By the Division of Banks

DECISION RELATIVE TO THE APPLICATION OF 
SPENCER MHC AND ITS MID-TIER SUBSIDIARY, SPENCER MID-TIER 
HOLDING COMPANY, SPENCER, MASSACHUSETTS
TO BECOME BANK HOLDING COMPANIES


Spencer MHC and its wholly-owned subsidiary Spencer Mid-Tier Holding Company (“Spencer Mid-Tier”) (collectively “Petitioner”), Spencer Massachusetts, have petitioned the Board of Bank Incorporation (the “Board”) to each become a bank holding company through a merger with Green Valley Bancorp, MHC (“Green Valley MHC”) and its subsidiary, Green Valley Bancorp, Inc. (“Green Valley Mid-Tier”), and the indirect acquisition of Southbridge Savings Bank, Southbridge, Massachusetts (“Southbridge Bank”), under the provisions of General Laws chapter 167A, sections 2 and 4 (hereinafter the “Merger”).  Spencer Mid-Tier’s banking subsidiary is Spencer Savings Bank (“Spencer Bank”), Spencer, Massachusetts.  The merger of two mutual holding companies is authorized under General Laws chapter 167H, section 7.  Green Valley MHC, a mutual holding company headquartered in Southbridge, Massachusetts, and Green Valley Mid-Tier, a Delaware corporation and wholly-owned subsidiary of Green Valley MHC, are the mutual holding company and the mid-tier holding company, respectively, for Southbridge Bank.  The proposed transaction will result in Spencer Mid-Tier continuing as a wholly-owned subsidiary of Spencer MHC, and controlling two state-chartered banks, Spencer Bank and Southbridge Bank.  The resulting mutual holding company will operate under the name “SSB Community Bancorp MHC,” and the resulting mid-tier subsidiary will operate under the name “SSB Community Bancorp Inc.”  Spencer Bank and Southbridge Bank will not merge following the consummation of the Merger, but rather, will operate as separate wholly-owned subsidiaries, with each retaining its respective charter, board of directors, and management.

Petitioner published notice of the petition as directed by the Board, thereby affording opportunity for interested parties to submit comments.  The Board held a public hearing relative to this application on April 12, 2016.  The comment period on the proposed transaction ended on April 19, 2016 and no comments were received.  The Board reviewed the application, testimony received at the public hearing, and all related documents.  That review focused on the statutory and administrative criteria applicable to such transactions that include, among other things, whether competition among banking institutions will be unreasonably affected; whether public convenience and advantage would be promoted; and the record of performance under the Community Reinvestment Act (“CRA”) by the respective subsidiary banks of the holding companies.  The financial and management components of the proposed transaction were also considered.  The additional statutory requirements set out in sections 2 and 4 of said chapter 167A were also notable factors in the Board’s deliberations on the matter before it.

One such statutory provision requires the Board to have received notice from the Massachusetts Housing Partnership Fund (“MHPF”) that satisfactory arrangements have been made by the Petitioner consistent with statute and the MHPF’s various affordable housing loan programs.  The Board received notice from the MHPF that satisfactory arrangements had been made for this transaction in a letter dated April 11, 2016.

The Parties

Spencer Bank, Spencer Mid-Tier’s sole banking subsidiary, is a Massachusetts-chartered savings bank established in 1871.  Spencer Bank reorganized into a mutual holding company structure in 2007.  As of March 31, 2016, Spencer Bank had total assets of approximately $531.2 million and deposits of approximately $427.3 million.  Spencer Bank operates from six locations in Massachusetts, including its main office in Spencer, as well as branches located in Leicester, Rutland, Spencer, Warren, and Worcester.  Spencer Bank offers a range of personal banking services, including savings and money market accounts; personal and commercial checking accounts; certificates of deposit; individual retirement accounts; direct deposit; safe deposit boxes; and a variety of personal and commercial loans.  Spencer Bank has one subsidiary, Spensabank, Inc.  Spencer Bank’s deposits are insured to allowable limits by the FDIC and deposits in excess of those limits are insured by the Depositors Insurance Fund. 

Southbridge Bank, Green Valley Mid-Tier’s sole banking subsidiary, is a Massachusetts-chartered savings bank originally chartered in 1848.  Southbridge Bank reorganized into a mutual holding company form of organization in October, 2008.  As of March 31, 2016, Southbridge Bank had total assets of approximately $526.3 million and deposits of approximately $394.4 million.  Southbridge Bank operates from nine locations in Massachusetts, including its main office in Southbridge, as well as branches located in Charlton, Holden, North Oxford, Southbridge, Spencer, Sturbridge, Webster, and Worcester.  In large part, Southbridge Bank offers the same consumer and business products and services as Spencer Bank, including savings and money market accounts; personal and commercial checking accounts; certificates of deposit; individual retirement accounts; direct deposit; safe deposit boxes; and a variety of personal and commercial loans.  However, Southbridge Bank also offers investment products and services that are not available at Spencer Bank.  Southbridge Bank has one subsidiary, SSB Securities Corp.  Southbridge Bank’s deposits are insured to the allowable limits by the FDIC and deposits in excess of those limits are insured by the Depositors Insurance Fund.  Southbridge Bank is a member of the Federal Reserve System.

