Legal and Procedural Requirements
Notice of North Shore Bank’s application was posted and published as directed by the Division thereby affording opportunity for the public to submit comments. The period for filing comments has expired and no comments were received. The Division reviewed the application and supplementary materials submitted by North Shore Bank in accordance with applicable law, including 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,” will be promoted by approval of the proposed transaction. The Division also considered both banks’ records of performance under the Community Reinvestment Act (CRA) as well as financial and managerial factors.
The merger of Beverly Financial and North Shore Bancorp will be completed according to the authority set forth in Massachusetts General Laws chapter 167H, section 7. Pursuant to Massachusetts General Laws chapter 167A, section 3, because Beverly Financial will merge with and into North Shore Bancorp simultaneously with the merger of the respective subsidiary banks and such subsidiary bank merger requires the approval of the Commissioner of Banks, an application to the Commonwealth’s Board of Bank Incorporation was not required to complete this related holding company transaction. However, in reviewing the proposed transaction, the Division must receive notice from the Massachusetts Housing Partnership Fund (MHPF) that satisfactory arrangements have been made consistent with Massachusetts General Laws chapter 167A, section 4 and the MHPF’s affordable housing loan programs. The Division received notice from the MHPF that satisfactory arrangements have been made for this transaction in a letter dated August 8, 2019. In addition, The Co-operative Central Bank confirmed by letter dated May 17, 2019, that satisfactory arrangements have been made relative to providing excess deposit insurance for the deposits of the Continuing Institution.
The Parties
North Shore Bank was originally chartered as a mutual co-operative bank in 1888. It reorganized into the mutual holding company form of organization in 1998 after receiving required approvals from the Division and the Massachusetts Board of Bank Incorporation. Accordingly, North Shore Bank is a stock co-operative bank and the wholly-owned subsidiary banking institution of North Shore Bancorp, a mutual holding company. Upon consummation of the proposed multi-step transaction, the Continuing Institution will remain a wholly-owned subsidiary of North Shore Bancorp. In addition to its main office in Peabody, Massachusetts, North Shore Bank operates 11 full-service branch offices located in Beverly, Danvers, Merrimac, Middleton, Peabody (3), Salem, and Saugus (3), in Essex County, Massachusetts, and in Newton in Rockingham County, New Hampshire. North Shore Bank has three wholly-owned subsidiaries, North Shore Security Corp., Compass Rose Security Corporation, and First Saugus Corporation. North Shore Security Corp. and Compass Rose Security Corporation are Massachusetts security corporations. First Saugus Corporation is a Massachusetts corporation established for the purposes of holding title to real estate. As of June 30, 2019, North Shore Bank reported total assets of approximately $894.1 million and total deposits of approximately $734.5 million. North Shore Bank’s deposits are insured up to allowable limits by the Federal Deposit Insurance Corporation (FDIC) and by the Share Insurance Fund of The Co-operative Central Bank for amounts in excess of the FDIC’s insurance limits.
Beverly Bank is a Massachusetts state-chartered co-operative bank that was also originally chartered in 1888. Beverly Bank is a wholly-owned subsidiary of Beverly Bancorp, its mutual holding company, and accordingly is a stock co-operative bank. In addition to its main office in Beverly, Massachusetts, Beverly Bank operates five full-service branch offices located in Beverly (2), Danvers, Peabody, and Salem in Essex County, Massachusetts. Beverly Bank has three wholly-owned subsidiaries, Beverly Security Corporation, Essex County Properties, LLC, and 254 Cabot Street Corporation. Beverly Security Corporation is a Massachusetts security corporation. Essex County Properties, LLC is a Massachusetts limited liability company established to hold or dispose of other real estate owned and 254 Cabot Street Corporation is a Massachusetts corporation that is currently dormant. As of June 30, 2019, Beverly Bank reported total assets of approximately $507.9 million and total deposits of approximately $430 million. Beverly Bank’s deposits are likewise insured up to allowable limits by the FDIC and by the Share Insurance Fund of The Co-operative Central Bank for amounts in excess of the FDIC’s insurance limits.
Competition
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 upon, the guidelines used by the federal authorities to review bank mergers. These guidelines define relevant geographic markets and measure market concentrations as indicators of competitiveness in the local banking markets. 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 the affected market into a single value. For this transaction, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources.
