FDIC to Merge Five Banks Into Two in N.H. Bailout
WASHINGTON -- The Federal Deposit Insurance Corp. has unveiled its long-awaited plan for bailing out New Hampshire's five largest independent banks.
The plan calls for closing the institutions and merging them into two banks. The FDIC will strip out problem loans, pump in cash, and seek additional capital from private investors.
State officials had lobbied regulators to leave the banks open and recapitalize them with private and public funds.
But in discussions this week with potential investors, the agency signaled it had rejected that approach.
At a meeting Monday in Boston, the FDIC told prospective buyers that it plans to merge Amoskeag Bank and East Bank, both based in Manchester. It will also combine Dartmouth Bank and Numerica Savings Bank, also of Manchester, with Concord-based New Hampshire Savings Bank.
The institutions, all FDIC-insured savings banks, have assets of $4.6 billion. In all, the agency insures 28 banks in New Hampshire with $8.7 billion in assets.
The timetable calls for selling the five banks by September.
Possible acquirers include: John Hancock Financial Services, an affiliate of the insurance concern, based in Boston; Fleet/Norstar Financial Group, Providence, R.I.; First New Hampshire Bank, Manchester, a subsidiary of the Bank of Ireland; and Boston investor Thomas H. Lee.
A John Hancock official confirmed that a representative attended the bid meeting, which was first reported in the Boston Globe. The others either declined comment or could not be reached. The FDIC also declined comment.
Robert P. Keller, president and chief executive of Dartmouth Savings, is teaming up with former Shawmut vice chairman William Craig to bid for his institution and its two counterparts.
According to people at the meeting, the FDIC said that a buyer could choose either a bank or thrift charter.
"The option is being opened for companies that might not want to be, or can't be, a bank holding company," said one person familiar with the FDIC's proposal.
John Hancock already owns a limited-service bank, First Signature Bank in Portsmouth, N.H., but its growth is restricted by a 1987 law. Gaining a thrift charter through an acquisition, John Hancock could grow the institution at will.
Possibility Wins Praise
Marcel Veilleux, president of the New Hampshire Bankers Association, welcomed signs that the FDIC is prepared to act. "We have 89 banks in New Hampshire and five of them have received 90% of the attention," he said. "Going into the fall, we will have dispersed that cloud and can get on with the survivors."
FDIC officials are not completely opposed to keeping troubled banks open with government assistance. In fact, the agency is working to revise its "open-bank assistance" policy right now, but it is too late to help the New Hampshire banks.
"I don't think there is anything new-fangled here," said Connecticut Banking Commissioner Ralph Shulansky. "Open-bank assistance is not going to happen in New Hampshire because no one can deal with the undisclosed liabilities."
While this is disappointing to New England leaders, Mr. Shulansky said Wednesday that banks that collapse in the future could yet benefit from a change in FDIC policy.
"We have a difficult economic situation up here and I don't see it turning around anytime soon," he said. "It may be too late for some banks, but not others."
The FDIC's moves to solve New Hampshire's banking crisis parallels actions in Massachusetts and Connecticut, where meetings with potential acquirers have already taken place.
According to the FDIC, Massachusett's 223 FDIC-insured banks hold $51.3 billion in assets. In the first quarter, 68 banks lost $68 million. For all of 1990, Massachusetts banks lost $594 million.
A third of Connecticut's 62 FDIC-insured banks lost $80 million in the quarter. The state's banking industry, which has $38.4 billion in assets, racked up a $755 million loss in 1990, according to FDIC figures.
How Regulators Will Package Banks
Insolvent institutions in New Hampshire will be merged and sold in two groups Assets ($ in millions)Amoskeag Bank $1,070Bank East 878Total $1,948Numerica Savings $985Dartmouth Bank 976New Hampshire 670
PHOTO : William Craig Wants to buy savings bank