Decision Relative To The Merger of Athol-Clinton Co-operative Bank, Athol, Massachusetts With And Into Hometown Bank, A Co-operative Bank, Webster, Massachusetts
Hometown Bank, A Co-operative Bank (the "Petitioner" or "Hometown"), Webster, Massachusetts has applied to the Division of Banks (the "Division") to merge with Athol-Clinton Co-operative Bank ("Athol-Clinton"), Athol, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 170, section 25. Under the terms of the Agreement and Plan of Merger (the "Merger Agreement") dated as of December 31, 2010 and amended as of January 7, 2011, Athol-Clinton will merge with and into Hometown under the charter, by-laws and name of Hometown Bank, A Co-operative Bank. Both banking offices of Athol-Clinton will be retained after the merger.
Notice of the Petitioner's application was posted and published as directed by the Division thereby affording opportunity for interested parties to submit comments. The period for filing comments has expired. Shareholders of each co-operative bank have voted in favor of the proposed merger at special meetings called for that purpose. No comments have been received on the application. The Division reviewed the application including a supplemental filing submitted on January 27, 2011 in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage as well as net new benefits would be promoted by approval of the proposed transaction. Both banks' records of performance under the Commonwealth's Community Reinvestment Act ("CRA"), Massachusetts General Laws chapter 167, section 14 and the Division's regulation, 209 CMR 46.00 et seq. also were factors considered by the Division.
Hometown was chartered as a mutual co-operative bank in 1889. As of December 31, 2011, Hometown had total assets of approximately $221.8 million. In addition to its main office in Webster, Hometown operates two branch offices. Hometown's branch office locations are in Oxford and Sturbridge. Hometown's deposits are insured up to allowable limits by the Federal Deposit Insurance Corporation ("FDIC") and the Share Insurance Fund of The Co-operative Central Bank for amounts in excess of the FDIC's insurance limits.
Athol-Clinton was chartered as a mutual co-operative bank in 1889. As of December 31, 2010, it had total assets of approximately $85.4 million. In addition to its main office in Athol, Athol-Clinton operates a branch office in South Lancaster. Athol-Clinton's deposits are insured up to allowable limits by the FDIC and the Share Insurance Fund of The Co-operative Central Bank for amounts in excess of the FDIC's insurance limits.
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 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. There are no communities in which both banks maintain a banking office, even though both banks operate their banking offices in Worcester County. The banking offices of Athol-Clinton are located in communities several miles north of the communities in which Hometown's banking offices are located. Accordingly, the Division's review of the transaction's impact on competition does not raise concerns which would preclude its approval.
The Division has also considered the record of this application to determine whether public convenience and advantage will be promoted by this transaction. Under the proposed merger, the Petitioner states it will continue to offer all of its products and services to customers of the continuing bank. Hometown believes that these include all products and services currently offered by Athol-Clinton. Additionally, the Petitioner states that it will be able to offer several products and services that are not currently offered to Athol-Clinton customers. Such products and services include overdraft protection and telephone banking, as well as a full line of business banking services, including commercial real estate lending, equipment financing, commercial lines of credit and letters of credit, small business loans and SBA lending. Additionally, customers of both banks will benefit from the larger lending limit available through the combined institution. Customers of both banks also will benefit through an expanded network of banking offices and ATMs. 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 as set out in said section 25 of chapter 170 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 Petitioner has addressed this requirement of statute. As stated in the supplemental filing submitted January 27, 2011, the continuing bank intends to make initial capital investments of approximately $328,500 in banking office renovations, new signage and information systems improvements to the banking offices of Athol-Clinton. As noted above, both banking offices of Athol-Clinton will be maintained by Hometown. According to the application, Hometown will offer employment to current employees of Athol-Clinton who continue to be employed by Athol-Clinton upon the effective time of the merger of the banks. Hometown believes that, upon the merger, the combined bank, will be able to compete and grow more effectively, which will provide enhanced job and career opportunities to current employees of both banks, as well as future employees. Moreover, customers of both banks will benefit from the aforementioned products and services which will available to customers of both banks. These and other factors are also cited as support for meeting the criteria of this statutory requirement.
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 state-chartered banks includes examination by personnel of 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. Hometown received a "Satisfactory" rating from the FDIC at its last examination of performance under CRA. At its most recent CRA examination by the Division, Athol-Clinton received a rating of "High Satisfactory."
The application states that, in connection with the merger, the continuing institution's Board of Directors will increase from eight to twelve directors and consist of all of the persons currently serving as directors of Hometown, along with four directors of Athol-Clinton. The management of the combined bank is also set out in the application documents. Other than fees and expenses related to the merger, there is no financing of the transaction since it is a merger between mutual banks. Capital ratios of the combined institution have been considered in the review of this transaction. Upon consolidation, the continuing bank will meet all required capital standards. Accordingly, upon review, financial and managerial considerations support the approval of the application.
Upon review of the complete record of the application with reference to the relevant statutory and regulatory requirements, this Division has concluded that the consummation of the proposed consolidation would be in the public interest. On the basis of these considerations, approval is granted to merge Athol-Clinton with and into Hometown under the charter, by-laws and name of Hometown Bank, A Co-operative Bank under the provisions of said section 25 of chapter 170 of the General Laws.
The approval granted herein is subject to the following conditions:
(1) that the proposed merger shall not become effective until a Certificate signed by the Presidents and Clerks or other duly authorized officers of each bank indicating that each institution has complied with the provisions of Massachusetts General Laws chapter 170, section 25 has been returned for my endorsement thereon;
(2) that the proposed merger shall not become effective until Articles of Merger with my endorsement thereon are filed with the Secretary of State;
(3) that the proposed merger shall be consummated within one year of the date of this Decision
Dated at Boston, Massachusetts, this 28th day of February, 2011
By: David J. Cotney