Fleet May Merge New York Units

Fleet/Norstar Financial Group Inc. is considering merging its three New York State bank units into one institution.

The move would meld the more profitable Albany and Buffalo banks with Fleet's troubled Long Island unit, possibly staving off future capital problems at the Long Island operation.

"It is an appropriate time to discuss how we might leverage market opportunities," by merging the banks, said Fleet's executive vice president, John B. Robinson Jr., in a prepared statement.

Loss on Long Island

Fleet's Long Island unit, known as Norstar Bank of Long Island, reported a loss of $11.9 million in the second quarter. Meanwhile, the Long Island bank's nonperforming loans increased 21%, to $170 million. That was the largest jump in nonperformers at any Fleet's banks.

The Buffalo and Albany units both posted profits for the second quarter, and their nonperformers increased only marginally.

In a preliminary step toward merging the New York operations, Fleet said it recently "activated" the Fleet/Norstar New York holding company, which has existed since 1988 for legal purposes. Robert F. Macfarland, chairman of Norstar Bank of Albany, will become chairman of the holding company. Erland E. Kailbourne, chairman of Norstar Bank of Buffalo, will become the holding company's president.

Experienced in Consolidation

Fleet has its hands full when it comes to consolidating units, but it also has a lot of practice. The company purchased $14.5 billion in assets from the failed Bank of New England franchise in July and is busy merging those units with its own branches througthout New England. Fleet has formed an umbrella group temporarily dubbed Newco to oversee operations in Massachusetts, Connecticut, and Rhode Island.

"Fleet's move follows a trend of consolidations by other banks in New York," said Donald Kauth, an analyst for First Albany. He noted that Keycorp moved in July to consolidate its banks in western, eastern and central New York into one, called Key Bank of New York.

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