from $2.25.

"They will still continue to have a community bank focus and I would say the people in New Hampshire won't even notice that much," Mr. Ford said. "It'd almost be run like a separate entity. That's the only way they can differentiate themselves from Fleet and Key."

Under the transaction, Bank of New Hampshire shareholders will receive two Peoples Heritage shares for every share they own in a tax-free transaction.

"It's particularly good for BNH shareholders," said James Moynihan, senior vice president of Advest Group in Boston. "BNH is the only major commercial bank in New Hampshire to survive the financial disaster up there. They took their lumps back in 1990 and 1991 and have been on the recovery since."

The merger, which is still subject to shareholder and regulatory approval, is expected to close by mid-1996.

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