By the Division of Banks


DECISION
RELATIVE TO THE MERGER OF
CENTRIX BANK & TRUST, BEDFORD, NEW HAMPSHIRE
WITH AND INTO
EASTERN BANK, BOSTON, MASSACHUSETTS


Eastern Bank (the “Petitioner”), Boston, Massachusetts, has applied to the Division of Banks (the “Division”) for permission to merge with Centrix Bank & Trust (“Centrix”), Bedford, New Hampshire pursuant to the provisions of Massachusetts General Laws chapter 172, section 36 under the terms of a Plan of Bank Merger and Contract for Union (“Agreement”).  The Agreement provides for the merger of Centrix with and into Eastern Bank under the charter, by-laws and name of Eastern Bank.  The banking offices of Centrix will be retained as branch offices after the merger.  The proposed merger is part of a multi-step transaction involving an application before the Board of Bank Incorporation by Eastern Bank Corporation to acquire Centrix and to establish an interim trust company, Eastern Merger Interim Bank.  Eastern Bank Corporation is the mutual holding company for Eastern Bank.  The Board of Bank Incorporation approved the transaction in its Decision of this same date. 

Notice of the Petitioner’s application was posted and published as directed by the Division thereby affording opportunity for interested parties to submit comments.  The period for filing comments has expired. No comments have been received on the application.  The Division reviewed the application and all related documents in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage as well as net new benefits would be promoted by approval of the proposed transaction.  The record of performance under the Commonwealth's Community Reinvestment Act (“CRA”), Massachusetts General Laws chapter 167, section 14 and the Division's regulation, 209 CMR 46.00 et seq. also were factors considered by the Division.

Eastern Bank is the subsidiary banking institution in stock form resulting from a reorganization into a mutual holding company, Eastern Bank Corporation in 1989.  On July 31, 2004, Eastern Bank was converted, by operation of law, from a state-chartered savings bank to a state-chartered trust company.  As of March 31, 2014, Eastern Bank had total assets of approximately $8.7 billion.  Eastern Bank’s main office is located in Boston, Massachusetts.  Eastern Bank accepts deposits and offers a full range of financial products and services for consumers, businesses, investors, government agencies and nonprofit organizations through its network of 96 banking offices located in eastern Massachusetts.  Eastern Bank’s deposits are insured to allowable limits by the Federal Deposit Insurance Corporation (“FDIC”). 

Centrix is a New Hampshire-chartered commercial bank headquartered in Bedford, New Hampshire and was organized in 1998.  Centrix had total assets of approximately $951 million as of March 31, 2014.  In addition to its main office in Bedford, New Hampshire, Centrix operates six banking offices located in Concord, Dover, Manchester, Milford, Nashua, and Portsmouth, New Hampshire.  Centrix’s deposits are insured to allowable limits by the FDIC. 

Materials have been submitted to address the issue that competition among banks will not be unreasonably affected by the proposed transaction.  In analyzing the impact of a proposed transaction on banking competition, the Division considers, but does not rely exclusively on, the guidelines used by federal authorities to review bank mergers.  Essentially, these guidelines define relevant markets and measure concentration, which is considered an important indicator of competitiveness.  The starting point in the federal analysis is the Herfindahl-Hirschman Index (“HHI”), an arithmetic measure of market concentration that synthesizes the distribution of market shares and the number of banks in an affected market into a single value.  In this case, there will be no change in the HHI for the geographical areas analyzed.  In addition to that analysis, the Division considers the competitive impact of the proposed transaction on a community-by-community basis, as well as on the overall banking structure of the Commonwealth.  The primary service areas of both banks are discussed in the merger application and there is no overlap in the primary service areas.  Eastern Bank’s primary service area is its CRA assessment area which consists of 141 cities and towns within the Boston-Cambridge-Quincy, Barnstable and Providence-New Bedford-Fall River metropolitan statistical area. Centrix defines its primary service area as Belknap, Carol, Cheshire, Hillsborough, Merrimack, Rockingham and Strafford counties in New Hampshire and York County, Maine.  The continuing bank intends to continue to serve the combined primary service area of both banks.       

The communities in the primary service area for the merging banks are different.  As stated above, Centrix does not operate any banking offices in Massachusetts.  Additionally, it is noted that there are several financial institutions located in the combined primary service area of the merging banks.  Therefore, customers will continue to be able to choose, if they desire, from a variety of banking options.  Accordingly, the review of the transaction’s impact on competition does not raise concerns which would preclude its approval.

