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Eastern Bank Corporation (the "Petitioner" or "Corporation"), Boston, Massachusetts has petitioned the Board of Bank Incorporation (the "Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 for approval to acquire ownership and control of MASSBANK Corp., Reading, Massachusetts and its subsidiary bank, MASSBANK, Reading, Massachusetts in a multi-step transaction which will also involve the subsequent merger of subsidiary banks. The Petitioner is the mutual holding company for Eastern Bank, Boston, Massachusetts. As described in the application documents, there will be a preliminary merger of MASSBANK Corp. with a subsidiary of the Petitioner with MASSBANK Corp. surviving as a subsidiary of the Petitioner. It is possible that MASSBANK Corp. could be retained as a subsidiary of Eastern Bank Corporation subsequent to the consummation of this entire transaction. Initially, both banks will operate as separate subsidiaries of the Petitioner until the subsequent merger of MASSBANK with and into Eastern Bank. The merger of the subsidiary banks, is by statute, subject solely to the approval of the Division of Banks.
Notice of the application was published and posted as directed by the Board, thereby affording opportunity for interested parties to submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The Board held a public hearing on the petition of the Corporation on June 26, 2008. The stockholders of MASSBANK Corp. approved the transaction on July 17, 2008. The comment period on the proposed transaction ended July 21, 2008. No comments after the public hearing were received by the Board.
The Board has reviewed the application and the oral testimony received at the public hearing. That review focused on the statutory and administrative criteria which includes, among other things, whether competition among banking institutions will be unreasonably affected; whether public convenience and advantage would be promoted; and the record of performance under the Community Reinvestment Act ("CRA") of the subsidiary banks of the Petitioner and MASSBANK Corp. The additional statutory requirements set out in sections 2 and 4 of said chapter 167A were also significant factors in the Board's deliberations on the matter before it.
One such statutory provision requires the Board to have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and the MHPF's various affordable housing loan programs. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated June 13, 2008.
The Petitioner is a mutual holding company headquartered in Boston, Massachusetts and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended. At March 31, 2008, it had consolidated assets of approximately $6.9 billion and consolidated equity capital of approximately $797 million. The Petitioner's primary business is serving as the holding company for Eastern Bank. Eastern Bank, the Petitioner's sole banking subsidiary, was chartered as a mutual savings bank in 1818. It reorganized to the mutual holding company form of organization in 1989, the first bank to do so in Massachusetts. On July 31, 2004 Eastern Bank, by operation of law, became a state-chartered trust company. Eastern Bank operates 74 banking offices, which are located primarily in Eastern Massachusetts, from the Merrimack Valley to Cape Cod. In 2003, Eastern Bank received permission from the Board to change the location of its main office from Lynn to Boston. Through its banking offices, Eastern Bank offers a range of financial products and services for consumers, business and government customers. Additionally, it manages over $1.5 billion in trust and investment management assets, and provides financial advisory services to businesses on capital market activities, equipment leasing, cash management, commercial real estate, and international trade and foreign exchange matters. Eastern Bank has a number of non-bank subsidiaries, including a large insurance agency and a commercial mortgage and real estate investment banking firm. Eastern Bank operates a charitable foundation, through which Eastern Bank makes donations to non-profit organizations in its market area. The deposits of Eastern Bank are insured to allowable limits by the Federal Deposit Insurance Corporation ("FDIC").
MASSBANK Corp. is a bank holding company headquartered in Reading. As of March 31, 2008, it had total consolidated assets of approximately $800 million and consolidated stockholders' equity of approximately $108 million. Its sole banking subsidiary is MASSBANK, which traces its origins to 1872. It converted from mutual to stock and formed a holding company in the mid 1980's. MASSBANK operates 15 banking offices as follows: Reading, Melrose (2), Stoneham, Wilmington (2), Medford, Chelmsford (2), Tewksbury, Westford, Dracut, Lowell (2), and Everett. Through its banking offices, MASSBANK accepts deposits and provides a full range of loan products and financial services to consumer and commercial customers. Like Eastern Bank, MASSBANK's deposits are insured to allowable limits by the FDIC. However, as a Massachusetts savings bank, MASSBANK's deposits in excess of those FDIC coverage limits are insured by the Depositors Insurance Fund.
