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Eastern Bank (the "Petitioner" or "Eastern"), Boston, Massachusetts, has applied to the Division of Banks (the "Division") for permission to merge with MASSBANK, Reading, Massachusetts. The proposed merger is pursuant to an Agreement and Plan of Merger dated as of March 10, 2008 (the "Agreement"). Under the terms of the Agreement MASSBANK will merge with and into Eastern under the charter, by-laws and name of Eastern. After the merger, which is authorized pursuant to the provisions of section 36 of chapter 172 and section 34D of Chapter 168 of the General Laws, MASSBANK will cease to exist. The proposed merger is part of a multi-step transaction involving an application before the Commonwealth's Board of Bank Incorporation by the Petitioner's mutual holding company, Eastern Bank Corporation, to acquire MASSBANK Corp., the bank holding company for MASSBANK.
Notice of the Petitioner's application was published and posted for interested parties to comment on the transaction. There were no comments received from the public on this transaction during the open comment period which ended on July 21, 2008. Accordingly, all documents and materials 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 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"), section 14 of Chapter 167 of the General Laws and its implementing regulation 209 CMR 46.00 et seq.
Eastern 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, by operation of law, became a state-chartered trust company. As of June 30, 2008, Eastern had total assets of approximately $6.8 billion. Eastern operates 74 banking offices, which are located primarily in Eastern Massachusetts, from the Merrimack Valley to Cape Cod. In 2003, Eastern received permission to change the location of its main office from Lynn to Boston. Through its banking offices, Eastern 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 has a number of non-bank subsidiaries, including a large insurance agency and a commercial mortgage and real estate investment banking firm. Eastern operates a charitable foundation, through which Eastern makes donations to non-profit organizations in its market area. The deposits of Eastern are insured to allowable limits by the Federal Deposit Insurance Corporation ("FDIC").
MASSBANK 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. As of June 30, 2008, MASSBANK had total assets of approximately $782 million. Like Eastern, MASSBANK's deposits are insured to allowable limits by the FDIC. However, as a Massachusetts chartered savings bank, MASSBANK's deposits in excess of those FDIC coverage limits are insured by the Depositors Insurance Fund.
The Division's review of the proposed transaction must consider whether 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. The Division does not limit its review to those previously cited federal standards in its consideration of whether competition will be unreasonably affected. Rather the Division considers 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 proposed transaction, there is an overlap in the banking office networks of Eastern and MASSBANK. There are four communities, Medford, Stoneham, Melrose, and Reading, in which both Eastern Bank and MASSBANK operate banking 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 closing three or more of these branches. Any such closures, however, would require subsequent applications to the Division, public notice and the approval of the Division. Upon review, however, The Division concludes 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 including the five cited communities. Non-bank financial institutions also provide an additional competitive impact. Based on these factors, the Division finds that banking competition will not be unreasonably affected by the proposed transaction.
The Commissioner must also consider whether the proposed transaction promotes public convenience and advantage, as well as whether there has been a showing of net new benefits in relation to the transaction. 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 matters as the Commissioner may deem necessary or advisable. As set out in the application documents, the Petitioner states that the transaction will allow Eastern 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. The banks will pool their financial resources and reduce costs to better serve their communities by offering a broader array of products and services to consumers and businesses. The products and services offered by Eastern, which are not currently offered by MASSBANK, include investment management services, cash management services, merchant card services, and international trade services. Additionally, Eastern's telephone and Internet based banking services will become available to customers of MASSBANK. Customers of MASSBANK will be able to conduct their banking business at the continuing institution's approximately 90 banking offices and over 100 ATMs. Larger loan limits for commercial loans as well as Eastern's various small business loan programs, will also be available to current MASSBANK customers.
Upon review and consideration of all the materials submitted on the record of this transaction by the Petitioner, the Division concludes that the proposed merger will provide the customers of both entities with greater banking convenience in the form of more banking locations, and provide MASSBANK's customers with access to an expanded range of banking products and services. These factors, together with additional evidence contained in the application documents, support the conclusion that the proposed merger will promote the public convenience and advantage. Further, the criteria for net new benefits have been established.
Prior to approving this transaction, and as required by Massachusetts General Laws chapter 167, section 14, the Division must consider the involved banks' record of performance under the CRA. Such assessment for a state-chartered bank involves examination by Division 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. The relevant evaluations were also submitted as part of Petitioner's application materials. The Division notes that Eastern has an "Outstanding" rating in its most recent examination of performance under CRA. MASSBANK has a "Satisfactory" rating in its most recent FDIC examination of CRA performance. These ratings, as well as other materials submitted on this issue, sufficiently demonstrate that the banks involved in this transaction are adequately meeting the credit needs of their respective communities.
The Division has also considered the financial aspects and management factors of the merger. Those reviews were also supportive of approval. As part of the transaction, Eastern is seeking approval from the Division to pay a dividend to its holding company to finance the cash acquisition of the stock of MASSBANK Corp. That dividend request is approved in a separate letter dated today.
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 MASSBANK to merge with and into Eastern in conformity with the Agreement and pursuant to Massachusetts General Laws chapter 172, section 36 and chapter 168, section 34D.
The approval granted herein is subject to the following conditions:
August 15, 2008
Steven L. Antonakes
Commissioner of Banks