The transaction will permit Eastern Bank and Centrix to pool their financial resources to reduce costs, to diversify risk, and to better serve their communities by offering a broader array of products and services to consumers and businesses with a greater range of features through a more extensive network of banking offices.  Customers of both banks will benefit from the increased number of branch and ATM locations in New Hampshire as well as in the Commonwealth.  Customers of Centrix will have access to more products and services including, among others: internet and mobile banking, wealth management and trust products, international trade services, and foreign exchange services, as well as a broad array of retail products.  Centrix customers will also have access to larger and more complex commercial and industrial lending services as well as a full range of insurance products through Eastern Insurance Group, LLC. The Division considered these reasons and others cited in the submitted documents in determining that public convenience and advantage will be promoted by approval of this transaction.

In determining whether or not to approve a petition under the statutory criteria, the Commissioner is also required to consider a showing of “net new benefits” related to the transaction.  That term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors, which the Commissioner may deem necessary.  As set out in the application, the continuing bank intends to provide the aforementioned products and services to customers, as well as make capital investments in the form of improvements to its continuing banking offices including new signage for the Centrix banking offices in connection with the merger.  The Petitioner plans to retain all customer-facing employees in the offices of Centrix following the proposed merger.  Eastern Bank does anticipate the elimination of certain back office positions for cost efficiencies and to minimize job duplications. According to the Petitioner’s oral testimony at the July 15, 2014 public hearing on the transaction as well as supplemental material submitted, it is anticipated that there will be an initial reduction of staff levels in connection with the merger, if approved.  In terms of future job creation, Eastern Bank believes that over time job expansion in Massachusetts and New Hampshire may occur as a result of the overall growth of the institution in its expanded footprint.  These and other factors are also cited as support for meeting such criteria.

Related to the issue of public convenience and advantage is the record of performance under CRA by the banks which are parties to this transaction.  Such review for a state-chartered bank includes examination of personnel by the Division as well as analysis of concerns received from the bank’s community and its response to those concerns fairly raised.  A publicly available descriptive rating and evaluation by a federal bank regulatory agency will also be considered.  Upon review, the Division has noted that Eastern Bank received an “Outstanding” rating in its most recent CRA performance evaluation prepared by the Division and the FDIC on June 20, 2011. Centrix received a “Satisfactory” rating in its most recent CRA performance evaluation conducted by the FDIC on April 12, 2012.

The application states that, in connection with the merger, the continuing institution's Board of Directors will consist of all of the persons currently serving as directors of Eastern Bank with the addition of one director of Centrix.  Additionally, twelve directors of Centrix will become trustees and corporators of Eastern Bank Corporation.  The management of the combined bank is also detailed in the application documents.  Economies and service capabilities which would result from the transaction are set out in the submitted documents.  The acquisition of Centrix will be funded from Eastern Bank’s cash on hand with no external financing required.  Eastern Bank will continue to operate as a well-capitalized bank after the consummation of the merger, if approved. Accordingly, upon review, financial and managerial considerations support the application.

Based on the entire record of this matter and considered in light of all relevant statutory and administrative requirements, the Division concludes that all such requirements have been met and that consummation of the proposed merger would be in the public interest.  On the basis of these conclusions, and subject to the conditions set forth below, approval is granted for Centrix to merge with and into Eastern Bank in conformity with the Agreement and pursuant to Massachusetts General Laws chapter 172, section 36.  In accordance with General Laws chapter 167C, section 6, approval is also granted for Eastern Bank to maintain the banking offices of Centrix as branch offices. Furthermore, all necessary approvals are granted for the merger of Eastern Merger Interim Bank with and into Centrix as part of this multi-step transaction. 

The approvals granted herein are subject to the following conditions:

  1. that the merger of Centrix and Eastern Bank shall not become effective until a Certificate, signed by the Presidents and Clerks or other duly authorized officers of the banks involved in the merger, indicating that the institution has complied with the provisions of Massachusetts General Laws chapter 172, section 36, has been returned with my endorsement thereon.  A Certificate for the interim bank merger shall also be filed;
  2. that such Certificates and Articles of Merger for both transactions shall be filed with the Secretary of State of the Commonwealth of Massachusetts; and
  3. that the proposed mergers shall be consummated within one year of the date of this Decision. 

October 6, 2014
_____________
Date


David J. Cotney
____________________
Commissioner of Banks