Vermont Financial Services Corp. would be within striking distance of market-share leadership in the state after the planned acquisition of a neighboring New England bank.
Vermont Financial, based in Brattleboro, agreed Nov. 14 to acquire Eastern Bancorp of Dover, N.H., in a stock-and-cash deal valued at $89.1 million. Eastern is the parent of Vermont Federal Bank, based in Williston.
The buyout deal - a rare occurrence in the quiet Vermont banking community - would boost Vermont Financial's assets in the state to $1.6 billion and give it a 19% share of deposits.
That would nearly put the company in a dead heat for market share with Banknorth Group Inc., a $2.5 billion-asset multibank holding company. Banknorth, based in Burlington, holds 19.6% of the Green Mountain State's deposits and has $1.7 billion in assets there.
But Banknorth officials said the proposed merger is not a threat. "We'll be competing against the same people we've always competed against," said Thomas J. Pruitt, executive vice president and chief financial officer. "Competition is good for the consumer."
Analysts say Banknorth probably passed up making a play for Eastern, despite the benefits its purchase could give a rival.
"It's been rumored for quite a while that Eastern was for sale," said Kevin Timmons, senior banking analyst at First Albany Corp. in Albany, N.Y. "If Banknorth had felt it was imperative to make a move, you think they would have made a move there."
The deal is the first big one in years involving two significant players in the Vermont market. In some respects it would be virtually an in-state transaction, since the vast majority of Eastern's $689 million of assets are in Vermont, and the company itself was based in Williston until 1994.
But home-state competition isn't the only incentive for Vermont Financial. With much of the state's banking market already consolidated, Vermont's largest banking companies have been looking instead to neighboring states for their expansion.
Both Banknorth and Vermont Financial, as well as Burlington-based Chittenden Corp., have subsidiaries in Massachusetts. And Vermont Financial would make its debut in New Hampshire through this deal. Eastern subsidiary First Savings of New Hampshire runs 10 branches in the southern part of the Granite State.
"The chemistry was right," said John Cobb, president and chief executive of Eastern Bancorp.