In addition to the HHI 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. Although the branch office networks of North Shore Bank and Beverly Bank have overlap in Beverly, Danvers, Peabody, and Salem, Massachusetts, any adverse competitive impact in these communities resulting from the proposed transaction is mitigated by the presence of numerous other banks and credit unions operating banking offices in these municipalities. Likewise, the significant presence of other banks and credit unions in the broader Essex County and Rockingham County markets is a further indication that the proposed transaction will not result in an undue concentration of banking resources in the communities to be served by the Continuing Institution. Accordingly, the analysis of the competitive impact of this transaction supports its approval.
Public Convenience and Advantage
The Division also considered information provided in the application addressing whether public convenience and advantage will be promoted by the proposed merger. North Shore Bank anticipates that the merger will provide the Continuing Institution with the ability to offer its products and services in a more efficient manner, spreading fixed costs over a larger asset base. With no branch office closings anticipated as a result of this transaction, customers of both banks will benefit from access to the larger branch and ATM network of the Continuing Institution.
In determining whether to approve a petition under the statutory criteria, the Division is required to consider a showing of “net new benefits” related to the transaction. That term as set out in Massachusetts General Laws chapter 167I, section 3 includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors that the Division may deem necessary. The materials submitted as part of the application indicate that North Shore Bank plans capital investment in the amount of approximately $100,000 for signage, planned branch improvements, and related expenses. The application further indicates that there would be no initial loss of jobs. With regard to job creation plans, North Shore Bank anticipates that the Continuing Institution will continue to grow in the future, which will create additional jobs and also provide opportunities for career advancement. In addition, the combined talent and expertise of the employees of both banks will allow the Continuing Institution the opportunity to further develop and market new products and variations of existing products. The Continuing Institution will also have higher lending limits and a larger branch and ATM network than is currently available to Beverly Bank’s customers. Accordingly, the factors related to public convenience and advantage, including net new benefits, are consistent with approval of the transaction.
Related to the issue of public convenience and advantage is the record of CRA performance by the banks that are parties to this transaction. Such review for Massachusetts-chartered banks includes examination by personnel of the Division. A publicly available descriptive rating and evaluation by a federal bank regulatory agency may also be considered. North Shore Bank received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of July 5, 2016. Beverly Bank also received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of June 18, 2018. The Division’s consideration of the CRA performance of North Shore Bank and Beverly Bank also support the approval of the proposed merger.
Financial and Managerial Considerations
The Division also reviews and considers the financial and managerial aspects of the proposed transaction. Materials provided indicate that the Continuing Institution will meet all regulatory capital requirements upon consummation of the proposed merger.
The initial board of directors of the Continuing Institution will be comprised of 15 directors, ten designated from the current North Shore Bank Directors and five designated from the current Beverly Bank Directors. Materials provided indicate that the Continuing Institution’s senior executive officers will be comprised of senior management from each bank. Accordingly, upon review, the financial and managerial considerations support approval of the application.
Conclusion
Upon review of the complete record of the application with reference to the relevant statutory and regulatory requirements, the Division concludes that all such requirements have been met, and that consummation of the proposed transaction is in the public interest. On the basis of these considerations, and subject to the conditions set forth below, approval is granted for Beverly Bank to merge with and into North Shore Bank, a Co-operative Bank under the charter, by-laws, and name North Shore Bank, a Co-operative Bank pursuant to Massachusetts General Laws chapter 167I, section 3. Upon consummation of the merger, the charter of the former Beverly Bank will cease to exist and all rights, privileges, powers, franchises, properties, assets, liabilities, and obligations of Beverly Bank shall be vested in and assumed by the Continuing Institution. Approval is also granted for the Continuing Institution to maintain each of the branch offices of Beverly Bank as branch offices of the Continuing Institution.
The approvals granted herein are subject to the following conditions:
- That the proposed bank 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 167I, section 3 has been returned with my endorsement thereon;
- That the proposed bank merger shall not become effective unless the Articles of Merger with my endorsement thereon are filed with the Secretary of State;
- That the proposed holding company merger of Beverly Financial, MHC with and into North Shore Bancorp shall not become effective unless the Articles of Merger are filed with the Division; and
- That the proposed bank merger shall be consummated within one year of the date of this Decision.
Signed by:
Mary L. Gallagher
Commissioner of Banks
August 20, 2019
Date
