Decision relative to the petition of OneUnited Bank, Boston, Massachusetts, formerly the Boston Bank of Commerce to acquire Family Savings Bank, Los Angeles, California and to become a bank holding company

By the Division of Banks

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On October 15, 2002, The Boston Bank of Commerce (the "BBOC"), Boston, Massachusetts, petitioned the Board of Bank Incorporation ("the Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 to acquire Family Savings Bank, F.S.B. ("Family Bank"), Los Angeles, California. Subsequently, BBOC informed the Board that it had changed its name to OneUnited Bank (the "Petitioner" or "OneUnited") OneUnited's application before the Board is the first in a series of related transactions. Ultimately, upon the approval of the Division of Banks, Family Bank will merge with and into OneUnited pursuant to the terms of an Agreement and Plan of Merger (the "Agreement") dated July 23, 2002. Following this merger, the banking offices of Family Bank will be operated as branch offices of OneUnited.

As directed by the Board, notice of the application was published and posted and a public hearing was scheduled, thereby affording an opportunity for interested parties to attend or submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The public hearing was held on December 3, 2002. Representatives of OneUnited offered testimony and responded to questions from the members of the Board. Following the hearing, the public comment period remained open so that interested parties could submit any additional comments. No further public comments were received. On December 9, 2002, the shareholders of Family Bank approved the transaction and the comment period closed.

BBOC, now OneUnited, was established in 1982 and is a Massachusetts chartered trust company. In 1999, it acquired branch offices and certain related assets of Peoples National Bank of Commerce, a national banking association with offices in Florida. In 2001, Petitioner acquired Founders National Bank of Los Angeles, a national bank headquartered in Los Angeles, California. As a result of these acquisitions, Petitioner has its main office in Boston, Massachusetts and seven additional banking offices located in Roxbury, Massachusetts, Miami and Lauderdale Lakes, Florida, and Los Angeles and Compton, California. At June 30, 2002, Petitioner held approximately $252.4 billion in total consolidated assets. OneUnited is a member of the Bank Insurance Fund administered by the Federal Deposit Insurance Corporation ("FDIC").

Family Bank is a federally chartered savings association headquartered in Los Angeles, California, a subsidiary of Watts Financial Services, Inc. ("Watts Financial"), a California corporation whose only activity is as a holding company for Family Bank. It currently owns approximately 76% of the issued and outstanding stock of Family Bank, and is itself a wholly-owned subsidiary of Watts Health Systems, Inc. ("Watts Health"), a California non-profit organization that provides low-cost health care to low income residents of South Los Angeles County. In addition to its corporate headquarters in Los Angeles, Family Bank also operates three additional banking offices located in Los Angeles, Compton, and Pasadena, California. At June 30, 2002, Family Bank held approximately $200.8 million in total consolidated assets. Like OneUnited, Family Bank's deposits are insured by the FDIC.

The proposed acquisition would be accomplished through a series of inter-related transactions. First, Petitioner would acquire the stock of Watts Financial from Watts Health. Thereafter, Petitioner will liquidate Watts Financial, which will cause Family Bank to become a direct, majority owned subsidiary of the Petitioner. In the next step of the transaction, Petitioner will organize an interim savings organization under federal law ("merger sub"), which will then be merged with and into Family Bank. As a result of the merger, all of the shares of stock of Family Bank issued and outstanding prior to the transaction will be cancelled in exchange for issuance of a share of stock of Family Bank. In this way, Family Bank will become the wholly-owned subsidiary of the Petitioner. In the final step in the transaction, Family Bank will be merged with and into the Petitioner.

Prior to approving an application under chapter 167A, the Board must have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that the Petitioner has arranged to participate in the MHPF's various affordable housing loan programs. On December 6, 2002, the Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction.

The Board's review of this transaction focuses on the applicable statutory and administrative criteria which include, among other things, whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In determining whether the public convenience and advantage are promoted by the proposed transaction, the Board considers, among other things, whether there has been a showing of "net new benefits." Net new benefits are defined as initial capital investments, job creation plans, consumer and business services, commitment to maintain and open branch offices within a bank's delineated local community, and such other matters as the Board may deem necessary or advisable. The Board also considers the bank's record of performance under the Community Reinvestment Act ("CRA") and any relevant public testimony or commentary submitted into the record.

On the issue of whether banking competition will be unreasonably affected by the proposed transaction, the Board 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. (The HHI is the sum of the squared market shares of all banks in the market.) However, the Board's analysis of a transaction is not confined to the consideration of concentration ratios to evaluate competitive conditions; it also considers the competitive impact on a community by community basis, as well as on the overall banking structure of the Commonwealth. As the proposed transaction involves the acquisition of a bank located in another state, it will have no direct competitive impact on banking competition within the Commonwealth. Petitioner has also submitted information relating to the competitive impact of the proposed transaction in the Los Angeles market, based on the fact that both banks maintain offices in there. In this regard, Petitioner points out that the proposed transaction will have a negligible impact on banking competition in the Los Angeles market. Rather, Petitioner asserts that approval of the proposed transaction will make it a stronger competitor in the Los Angeles market, thus actually promoting competition. Based on a review of all of the information submitted, the Board concludes that the proposed transaction will not unreasonably interfere with competition in the Commonwealth. The Board also notes that approval of this acquisition will not significantly impact competition in any market.

