Decision relative to the merger of Lenox Savings Bank, Lenox, Massachusetts with and into City Savings Bank, Pittsfield, Massachusetts
By the Division of Banks
City Savings Bank ("City Savings"), Pittsfield, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with Lenox Savings Bank ("Lenox"), Lenox, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 168, section 34D under the terms of an Agreement and Plan of Merger (the "Agreement") dated as of October 10, 2001. The Agreement provides for the merger of Lenox with and into City Savings under the charter and by-laws of City Savings and under the name of Legacy Banks. The main office of City Savings would remain the main office of the continuing institution and both banking offices of Lenox will become branch offices of the continuing bank. City Savings and Lenox are both subsidiaries of the Mutual Bancorp of the Berkshires, Inc. ("Mutual Bancorp") and its mid-tier holding company, Legacy Group, Inc. ("Legacy Group"), Pittsfield, Massachusetts.
Notices of the application have 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. The record has been considered with regard to the financial and managerial resources of the proposed transaction, whether or not competition among banking institutions will be unreasonably affected, the convenience and needs of the communities to be served by the continuing institution, the record of performance under the Community Reinvestment Act ("CRA") of the banks involved in the transaction and other applicable statutory criteria.
City Savings is a Massachusetts state-chartered stock savings bank. It is in stock form as a result of its reorganization into a mutual holding company structure in 1997. At September 30, 2001, it had total assets of approximately $477 million. City Savings' main office is located in Pittsfield, Massachusetts and it operates eight branch offices. The branch offices are located in Pittsfield, Lee, Otis, North Adams and Great Barrington. The deposits of City Savings are insured by the Federal Deposit Insurance Corporation ("FDIC") and its excess deposits are insured by the Depositors Insurance Fund. It operates as a full-service savings bank.
Lenox is a Massachusetts state-chartered stock savings bank with its main office and one branch office located in Lenox. It is in stock form as a result of its reorganization into a mutual holding company structure in 1998. The deposits of Lenox are insured by the FDIC and its excess deposits are insured by the Depositors Insurance Fund. At September 30, 2001, Lenox had assets of approximately $129.7 million. It operates as a full-service savings bank.
On January 1, 1999, the mutual holding company of Lenox merged with and into Mutual Bancorp, the mutual holding company of City Savings. That transaction was the first merger of mutual holding companies in the Commonwealth and resulted in the first mutual holding company with two subsidiary banking institutions, City Savings and Lenox. As part of that transaction, the mid-tier stock holding company, Legacy Group, was established. Neither the banks nor Legacy Group have issued any stock to the public. The Division was informed that the banks were referred to as the Legacy Banks and that was the reason that name was chosen for the one continuing bank.
Materials have been submitted to address the issue that competition among bank will not be unreasonably affected by the proposed transactions. Both banks generally identify their market areas or primary service areas as Berkshire County. The combined bank would continue to serve the area currently served by both banks. Presently, according to those documents, City Savings is the third largest depository institution in Berkshire County with 13.3% of deposits. Lenox holds 3.5% of the deposits in the Berkshire County market. The merged entity would represent 16.8% of total bank and thrift deposits in the market. There is no overlap in the banking office networks of City Savings and Lenox. City Savings states that Berkshire County is currently served by numerous community banks as well as other financial institutions. Moreover, the Division is aware that as subsidiary banks of the same holding companies competition between City Savings and Lenox could be negated. The Division's analysis of the competitive impact of the transaction does not preclude approval.
The application notes that the continuing institution's Board of Directors will consist of all of the persons serving as directors of both City Savings and Lenox. The management of the combined bank is also detailed in the application documents. The applicant bank argues that the combined institution will produce greater efficiencies and achieve higher earnings to allow for steady and sound growth. Upon consolidation, the Bank will meet all required capital standards. Accordingly, upon review, financial and managerial considerations support the application.
As a result of the merger, City Savings indicates that the banking public will benefit in several ways. According to the application, such benefits include an expanded branch office network and a broader range of products and services. All of the products presently offered by City Savings and Lenox will be offered by the combined institution. 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. The applicant bank has addressed this requirement. According to the Petitioner, the merger will enhance the continuing bank's financial capability to invest in the communities it serves and to develop new products and services for its customers. The maintenance of Lenox's two banking offices as branch offices of the continuing bank as well as City Savings' ability to provide future employment opportunities for Massachusetts residents are also cited as support for meeting such criteria. The larger institution will have the financial resources available to develop new products, services and branch locations as conditions warrant.
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 Massachusetts 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 City Savings received a rating of "Outstanding" and Lenox a rating of "Satisfactory" in their most recent CRA performance examinations. Accordingly, the Division's review of factors related to public convenience and advantage are consistent with approval of the Petitioner's application.
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 Lenox to merge with and into City Savings pursuant to Massachusetts General Laws chapter 168, section 34D and the applicable provisions of chapter 168 of the Massachusetts General Laws. Approval is also granted for City to maintain the two banking offices of Lenox as branch offices. The Division understands that the continuing bank will operate under the charter and by-laws of City Savings and under the name Legacy Banks.
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, 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.
| December 13, 2001 Date | Thomas J. Curry Commissioner of Banks |