Banking industry officials, executives and lawmakers are hoping recently passed legislation will encourage formation of new banks across the state after decades of mergers and acquisitions that dramatically reduced the number of institutions in New Hampshire.

Signed into law earlier this summer by Gov. Kelly Ayotte, the new statute modifies several state regulations largely impacting recently launched banks in New Hampshire.

Referred to as the “bank startup bill” as it wound its way through the legislature, the newly enacted Senate Bill 85 shortens the initial probationary period for new state-chartered banks –officially known as a “de novo” period – from five years to three years.

In addition, the new law increases the amount that a state-chartered bank can lend to a single borrower, from the previous limit of 15 percent of a bank’s capital to 20 percent of a bank’s capital.

In both cases, the old rules made New Hampshire an “outlier” compared to federal de novo requirements and lending practices in neighboring New England states, officials said.

In Line with Federal Practices

The new changes, supporters said, bring the state more in line with federal and regional banking norms.

Ultimately, the law’s main goal is to encourage the launch of new state-chartered banks by easing regulatory burdens that mostly impact smaller banking institutions.

“It turned out to be a good bill,” said state Sen. Howard Pearl, R-Loudon, sponsor of SB 85. “It’s beneficial to small banks – and it should also help small business customers as well.”

Pearl added the law will hopefully promote increased banking competition if it indeed leads to new bank startups.

“Competition never hurts anyone,” said Pearl. “More competition means better rates and opportunities for customers.”

“The focus of the legislation was really about new banks,” agreed Kristy Merrill, president and CEO of the New Hampshire Bankers Association. “We’re trying to buck the trend of fewer banks in New Hampshire.”

That trend is decades-old.

According to the NHBA, there were 40 state-chartered banks in New Hampshire in 2000, but there are only 15 state-chartered banks today, thanks largely to the relentless pace of mergers and acquisitions within the banking industry over the years.

The state M&A trend has surged right through the first half of 2025. In January, Maine-based Camden National Corporation closed on its acquisition of New Hampshire-based Northway Bank.

In July, Maine-based Bar Harbor Bankshares completed its takeover of Guaranty Bancorp, the New Hampshire parent company of Woodsville Guaranty Savings Bank.

Number of Banks Shrinking

New Hampshire’s shrinking banking base mirrors an overall decline in the number of banks across the U.S., falling from 8,315 institutions in 2000 to 4,462 banks today, according to data from the NHBA.

Indeed, the regional decline in banking institutions stretches well back into the 1980s.

According to the Federal Reserve Bank of Boston, the number of banks in the First District — which covers Maine, Massachusetts, New Hampshire, Rhode Island, Vermont and most of Connecticut — declined by 75 percent from 1986 to 2023.

Despite the dwindling number of banking institutions in New Hampshire, the state does have a history of de novo, banks, such as Millyard Bank (launched in Nashua in 2019) and Walden Mutual Bank (launched in Concord in 2022).

The CEOs of both of those banks strongly support the new banking law.

“It’s just total common sense,” said Charley Cummings, CEO of Walden Mutual, whose customer focus is on local and sustainable food-related companies across the Northeast. “It’s bringing New Hampshire [banking rules] up to date.”

“I’m happy they’ve changed the rules,” said Frank Teas, CEO of Millyard Bank, a commercial bank. “I think it’s a prudent move by the state.”

While the new regulatory changes could lead to an increase in banking competition across the state, Chris Logan, CEO of Bank of New Hampshire, said he supported passage of SB 85.

“A healthy banking environment needs de novo banks,” said Logan, who’s vice chair of the NHBA and head of one of the largest banks in New Hampshire.

“The new law doesn’t change the dynamics for us much [at Bank of New Hampshire], but overall it will help the entire banking industry here.”

De Novo Period Shortened

Following is a quick look at the new law’s major changes.

In 2016, the Federal Deposit Insurance Company reduced its required de novo period, or when newly established banks are subjected to heightened regulatory scrutiny, from seven years to three years.

But the state of New Hampshire maintained a five-year de nova period for new state-chartered banks – and now that’s been brought in line with the FDIC’s three-year timeline.

Technically, the New Hampshire Banking Department can extend de novo for an extra two years for safety-and-soundness reasons, but the state law is effectively three years now.

Among other things, de novo banks are subjected to enhanced capital restrictions, more frequent audits and other regulatory measures designed to safeguard customers and the overall banking system.

“It’s not an easy process,” said Cummings, whose Walden Mutual Bank is still in its de novo period. “(De novo) is a pretty heavy burden from a compliance standpoint.”

He added: “The early years are a risky time for startup banks, so that’s why there are more restrictions. (But) changing the state law to be consistent with the FDIC’s de novo period is just a common-sense move.”

Lending Limits Raised

Under the new law, the amount that a state-chartered bank can lend to a single borrower has been increased from 15 percent of a bank’s capital to 20 percent, with an extra 5 percent allowed if the loan is fully secured.

The changes are consistent with lending limits in neighboring New England states and the vast majority of other states around the country, officials stress.

How will this help startup banks?

If a commercial borrower outgrows the 15 percent limit, it will often switch to a larger bank in order to secure a necessary loan or force a small startup institution to partner with another lender to arrange a loan package.

And that lending partner is quite frequently an out-of-state bank, officials note.

Basically, the new lending-limit rule allows smaller banks to provide larger loans to growing businesses.

“Customers can actually outgrow a smaller bank,” said the NHBA’s Merrill. “This (lending-limit) change helps small banks to keep working with customers. It increases access to local capital.”