The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. The application contained an analysis utilizing the various tests used by federal agencies. The analysis demonstrates that consummation of the transaction will not result in undue concentration of banking resources in the specified banking market in Massachusetts. Traditionally, however, this Board has not limited its review to those previously cited federal standards in its consideration of whether competition will be unreasonably affected. Rather it is the position of this Board to consider a transaction in light of its impact on the citizens, communities and banking structure in the Commonwealth on a community by community basis instead of by variously grouped markets. In this case, there are four communities, Medford, Stoneham, Melrose, and Reading, in which both Eastern Bank and MASSBANK operate offices. The Petitioner's application also discloses that there is a branch office located in Malden that is under review due to its close geographic proximity to other branch offices. The Petitioner further states that it will be considering consolidating three or more of these branches. Any such closures, however, would require a separate application to the Division of Banks and the approval of that agency after notice to the public. Upon review, the Board concluded that consumers and businesses will continue to have access to a wide variety of competitive products and services, offered by a number of state-chartered or federally-chartered commercial banks, savings banks, cooperative banks, savings and loan associations and credit unions throughout MASSBANK's service area. Non-bank financial institutions provide an additional competitive impact which has been considered by the Board. Based on these factors, the Board finds that banking competition will not be unreasonably affected by the proposed transaction.
The Board has considered whether public convenience and advantage will be promoted by this proposed transaction. The Petitioner states that the transaction will permit Eastern Bank and MASSBANK to pool their financial resources, reduce costs, diversify risk, and better serve their communities by offering a broader array of products and services to consumers and businesses. According to the application documents and public testimony, current customers of MASSBANK will experience substantial improvement in access to banking services. As a larger institution, Eastern Bank offers a greater variety of products and services than MASSBANK. The products and services offered by Eastern Bank, which are not currently offered by MASSBANK, include investment management services, cash management services, merchant card services, and international trade services. Additionally, Eastern Bank's telephone and Internet based banking services will become available to customers of MASSBANK. Those customers will also be able to conduct their banking services at all banking offices of Eastern Bank, a number of which are open on Sundays. The application documents also provide additional products and services which are available to all customers of Eastern Bank. Eastern Bank, with a larger lending limit, will have the ability to offer larger commercial loans. It will also continue its small business lending programs as well as loan programs through the Small Business Association.
The Board has considered the Petitioner's statements on the statutory criteria of "net new benefits" related to the transaction. The term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors. The Petitioner has addressed all of these statutory provisions in the application documents and provided additional comments at the public hearing. With respect to job creation, the Petitioner indicates that any short term job loss will be made up by future anticipated job growth. The Petitioner states that the transaction will allow Eastern Bank to provide substantial new benefits to customers of the combined institution, particularly current MASSBANK customers, and to the communities that the combined institution will serve. By pooling financial resources and reducing costs, the combined bank will be able to offer a broader array of products and services to consumers and businesses. The Petitioner has emphasized that it is a large employer with over 1,600 employees with a history of steady growth. The transaction, it believes, will further support continued growth which will create additional jobs. Such growth and expansion will also result in the other components of the net new benefits requirements being met. The Board has considered the application and testimony submitted by the Petitioners and finds that consideration of public convenience and advantage including net new benefits weighs in favor of approving the proposed transaction.
Related to the issue of public convenience and advantage is the record of performance under CRA by the subsidiary banks which are the parties to this transaction. Such a review for a state-chartered bank includes examination by personnel of the Division of Banks as well as analysis of concerns received by the bank's community and its response to those concerns fairly raised. For other institutions, the Board looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency. The Board has noted that the Petitioner's subsidiary bank, Eastern Bank has an "Outstanding" rating in its most recent examination of performance under CRA. The Board is aware that MASSBANK has a "Satisfactory" rating at its most recent FDIC examination. Compliance with CRA was specifically addressed at the public hearing. As part of his testimony, a representative of MASSBANK Corp. mentioned three recent projects initiated by MASSBANK which would be continued by the Petitioner.
The financial aspects and any tax consequences from the structure of the transaction were also considered by the Board. This is a cash transaction and the Board has reviewed the source of funding to be used by the Petitioner for the acquisition of MASSBANK Corp. Management factors reviewed were also found supportive of approval of the application.
The application, supporting documents, and the testimony received at the public hearing have established a comprehensive record on this petition, which has been reviewed consistent with statutory provisions and the policies of the Board. Based on the record of this matter considered in light of all relevant statutory and administrative requirements, the Board finds that public convenience and advantage will be promoted and that competition among banking institutions will not be unreasonably affected and that the record of performance under CRA by the subsidiary banks involved in this transaction are consistent with its approval. Having considered the record established on this application, the Board has found that the applicable statutory and administrative criteria have been met.
In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Eastern Bank Corporation to acquire MASSBANK Corp. and MASSBANK in a multi-step transaction as described in the submitted documents, provided that the transaction is completed within one year of the date of this Decision.
Steven L. Antonakes
Commissioner of Banks
Commissioner of Revenue
Timothy P. Cahill
Treasurer and Receiver-General