Legal and Procedural Requirements
Notice of Brookline Bank’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, and no comments were received. The Division reviewed the application and supplementary materials submitted by Brookline 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.
Brookline Bank converted its charter by operation of law from that of a Massachusetts-chartered savings bank to that of a Massachusetts-chartered trust company and ended its membership in the Depositors Insurance Fund (DIF) on July 31, 2019. The application notes that excess deposits that were insured by the DIF prior to the conversion to a trust company charter will continue to be insured by the DIF up to a year after the conversion. Additionally, term deposits will continue to be insured by the DIF until they reach maturity. The DIF confirmed by letter dated November 5, 2019 that satisfactory arrangements have been made relative to providing excess deposit insurance for certain deposits of Brookline Bank under the temporary continuation of insurance arrangement as detailed above.
Brookline Bank is a Massachusetts-chartered trust company and is one of three banking subsidiaries owned by Brookline Bancorp. The other banking subsidiaries held by Brookline Bancorp include First Ipswich Bank and Bank of Rhode Island. In addition to its main office in Brookline, Massachusetts, Brookline Bank operates 24 full-service branch offices in eastern Massachusetts. As of September 30, 2019, Brookline Bank had consolidated assets of approximately $4.9 billion and total deposits of approximately $3.5 billion. Brookline Bank offers a full range of personal, business, and commercial products and services, including consumer and residential lending. Brookline Bank’s deposits are insured up to allowable limits by the Federal Deposit Insurance Corporation (FDIC).
First Ipswich is a Massachusetts-chartered trust company with its main office located in Ipswich, Massachusetts. First Ipswich has five full-service branches located in Danvers, Essex, Gloucester, Newburyport, and Rowley, Massachusetts. As of September 30, 2019, First Ipswich had consolidated assets of approximately $464.9 million and total deposits of approximately $372.4 million. Like Brookline, First Ipswich offers a full range of personal, business, and commercial products and services, including consumer and residential lending. The deposits of First Ipswich are insured up to allowable limits by the FDIC.
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 banking regulators 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 the affected market into a single value. According to the application, no HHI analysis was required by federal banking regulators since the Merger was between affiliate banks. In addition to any federal HHI analysis, the Division also 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. The Merger will not affect any of the communities in which the two banks do business since the Continuing Institution is maintaining all First Ipswich branches. Also, the significant presence of other banks, credit unions, and non-depository lenders in the relevant 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 Division’s analysis of the competitive impact of this transaction does not raise concerns that would preclude its approval.
Public Convenience and Advantage
In reviewing the application, the Division must determine whether public convenience and advantage will be promoted by the proposed transaction. Brookline Bank provided information to illustrate that the banking public will benefit as a result of the Merger. The application materials indicate that the customers of Brookline Bank and First Ipswich will both benefit from an expanded branch and ATM network, as the Continuing Institution will have 30 branches and five ATM-only locations throughout Essex, Middlesex, Norfolk, and Suffolk Counties. As a result of its increased asset size, the Continuing Institution will be able to offer larger commercial loan opportunities to First Ipswich’s commercial customers.
In determining whether to approve a proposed transaction, the Division is required to consider a showing of “net new benefits” related to the transaction. That term, as set forth in Massachusetts General Laws chapter 167I, section 3, includes initial capital investments, job creation plans, consumer and business services, commitments to maintain and open branch offices, and such other factors that the Division may deem necessary. Brookline Bank plans to maintain the main office and five branch offices of First Ipswich as branch offices of the Continuing Institution. With regard to employment, Brookline Bank plans to retain most of First Ipswich’s employees in their current positions. Although it is anticipated that the consolidation of operations and integration of banking functions may cause a slight reduction in some First Ipswich positions, Brookline Bank has stated that they will endeavor to move any First Ipswich employee in a redundant position to a comparable position elsewhere within the Brookline Bancorp structure. Looking forward, Brookline Bank anticipates that the combined banks will produce a stronger, more competitive institution that will be able to create additional jobs in the future to offset any initial job losses attributable to the consolidation of operations resulting from the Merger.
Brookline Bank has stated that the Continuing Institution’s business strategy will not differ materially from the current business strategies of Brookline Bank and First Ipswich. As members of the Brookline Bancorp structure, Brookline Bank and First Ipswich already share many back office operations. Additionally, the application notes that both Brookline Bank and First Ipswich have the same consumer product offerings. Such consumer products will not change as a result of the Merger. Brookline Bank and First Ipswich also have substantially similar commercial products, and there are no plans to change these product offerings at this time. Brookline Bank and First Ipswich believe that the Merger will reduce the corporate governance and compliance burden associated with maintaining Brookline Bank and First Ipswich as separate entities, allowing the Continuing Institution to offer products and services in a more efficient manner in the communities it serves. The Division considered the above reasons and others presented in the submitted documents in determining that public convenience and advantage will be promoted by an approval of this 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. Brookline Bank received a “Satisfactory” rating in its most recent CRA performance evaluation conducted concurrently by the Division and the Federal Reserve Bank of Boston, each as of October 16, 2017. First Ipswich also received a “Satisfactory” rating in its most recent CRA performance evaluation conducted concurrently by the Division and the Federal Reserve Bank of Boston, each as of April 8, 2019. The Division’s consideration of the CRA performances of Brookline Bank and First Ipswich, respectively, also supports the approval of the proposed transaction.
Financial and Managerial Considerations
The Division also considered the financial and managerial aspects of the proposed transaction. As noted above, both Brookline Bank and First Ipswich are subsidiaries of Brookline Bancorp. Therefore, no additional financing will be necessary in order to complete the Merger. The materials provided indicate that upon consummation of the Merger, the Continuing Institution will meet all regulatory capital requirements.
According to the application materials, the board of directors and senior executive officers of the Continuing Institution will be comprised of the same individuals currently serving as the directors and senior executive officers of Brookline Bank. Accordingly, upon review, the financial and managerial considerations support approval of the proposed transaction.
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 First Ipswich to merge with and into Brookline Bank under the charter, by-laws, and name of Brookline Bank pursuant to section 3 of chapter 167I of the General Laws. Approval is also granted for Brookline Bank to maintain the main office and branch offices of First Ipswich as branch offices of the Continuing Institution.
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 167I, section 3 has been returned with my endorsement thereon;
2. That the proposed merger shall not become effective unless the Articles of Merger with my endorsement thereon are filed with the Secretary of State; and
3. That the proposed merger shall be consummated within one year of the date of this Decision.
Mary L. Gallagher
Commissioner of Banks
December 19, 2019