Decision relative to the merger of Somerset Savings Bank, Somerville, Massachusetts with and into UStrust, Boston, Massachusetts
By the Division of Banks
USTrust ("USTrust" or the "Petitioner"), Boston, Massachusetts has applied to the Division of Banks for authority to merge with Somerset Savings Bank, ("Somerset"), Somerville, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 172, § 36 and under the terms of an Agreement and Plan of Merger (the "Agreement") dated as of December 9, 1997. The Agreement provides for the merger of Somerset with and into USTrust under the name, charter and by-laws of USTrust. The banking offices of Somerset will become branch offices of USTrust.
Notice of the applications has been posted and published. The time period for interested parties to submit comments has passed. Accordingly, all documents and materials related to this transaction have been reviewed. That record has been considered with regard to the financial and managerial resources of each bank, the competitive effects of the proposed transaction and the convenience and needs of the communities to be served by the continuing institution and other applicable statutory criteria, including the Commonwealth's Community Reinvestment Act ("CRA"), Massachusetts General Laws chapter 167, § 14 and its implementing regulation, 209 CMR 46.00 et seq.
USTrust is a state-chartered bank and trust company in stock form organized in 1958. As of December 31, 1997 it had assets of $3.7 billion, deposits of $3.0 billion and net loans of $2.83 billion. USTrust is headquartered in Boston, Massachusetts and operates sixty-six (66) branch offices. USTrust is an indirect subsidiary of UST Corp. ("UST"), a Massachusetts bank holding company and a direct subsidiary of Mosaic Corp., a Massachusetts corporation and wholly-owned subsidiary of UST. USTrust also directly or indirectly owns the following non-bank subsidiaries: UST Leasing Corporation, UST Capital Corp., UST Auto Lease Corp., Firestone Financial Corp. (and its Canadian subsidiary, Firestone Financial Canada Ltd.), Walden Financial Corp., and four subsidiaries which passively hold securities permissible for banks as well as eight subisidiaries which hold foreclosed real estate. The deposits of USTrust are insured by the Federal Deposit Insurance Corporation ("FDIC").
Somerset is a state-chartered savings bank in stock form with its main office and three branch offices in Somerville, Massachusetts and two branch offices in Burlington, Massachusetts. The deposits of Somerset are insured by the Bank Insurance Fund of the FDIC and by the Deposit Insurance Fund of the Mutual Savings Central Fund, Inc. of Massachusetts in excess of the FDIC's insurance limits. As of December 31, 1997, Somerset had assets in excess of $539 million, deposits of $454 million and net loans of $419 million. Somerset also has three wholly owned subsidiaries: Somerset Securities, Inc.; SB Securities, Inc.; and Somco Investment, Inc.
The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. Much of that analysis is detailed according to various tests relative to the size of each institution and its competitors within delineated markets used by federal agencies. That analysis demonstrates that consummation of the transaction will not result in undue concentration of banking resources in the Boston banking markets in Massachusetts. The Division, however, also looks to the primary service area of the bank which is being merged with and into another financial institution to analyze the banking options which will remain for the public in those communities. The Division's review has focused on the communities in which Somerset operates banking offices, Somerville and Burlington, Massachusetts. Upon review, the Division notes the high concentration of other banking offices in the Greater Boston area, including Somerville and Burlington, which will also remain available to both commercial and consumer customers. The Division's analysis of these facts and materials indicate that no significant adverse impact on competition within Somerset's primary service area would result from this consolidation.
The Division has also considered whether public convenience and advantage will be promoted by this proposed transaction. The application delineates some of the benefits which will result from the merger of Somerset into USTrust. In general, USTrust asserts that the conversion of all of Somerset's branches onto USTrust's operating systems will benefit USTrust's customers by an increased branch office presence in Burlington and Somerville, while benefitting Somerset's customers with access to a much larger branch network and many products and services previously unavailable. Somerset's customers will gain access to commercial banking services provided by USTrust, including deposit, investment, cash management, payroll, wire transfer, leasing, merchant credit card and commercial and industrial lending to small and middle-sized businesses. USTrust also provides consumer products and services such as savings and checking accounts, NOW and money market accounts, credit cards, ATM cards, safe deposit box facilities and travelers checks. In addition, as a result of the merger USTrust will re-enter the residential first mortgage loan and small residential development loan business while continuing to provide consumer loans, including home equity loans and lines of credit, automobile loans, personal loans and educational loans, as well as open-ended credit via cash reserve facilities. USTrust's affiliate United States Trust Company, Boston, Massachusetts also provides trust services, including custodial services, investment management, estate and financial planning and employeee benefit plan administration services all previously unavailable to Somerset's customers. Furthermore, upon the consummation of this transaction and USTrust's pending acquisition of Affiliated Bancorp and its subsidiary banking institutions, US Trust will operate the third largest branch network in greater Boston comprised of 83 banking offices. USTrust also asserts in the application that these consolidations will benefit all consumers in the Boston banking market by strengthening USTrust's ability to compete with larger banking institutions.
Related to the issue of public convenience and advantage is the record of performance under CRA by the banks which are parties to this multi-step transaction. Such review for a state-chartered bank includes examination by personnel of the Division as well as analysis of concerns received from the bank's community and its response to those concerns fairly raised. The application and records of the Division reflect that both USTrust and Somerset received "Outstanding" ratings in their most recent examinations of performance for CRA compliance. Accordingly, the Division's review of factors related to public convenience and advantage are consistent with approval of the Petitioner's application. In addition, the Division was notified in a letter dated June 18, 1998, that satisfactory arrangements have been made with the Depositors Insurance Fund under section 34D of Massachusetts General Laws chapter 168 for this transaction.
The financial structure of the transaction was reviewed and addressed. The financial aspects were also considered in light of the merger of UST Corp. and Affiliated Community Bancorp, Inc. The resulting capital ratios and projections for USTrust are satisfactory. Management factors reviewed in consideration of the proposed transaction are also supportive of its approval. Additionally, all other requirements of statute relating to a merger have been met.
Upon review of this application with reference to the relevant statutory and regulatory criteria, the Division has concluded 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 considerations approval is granted for USTrust to merge with and into Somerset. Approval is also granted for USTrust to maintain the six banking offices of Somerset as branch offices under General Laws chapter 167C, section 3.
The approvals granted herein are subject to the following conditions:
- that no merger shall 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 each such institution has complied with the provisions of Massachusetts General Laws chapter 168, section 34D and chapter 172, section 36, or other applicable statute has been returned with my endorsement thereon;
- that the proposed merger shall not become effective until Articles of Merger with my endorsement thereon are filed with the Secretary of State; and
- that the proposed merger shall be consummated within one year of the date of this decision.
| July 10, 1998 Date | Thomas J. Curry Commissioner of Banks |