Decision relative to the application of Citizens Bank of Massachusetts, Boston, Massachusetts to merge with Medford Savings Bank, Medford, Massachusetts
By the Division of Banks
Citizens Bank of Massachusetts (the "Petitioner" or "Citizens"), Boston, Massachusetts, has applied to the Division of Banks (the "Division") for permission to merge with Medford Savings Bank ("Medford"), Medford, Massachusetts. The proposed merger is pursuant to an Agreement and Plan of Merger dated June 13, 2002 (the "Agreement") and is authorized under the provisions of Massachusetts General Laws chapter 168, section 34D and Massachusetts General Laws chapter 172, section 36. The Agreement provides for the merger of Medford with and into Citizens, after which Medford will cease to exist and its branches will become branches of Citizens. The proposed merger is part of a multi-step transaction involving a petition before the Board of Bank Incorporation by Petitioner's holding company, Citizens Financial Group, Inc. ("Citizens Financial"), Providence, Rhode Island, and certain related entities, to acquire Medford Bancorp, Inc., Medford, Massachusetts. Medford Bancorp is the holding company of Medford.
Notice of Petitioner's application was published and posted, and the time period for interested parties to comment on the transaction has expired. Accordingly, all documents and materials related to this transaction have been received and reviewed. This record has been considered with regard to all applicable statutory standards, which require consideration of, among other things, whether competition among banking institutions will be unreasonably affected by the proposed transaction and whether the public convenience and advantage will be promoted. The Commissioner's review of this matter must also take into consideration the involved banks' record of performance under the Community Reinvestment Act ("CRA").
Citizens is a Massachusetts-chartered trust company, the resulting entity of a series of acquisitions and mergers. Citizens has approximately 177 branch offices throughout Massachusetts. At March 31, 2002, its total consolidated assets were $18.4 billion. Its deposits are insured through the Bank Insurance Fund administered by the Federal Deposit Insurance Corporation ("FDIC"). Citizens is an indirect subsidiary of The Royal Bank of Scotland Group plc, The Royal Bank of Scotland plc, RSBG International Holdings and a direct subsidiary of Citizens Financial, a bank holding company incorporated in Delaware.
Medford is a Massachusetts-chartered stock savings bank. For the three months ending March 31, 2002, Medford's total consolidated net income was $3.8 million, and its deposits totaled 1.1 billion. In addition to a main office in Medford, it operates 19 branch offices in Arlington, Belmont, Burlington, Malden, Medford, North Reading, Somerville, Tewksbury, Waltham and Wilmington. Like Citizens, Medford's deposits are insured through the Bank Insurance Fund administered through the FDIC. Additionally, as a Massachusetts-chartered savings bank, Medford's deposits in excess of the FDIC coverage are insured through the Depositors Insurance Fund (the "DIF"), established by Chapter 43 of the Acts of 1934. Medford has one wholly-owned subsidiary, Medford Securities Corporation, which buys, sells, deals in, and holds securities.
The Commissioner's review of this matter takes into consideration whether competition among banks will be unreasonably affected by the proposed transaction. Materials addressing this issue were submitted by the Petitioner and reviewed by the Division. Review of this material indicates that the merger would not result in an undue concentration of banking resources or have a significant impact on banking competition in the communities served by the resulting entity. Rather, the record demonstrates that the communities served by Medford will continue to be served by a number or diverse banks and financial institutions providing access to a variety of competitive deposit and credit services.
The Commissioner must also consider whether the proposed transaction promotes the public convenience and advantage, as well as whether there has been a showing of net new benefits in relation to the transaction. 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 Commissioner may deem necessary or advisable. Petitioner has submitted a variety of materials relating to the proposed merger's positive impact on its operational efficiency and competitive posture in Massachusetts. It contends that the increased operational efficiency, additional capital, and ability to spread operational costs over a larger base of business would enable Citizens to provide enhanced service to its customers. More immediately, it maintains, the proposed transaction would result in significantly greater banking convenience for the customers of the resulting entity.
