RELATIVE TO THE MERGER OF
LAFAYETTE FEDERAL SAVINGS BANK, FALL RIVER, MASSACHUSETTS
WITH AND INTO
MECHANICS' CO-OPERATIVE BANK, TAUNTON, MASSACHUSETTS
Mechanics' Co-operative Bank ("Mechanics'" or the "Petitioner"), Taunton, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with Lafayette Federal Savings Bank ("Lafayette"), Fall River, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 170, section 26B under the terms of a Consolidation Agreement dated May 23, 2008. The Consolidation Agreement provides for the merger of Lafayette with and into Mechanics' under the charter, by-laws and name of Mechanics' Co-operative Bank. The four banking offices of Lafayette will be retained as branch offices of the continuing bank after the merger.
Notice of the application has been posted and published. The time period for interested parties to submit comments has passed. Other matters related to this proposed transaction were the subject of telephone conversations with, as well as written communications from, staff of the Division. Supplemental filings to the application were made on July 3 rd and July 29, 2008. Accordingly, all documents and materials related to this transaction have been reviewed. That record has been considered with regard to the financial and managerial resources of each bank, the competitive effects of the proposed transaction, the interests of the depositors of each bank, the future prospects of the institutions and convenience and needs of the communities to be served by the consolidated entity as well as the performance of each bank under the Community Reinvestment Act ("CRA").
Mechanics' is a state-chartered co-operative bank in mutual form. As of June 30, 2008, it had total assets of approximately $194 million. Mechanics' main office is located in Taunton, Massachusetts and it operates one branch office in Taunton and one branch office in Dighton. Additionally, Mechanics' operates a branch office in Bridgewater as a result of its merger with Bridgewater Co-operative Bank in November 2007. The deposits of Mechanics' are insured by the Federal Deposit Insurance Corporation ("FDIC") and the Share Insurance Fund of The Co-operative Central Bank for deposits in excess of the FDIC's insurance coverage limits.
Lafayette is a federally-chartered mutual savings bank with its main office in Fall River. Lafayette operates branch offices in Somerset, Westport, and Swansea. As of March 31, 2008, Lafayette had assets of approximately $114 million. The deposits of Lafayette are insured by the FDIC.
The merger application summarizes the primary service areas of both banks. Mechanics' primary service area is its CRA Assessment Area, specifically the communities of Taunton, Bridgewater, Raynham, Berkley and Dighton. Lafayette considers its primary service area, also its CRA Assessment Area, as the communities of Fall River, Somerset, Swansea, and Westport. The continuing bank intends to continue to serve the combined primary service area of both banks.
Materials have been submitted to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. In analyzing the impact of a proposed transaction on banking competition, the Division 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. In this case, there will be a de minimis increase or no increase in the HHI for the geographical areas analyzed. In addition to that analysis, the Division considers the competitive impact of the proposed transaction on a community-by-community basis, as well as on the overall banking structure of the Commonwealth. As stated above, the communities in the primary service area for the merging banks are different. Mechanics' and Lafayette do not have any banking offices located in the same city or town. Even so, some of the communities in which the banks operate banking offices are contiguous and records reflect that each bank makes some loans and takes some deposits in minimal amounts from the communities within the other bank's primary service area. Additionally, the Division has noted that there are several banks, as well as state-chartered and federally-chartered credit union, with banking offices located in the combined primary service area of the merging banks. Therefore, customers will continue to be able to choose from a variety of banking options. Accordingly, the Division's review of the transaction's impact on competition does not raise concerns which would preclude its approval.
As a result of the merger, Mechanics' 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. It is the intent of the continuing bank to offer all of the products presently offered by Mechanics'. These include a variety of types of loans,
deposits, non-deposit products and internet banking services. Mechanics' believes that the products and services that it currently offers include, at a minimum, all products and services currently available to customers of Lafayette. Customers also will benefit from the anticipated development of new products 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 based upon its intent to provide the aforementioned products and services to customers, as well as its plans for capital investments to upgrade banking premises. 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. Also noted is the statement by the continuing bank that it anticipates that there will be some job creation and no job elimination as a result of the proposed transaction. These and other factors are also cited as support for meeting such statutory criteria.
Related to the issue of public convenience and advantage is the record of performance under the CRA by the banks which are parties to this transaction. Such review for a 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 Mechanics' and Lafayette received "Outstanding" and "Satisfactory" ratings, respectively, in their most recent CRA performance examinations.
The application notes that, upon consummation of the merger, the continuing institution's Board of Directors will include three current directors of Lafayette. The management of the combined bank is also detailed in the application documents. Financial economies and service capabilities which would result from the transaction of these two banks in mutual form are set out in the submitted documents. Upon consolidation, the continuing bank will meet all required capital standards. Accordingly, upon review, financial and managerial considerations support approval of the 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 Lafayette to merge with and into Mechanics' under the charter, by-laws and name of Mechanics' Co-operative Bank pursuant to Massachusetts General Laws chapter 170, section 26B. Approval is also granted for Mechanics' to maintain the four banking offices of Lafayette as branch offices. 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 170, section 26B 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.
August 12, 2008
Steven L. Antonakes
Commissioner of Banks