Competition

The Petitioner has addressed the issue of whether competition among banks will be unreasonably affected by the proposed transaction.  Part of the analysis includes various guidelines utilized by federal agencies.  The application contained an analysis under the Herfindahl-Hirschmann Index (“HHI”), a test utilized by federal agencies in assessing the competitive effects of a proposed bank merger.  In this case, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources in the Commonwealth.  The Board’s review, however, is not limited to such federal standards.  It is the practice of the Board to consider a transaction in light of its impact on the citizens, communities, and banking structure in the Commonwealth on a community-by-community basis.  In that regard, Petitioner has presented information that the proposed transaction will not have a significant adverse effect on competition among banking institutions in any relevant market.  The application describes the relevant geographical market of Spencer Bank and Southbridge Bank as Worcester County, Massachusetts and indicates that the primary service areas of the banks overlap, to a degree.[1]  However, Worcester and Spencer are the only two locations where both banks have banking offices, and both cities host banking offices of a number of other state-chartered banks, thereby minimizing any impact that the proposed transaction will have on the citizens and banking structure in those communities.  The application also states that no branch offices of either bank will close in connection with this transaction.  Accordingly, this transaction will broaden the combined physical presence of the continuing institution in Worcester County.  Upon review, the Board does not believe that the transaction will unreasonably affect competition for the reasons cited, as well as the fact that a number of diverse financial institutions will continue to provide competitive deposit and credit services throughout the affected areas and banking markets served by the continuing institution.

Public Convenience and Advantage

The Board also considered whether public convenience and advantage will be promoted by this transaction.  The maintenance of separate bank charters will allow Petitioner to expand into new markets using each bank’s established brand.  The Merger will allow the effective sharing of strengths between Spencer Bank and Southbridge Bank and provide an expanded network of branches and surcharge-free ATMs to customers of both banks.  Further, as a result of the Merger, Spencer Bank’s customers will have access to the non-deposit investment products currently offered to Southbridge Bank customers.  As previously mentioned, the Petitioner states that there will be no branch office closures of either bank as a result of the transaction and each bank will remain committed to its community. 

The Board has also considered the Petitioner’s analysis of “net new benefits” related to the transaction with respect to the statutory criteria.  The term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors.   Through its written submissions and testimony, Petitioner confirmed that there will be no reductions in staff.  The Board received testimony that the Merger will eventually provide back-room efficiencies for both banks.  Furthermore, the Merger will allow the resulting entity to compete more effectively and improve profitability for each institution, thereby providing funds for any future plans for capital investment, job creation, and expansion of consumer and business services. 

Related to the issue of public convenience and advantage is the record of CRA performance by the subsidiary banks.  Such a review for a state-chartered bank includes examination by personnel of the Division.  For other institutions, the Board looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency.  The Board has noted that the Petitioner’s subsidiary bank, Spencer Bank, received a “Satisfactory” rating from the FDIC and a “High Satisfactory” rating from the Division in its most recent CRA Performance Evaluation, dated March 3, 2014.  Southbridge Bank received a “Satisfactory” rating in its most recent CRA Performance Evaluation conducted by the Division as of September 29, 2014.  Accordingly, the Board’s review of factors related to public convenience and advantage support approval.

The financial and managerial aspects of any transaction are also a significant consideration of the Board, as they may affect the continuing holding company’s ability to serve the banking public, to actively compete with other financial institutions, and to maintain its capital ratio standards for a safe and sound institution.  Following the Merger, the Board of Directors of Spencer Bank will remain the same.  Likewise, the Board of Directors of Southbridge Bank will remain the same.  The Board’s consideration of the financial and managerial aspects of the transaction also supports its approval.

Conclusion

The application, supporting documents, the testimony received at the public hearing, as well as additional information submitted, have established a complete record on this petition, which has been reviewed in accordance with statutory provisions and policies of the Board.  Based on the record of this matter considered in light of all relevant statutory and administrative requirements, the Board finds that public convenience and advantage will be promoted, that competition among banking institutions will not be unreasonably affected, and that the record of performance under CRA by the subsidiary banks involved in this transaction are consistent with its approval.  Having considered the record established on this application, the Board has found that the applicable statutory and administrative criteria have been met.  In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Spencer MHC and Spencer Mid-Tier to each become a bank holding company and to directly and indirectly own and control Spencer Bank and Southbridge Bank through the acquisition of Green Valley MHC and its subsidiary, Green Valley Mid-Tier, provided that the transaction is completed within one year of the date of this Decision.


[1] The application describes the primary service area of Spencer Bank as consisting of thirteen cities or towns in Massachusetts.  The primary service area of Southbridge Bank is described as consisting of twenty-two cities or towns in Massachusetts and two cities or towns in Connecticut.  Eleven of the thirteen cities and towns comprising Spencer Bank’s primary service area overlap with Southbridge Bank’s primary service area.

Board of Bank
Incorporation

David J. Cotney
______________________
Commissioner of Banks


Deborah B. Goldberg
______________________
Treasurer and Receiver-General


Donald Twomey
______________________
Designee of the Commissioner of Revenue

 

May 19, 2016
_____________
Date