Petitioner submitted a variety of materials relating to the public convenience and advantage that will result from the proposed transaction. If the transaction is approved, it maintains, it will have greater resources and more efficient operating capabilities due to the consolidation of resources, economies of scale, and its resulting ability to spread operational costs over a larger base of business. Financially, Petitioner contends that approval of the transaction will shift its earning asset mix toward loans, which will improve Petitioner's yield on earning assets and earnings. This increased financial strength will ultimately accrue to the advantage of its customers, it asserts, as it will be better able to invest in the communities it serves. This is of particular importance, Petitioner points out, as its customer base is comprised primarily of low-to-moderate-income minority and urban residents. Relatedly, Petitioner maintains that the proposed transaction will serve as a platform for growth in these communities in the form of future employment opportunities.

Petitioner asserts that approval of the proposed transaction will increase its brick and mortar presence within under-served communities, thereby providing greater banking convenience and promoting accessibility, trust, and confidence in the community. Petitioner contends that, within urban communities, physical access to FDIC insured deposit products and credit services is often limited. If the proposed transaction is approved, Petitioner asserts, it will be able to expand this access, as well as its organization and coordination of financial literacy seminars. Such efforts, Petitioner maintains, through its strategic alliances with local community groups and local government programs in the communities in which it does business, Petitioner contends that it is able to provide credit to start-up small businesses not yet ready for traditional credit products and provides access to capital in low to moderate census tracts.

Existing customers of both banks will benefit from the greater geographic scope of its branch network, Petitioner asserts, and its Los Angeles customers will benefit from the increased convenience of three additional branches in the Los Angeles area. In the longer term, Petitioner contends, its customers will benefit from the enhanced products and services that will be made possible by increased operational capability and greater access to resources. In this regard, Petitioner notes that it is exploring the feasibility of online banking and other technology based services.

The Board has reviewed and considered all of the submitted materials bearing on the issue of public convenience and advantage. The Board finds that customers of both banks will have increased access to banking facilities, and the advantage of having access to banking facilities located in several of the nation's largest metropolitan areas. Moreover, Petitioner will be able to use its increased financial strength to expand its existing branch and ATM network and product and service offering to the benefit of existing and prospective customers. The Board also finds that approval of the proposed transaction will enable the Petitioner to continue and expand its community development efforts in under-served areas. Finally, the Board takes note of the fact that the proposed transaction will continue the tradition of African American ownership of Family Bank and will simultaneously, Petitioner contends, create the largest African American owned and managed financial institution in the United States. Based on the foregoing, the Board concludes that the proposed transaction will promote the public convenience and advantage. The Board further concludes that the criteria for net new benefits has been established.

The Board's review of this transaction requires an assessment of the subsidiary banks' performance under the Community Reinvestment Act ("CRA"). Such assessment for a state-chartered bank includes examination by Division of Bank personnel, as well as an analysis of the legitimate concerns raised by the community and the bank's response to those concerns. For other institutions, the Board reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency . Here, the relevant evaluations were submitted as part of Petitioner's application materials. In its most recent CRA examination, performed by the Federal Deposit Insurance Corporation ("FDIC"), Petitioner received a "Satisfactory" rating. The most recent CRA examination of Family Bank, performed by the Office of Thrift Supervision, resulted in an "Outstanding" rating. Based on its review of these ratings, the Board concludes that the banks involved in this transaction are adequately meeting the credit needs of their respective communities.

Finally, the Board reviews the financial structure, tax consequences, and operational aspects of the transaction. It has reviewed the consolidated financial statements of the parties and the details of the proposed transaction, including the Petitioner's capital ratios and projections. The capital ratios of the continuing bank were discussed at the public hearing and the Board is aware that this matter has also been discussed and addressed with other bank regulators. Information regarding the tax consequences of the proposed transaction was also provided by Petitioner and considered by the Board. Finally, operational issues were discussed at the hearing, and the Board is satisfied with Petitioner's efforts to ensure the smooth transition of its systems.

Conclusion

Based on the record of this matter and considered in light of all relevant statutory and administrative requirements, the Board concludes that competition among banking institutions in the Commonwealth will not be unreasonably affected and that the transaction will promote the public convenience and advantage. Specifically, the Board finds the transaction will benefit the customers of Family Bank, and further finds that the banks involved in this transaction have a satisfactory record of performance under the CRA. In accordance with these findings and pursuant to the statutory authority cited herein, the Board approves the application to become a bank holding company, and authorizes OneUnited Bank to acquire the stock of Family Bank, FSB, and the federal bank subsidiary formed to effectuate this transaction.

The approval granted herein is subject to the condition that all related transactions are completed within one year of the date of this Decision.

Thomas J. Curry Commissioner of Banks
Alan L. LeBovidge Commissioner of Revenue	Board of Bank Incorporation
Shannon P. O'Brien Treasurer and Receiver-General
December 23, 2002 Date