Petitioner asserts that the merger would provide both Citizens and Medford customers with a larger number of locations in which to conduct their banking business. It points out its commitment to a minimum number of branch consolidations and the significantly expanded branch and ATM network, both within Massachusetts and out-of-state, that would become available to Medford customers if the merger is approved. In addition, Petitioner states that its partnership with "Stop and Shop" supermarkets would provide Medford customers with the increased convenience of 45 supermarket branches, which are open seven days a week and have extended evening hours. Medford customers using online and telephone banking, Petitioner further asserts, would have continued access to these programs and, with regard to telephone banking, enhanced services.
The Petitioner's filing provided information relating to the range of deposit and loan products it offers its customers which Petitioner contends would provide Medford customers with more choice and convenience. With respect to transitioning Medford customers from Medford to Citizen products, Petitioner testified that it was committed to a smooth transition process and would accomplish the account conversions, and any corresponding changes in an account holder's account maintenance fees, on a gradual basis. To enable Medford customers to evaluate their transitioned accounts without risk, Citizens stated at the hearing that it will waive monthly maintenance fees on all such consumer checking, consumer savings, and business savings accounts, for one year.
Upon review and consideration all of the materials submitted on this issue by the Petitioner and other interested individuals, the Division concludes that the proposed merger will provide the customers of both entities with greater banking convenience in the form of more banking locations, and provide Medford customers with access to an expanded range of banking products and services. These factors, together with additional evidence contained in the record of this matter, support the conclusion that the proposed merger will promote the public convenience and advantage. Further, the criteria for net new benefits has been established.
Prior to approving this transaction, and as required by Massachusetts General Laws chapter 167, section 14, the Division must consider the involved banks' record of performance under the CRA. Such assessment for a state-chartered bank involves examination by Division 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 Division reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency . The relevant evaluations were also submitted as part of Petitioner's application materials. In its most recent CRA examination, performed by the Federal Deposit Insurance Corporation ("FDIC"), Medford received a "Satisfactory" rating. The most recent examination of Citizens was administered jointly by the FDIC and the Division of Banks, and it received an "Outstanding" rating. These ratings, as well as other materials submitted on this issue, sufficiently demonstrate that the banks involved in this transaction are adequately meeting the credit needs of their respective communities.
As a state-chartered savings bank, the deposits in Medford in excess of the deposit insurance coverage provided by the FDIC are insured, in full, by the DIF. Upon consummation of the merger of Medford with and into Citizens, a trust company, the excess deposit insurance coverage for Medford's deposits by DIF will end. The Division is aware that disclosure materials were sent to Medford's depositors by Medford, informing them that the DIF deposit insurance coverage will end if the merger is approved and finalized, while the FDIC coverage will continue. In past transactions, these disclosure materials on the end of excess insurance coverage have been reviewed by DIF. In order to provide additional review and opportunity to comment on such disclosure of the end of excess deposit insurance coverage, the Division will require those documents to be submitted to it in advance. This requirement will apply to any transaction by the Petitioner or any other party, involving a state-chartered savings bank or cooperative bank. The Division reserves the right to address the content of the disclosure, as well as the form in which it is distributed.
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 public interest. On the basis of these conclusions, and subject to the conditions set forth below, approval is granted for Medford to merge with and into Citizens in conformity with the Agreement and pursuant to Massachusetts General Laws chapter 168, section 34D and chapter 172, section 36.
The approval granted herein is subject to the following conditions:
- that the merger of Medford and Citizens 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 168, section 34D and chapter 172 section 36 has been returned with my endorsement thereon;
- that such Certificate and Articles of Merger shall be filed with the Secretary of State of the Commonwealth of Massachusetts;
- that the proposed merger shall be consummated within one year of the date of this Decision.
| October 11, 2002 Date | Thomas J. Curry Commissioner of Banks |