Decision relative to the application of South Shore Savings Bank, Weymouth, Massachusetts to merge with Horizon Bank & Trust Company, Braintree, Massachusetts
By the Division of Banks
South Shore Savings Bank ("Petitioner" or "South Shore"), Weymouth, Massachusetts, has applied to the Division of Banks (the "Division") for permission to merge with Horizon Bank & Trust Company ("Horizon"), Braintree, Massachusetts. The proposed merger is pursuant to an Agreement and Plan of Merger dated July 21, 2003 (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 Horizon with and into South Shore.
The proposed merger is part of a multi-step transaction that also involves a petition before the Board of Bank Incorporation for various approvals in conjunction with South Shore's reorganization into a mutual holding company in order to acquire Horizon. In order to accomplish the merger with Horizon, South Shore, as a bank in mutual form, had to reorganize into a mutual holding company structure pursuant to the provisions of chapter 167H of the General Laws. As part of that 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.
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, materials and public comments 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 Division's review of this matter must also take into consideration the involved banks' record of performance under the Community Reinvestment Act ("CRA").
South Shore 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 areas of 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.
Horizon 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.
The Division's review of this matter takes into consideration 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 Division 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 Division may deem necessary or advisable. At the direction of the Division, these factors, additional statutory requirements, and other relevant administrative criteria must be addressed in the application documents. The Division also considers any relevant testimony received at the public hearing of the Board of Bank Incorporation or submitted during the open comment period.
On the issue of whether competition will be unreasonably affected by the proposed transaction, the Division 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 Division 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. 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 Division 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 South Shore. South Shore operates eleven branches and ten ATMs in Norfolk and Plymouth counties.
On the issue of net new benefits to be derived from the proposed transaction, the Division notes Petitioner's statement that it anticipates that no services or products currently offered by South Shore and by Horizon will be discontinued as a result of the merger. No banking 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 banking 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, South Shore does not currently anticipate staff reductions at the continuing bank.
In addition, the Petitioner states that the merger will provide additional seasoned commercial lending staff to South Shore's existing staff, thereby adding to the strength and breadth of this segment for the benefit of South Shore's current and future customers. As the record demonstrates, the customers of Horizon will have access to an increased lending capacity, 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 Division's review weighs in favor of the finding that the public convenience and advantage will be promoted. The Division further concludes that the criteria for net new benefits has been established.
The Division's review of this transaction includes an assessment of the banks' performance under the Community Reinvestment Act ("CRA"). Such assessment for a state-chartered bank includes examination by the Division's 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 . Here, the relevant evaluations were submitted as part of Petitioner's application materials. In its most recent CRA examination, performed by the Division of Banks, South Shore received a "High Satisfactory" rating. The Division also performed the most recent examination of Horizon, which received a "Satisfactory" rating. Based on its review of these ratings, the Division concludes that the banks involved in this transaction are adequately meeting the credit needs of their respective communities.
As part of its inquiry, the Division reviews the financial structure, tax consequences, and the operational aspects of the transaction. The Division 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. Based on the information provided in the filing, the Division concludes that these issues have been adequately addressed.
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 the public interest. On the basis of these conclusions, and subject to the conditions set forth below, approval is granted for Horizon to merge with and into South Shore in conformity with the Agreement and pursuant to Massachusetts General Laws chapter 168, section 34D and chapter 172, section 36. In accordance with General Laws chapter 167C, section 3, approval is also granted for the continuing bank to maintain the existing banking office of Horizon as a branch office. All necessary approvals are also granted for an interim bank merger with Horizon as the surviving entity as part of this multi-step transaction.
The approval granted herein is subject to the following conditions:
that the merger of Horizon and South Shore 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.
| February 5, 2004 __________________________ Date | Steven L. Antonakes ___________________________________ Commissioner of Banks |