Decision relative to the petition of South Shore Savings Bank, Weymouth, Massachusetts to reorganize into a Mutual Holding Company and in conjunction therewith to acquire Horizon Bank & Trust Company, Braintree, Massachusetts
By the Massachusetts Division of Banks
South Shore Savings Bank ("South Shore"), Weymouth, Massachusetts has petitioned the Board of Bank Incorporation (the "Board") for various approvals in conjunction with its reorganization into a mutual holding company in order to acquire Horizon Bank & Trust Company ("Horizon"), Braintree, Massachusetts. In order to accomplish the acquisition of Horizon, South Shore, as a bank in mutual form, must first reorganize into a mutual holding company structure pursuant to the provisions of chapter 167H of the General Laws. As part of this multi-step transaction a mid-tier holding company, in stock form, will also be organized. The reorganization as structured also triggers the provisions of the Commonwealth's bank holding company statute, chapter 167A of the General Laws.
As proposed South Shore will form a new mutual savings bank which will reorganize into the mutual holding company, South Shore Bancorp MHC (the "MHC") with a subsidiary banking institution in stock form. A mid-tier holding company in stock form will be formed and operate under the name of South Shore Bancorp, Inc. Under the reorganization the mid tier holding company will own 100% of the stock of South Shore with the MHC owning 100% of the stock of the mid-tier. No stock will be issued to the public or the stockholders of Horizon. Upon completion of the reorganization, Horizon will merge with and into South Shore, in stock form, in a transaction subject to approval by the Division of Banks.
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 November 6, 2003. Representatives of South Shore Savings and Horizon 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. The public comment period closed on November 14, 2003.
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. In its application documents, Petitioner indicated that the Board would receive such notice under a separate cover. On January 7, 2004, the Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction.
South Shore Savings Bank is a Massachusetts-chartered savings bank headquartered in South Weymouth, Massachusetts. In addition to its main office in South Weymouth, South Shore Savings operates eleven branches in South Weymouth, East Weymouth, North Weymouth, Weymouth, East Bridgewater, Hanover, and Quincy. South Shore Savings had total assets of $761 million at June 30, 2003.
South Shore Bancorp is the mutual holding company being formed as part of the reorganization of South Shore Savings into the mutual holding structure pursuant to General Laws chapter 167H. Upon completion of its reorganization, the primary business purpose for the Bancorp will be to hold all of the stock of its subsidiary banking institution, South Shore Savings, which upon consummation of the reorganization will be in stock form.
Horizon Bank & Trust Company is a Massachusetts-chartered trust company headquartered in Braintree, Massachusetts, which began to transact business on June 15, 1998. Its only office is its main office in Braintree. Horizon had total assets of $129 million at June 30, 2003.
Pursuant to the standards set forth in the above-referenced statutes, the Board's approval of the proposed transaction must be based on a finding of 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 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 matter as the Board may deem necessary or advisable. At the direction of the Board, these factors, additional statutory requirements, and other relevant administrative criteria must be addressed in the application documents. The Board also considers any relevant testimony received at the public hearing or submitted during the open comment period.
On the issue of whether competition will be unreasonably affected by the proposed transaction, the Board considers, but does not rely exclusively on, the various indices used by federal agencies in measuring competition in a given market. In this case, the federal standards indicate that the proposed transaction will not result in undue concentration of banking resources in the relevant banking markets. However, the Board further considers the competitive effect of the proposed transaction in light of its impact on the citizens, communities, and banking structure of the Commonwealth on a community by community basis. The Board also notes the Petitioner's stated intention that no branch offices of the Bank or Horizon will be closed or the hours of operation of such branch offices will not be reduced as a result of the merger. Although both banks compete within the south shore the Petitioner has no banking office in Braintree. Upon careful review of all of these factors, and given the relatively small market share of the involved entities, the Board concludes that the transaction will not unreasonably interfere with competition. Rather, the area served by Horizon will continue to have access to a variety of competitive deposit and credit services, offered by a number of diverse bank and financial institutions.
Petitioner submitted materials relating to the public convenience and advantage that will result from the proposed transaction. It is anticipated that a wider variety of services, products and banking locations will be available to the customers of Horizon as a result of the merger with the Bank. The Bank operates eleven branches and ten ATMs in Norfolk and Plymouth counties, and had total assets of $761 million at June 30, 2003. By contrast, Horizon operates one branch with $129 million in assets at June 30, 2003. Accordingly, Horizon's lending capacity after the Merger will increase, thereby allowing additional opportunity to meet the existing and anticipated credit needs in Horizon's market area.
On the issue of net new benefits to be derived from the proposed transaction, the Board notes Petitioner's statement that it anticipates that no services or products currently offered by South Shore Savings and by Horizon will be discontinued as a result of the merger. No branch offices of either Horizon or the Bank will be closed or relocated as a result of the merger, and the hours of operation of such branch offices will not be reduced as a result of the merger. Interest rates on loans and deposits offered by Horizon are not anticipated to change significantly from current levels and will continue to be competitive in its market area. Finally, the Bank does not currently anticipate staff reductions either at the Bank or Horizon as a result of the merger.
In addition, the Petitioner states that the merger will provide additional seasoned commercial lending staff to the Bank's existing staff, thereby adding to the strength and breadth of this segment for the benefit of the Bank's current and future customers. As the record demonstrates that the customers of Horizon will have access to an increased lending capacity and access to a considerably larger and more geographically dispersed branch network, and will enjoy the additional products and services that a larger combined institution can offer, the Board's review weighs in favor of the finding that the public convenience and advantage will be promoted. The Board further concludes that the criteria for net new benefits has been established.
The Board's review of this transaction includes 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 Division of Bank, South Shore Savings received a "High Satisfactory" rating. The Division of Banks also performed the most recent examination of Horizon, which received a "Satisfactory" 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.
As part of its inquiry, the Board reviews the financial structure, tax consequences, and the operational aspects of the transaction. The Board has reviewed the consolidated financial statements of the entities and the details of the proposed transaction, and is satisfied with the Petitioner's capital ratios and projections. Information regarding the tax consequences of the proposed transaction was provided by Petitioner and considered by the Board. Based on the information provided in the filing, the Board concludes that these issues have been adequately addressed.
Conclusion
Based on the record of this matter and considered in light of all relevant statutory and administrative requirements, the Board concludes that the proposed transaction will not have a significant impact on competition among banking institutions in the Commonwealth and will promote the public convenience and advantage. Specifically, the Board finds the transaction will benefit the customers of South Shore Bank and Horizon, 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 and authorizes South Shore Bancorp to become a bank holding company and to acquire up to 100% of stock in Horizon. The Board also grants the other approvals necessary to complete this multi-step transaction and has issued certificates for the formation of the new mutual bank and the stock subsidiary bank in conjunction with the reorganization into a mutual holding company.
The approval granted herein is subject to the condition that all related transactions are completed within one year of the date of this Decision.
| Steven L. Antonakes ___________________________ Commissioner of Banks | |
| Alan L. LeBovidge ___________________________ Commissioner of Revenue | Board |
| Timothy P. Cahill ___________________________ Treasurer and Receiver General | |
| February 5, 2004 _____________________ Date |