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Marlborough Savings Bank, Marlborough, Massachusetts (Marlborough Bank) has applied to the Division of Banks (Division) to merge with North Middlesex Savings Bank, Ayer, Massachusetts (North Middlesex) pursuant to the provisions of Massachusetts General Laws chapters 167H, section 7 and 167I, section 4. Under the terms of the Agreement and Plan of Merger dated as of July 12, 2016, North Middlesex will merge with and into Marlborough Bank under the charter and by-laws of Marlborough Bank and under a new name, which will be determined by the parties on or before the closing date of the proposed transaction (Continuing Institution). The main office of Marlborough Bank will remain the main office of the Continuing Institution after consummation of the proposed merger, and all of the banking offices of North Middlesex will be retained by the Continuing Institution. Marlborough Bancshares, Inc. is the stock holding company for Marlborough Bank. Marlborough Bancshares, Inc.’s parent is Marlborough Bancshares, MHC. Although North Middlesex is in mutual form and Marlborough Bank is in stock form, the transaction is authorized under Massachusetts General Laws chapter 167H, section 7, clause (2) since Marlborough Bancshares, MHC is a mutual holding company and Marlborough Bank is its subsidiary banking institution.
Legal and Procedural Requirements
Notice of Marlborough 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 Marlborough Bank 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” will be promoted by approval of the proposed transaction. The Division considered both banks’ records of performance under the Commonwealth’s Community Reinvestment Act (CRA) as well as financial and managerial factors. The Depositors Insurance Fund confirmed by letter dated as of December 9, 2016 that satisfactory arrangements have been made relative to providing excess deposit insurance for deposits of the Continuing Institution. The Division reviewed all documents and materials related to this transaction according to applicable law.
Marlborough Bank was chartered as a Massachusetts mutual savings bank in 1860. It reorganized into a mutual holding company form of organization in 2007 after receiving the required approvals from the Division and the Massachusetts Board of Bank Incorporation. As mentioned above, Marlborough Bank is the wholly-owned banking subsidiary of Marlborough Bancshares, Inc., a Delaware corporation, which is a wholly-owned subsidiary of Marlborough Bancshares, MHC, a Massachusetts mutual holding company. In addition to its main office in Marlborough, Massachusetts, Marlborough Bank operates six full-service branch offices in Hudson, Marlborough, Northborough, Southborough, Sudbury, and Westborough, Massachusetts. As of September 30, 2016, Marlborough Bank had total assets of approximately $521.2 million and total deposits of approximately $436.7 million. Marlborough Bank offers a full range of personal and business checking, deposit, and loan products and services. Marlborough Bank’s deposits are insured up to allowable limits by the Federal Deposit Insurance Corporation (FDIC), and amounts in excess of FDIC insurance are insured by the Depositors Insurance Fund.
North Middlesex is a Massachusetts mutual savings bank that was chartered in 1885. In addition to its main office in Ayer, Massachusetts, North Middlesex operates six full-service branch offices in Devens, Groton, Littleton, Lunenburg, Pepperell, and Shirley, Massachusetts. North Middlesex also offers a full range of personal and business checking, deposit, and loan products and services. Like Marlborough Bank, North Middlesex’s deposits are insured up to allowable limits by the FDIC, and amounts in excess of FDIC insurance are insured by the Depositors Insurance Fund.
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 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 the affected market into a single value. In this case, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources. 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. Marlborough Bank and North Middlesex do not have any banking offices located in the same city or town, and the application indicates that all of the banking offices of North Middlesex will be maintained as branch offices of the Continuing Institution. Accordingly, the review of the transaction’s impact on competition supports its approval.
Public Convenience and Advantage
The Division has also considered the record of this application to determine whether public convenience and advantage will be promoted. Marlborough Bank indicates that the banking public will benefit in several ways as a result of the merger. Customers of both banks will gain access to a larger branch and ATM network. Furthermore, the Continuing Institution will offer products and services to North Middlesex customers that are not currently offered by North Middlesex, including free checking and savings accounts with cash back or higher interest rates; access to “fintech” services; and enhanced credit and lending products with a higher lending limit.
In determining whether 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 section 4 of said chapter 167I includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors that the Commissioner may deem necessary. Marlborough Bank has addressed this requirement of the statute. The application indicates that the Continuing Institution plans to make initial capital investments in new signage, telecommunications equipment, and other improvements following the consummation of the proposed transaction. With regard to employment, Marlborough Bank anticipates that all employees of both banks will be retained, and that continued growth resulting from the merger will, over time, create additional jobs and provide career advancement opportunities for employees of the Continuing Institution. As mentioned above, the Continuing Institution will offer improved consumer and business services through a higher lending limit and by providing a broader variety of products and services to North Middlesex customers. Furthermore, the Continuing Institution is expected to maintain all banking offices of North Middlesex as branch offices of the Continuing Institution. Customers of both banks will find additional convenience conducting their banking business from this larger branch network. Accordingly, the Division has reviewed the factors related to public convenience and advantage, including net new benefits, and has determined that they are consistent with approval of Marlborough Bank’s application.
Also 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. Marlborough Bank received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of February 15, 2013. North Middlesex also received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of January 20, 2015. The Division’s consideration of the CRA performance of Marlborough Bank and North Middlesex also support the approval of the proposed merger.
Financial and Managerial Considerations
The Division has reviewed and considered the financial and managerial aspects of this transaction. Materials provided indicate that Marlborough Bank will continue to meet all regulatory capital requirements after the consummation of the proposed merger.
The Board of Directors of the Continuing Institution, the Board of Directors of Marlborough Bancshares, Inc., and the Board of Trustees of Marlborough Bancshares MHC will each be comprised of fifteen members. Eight members of each board will be current members of the Board of Directors of Marlborough Bank, and seven members of each board will be current members the Board of Trustees of North Middlesex. Materials provided indicate that the Continuing Institution’s initial management will be comprised of senior management from each bank in approximately equal numbers. Accordingly, upon review, the financial and managerial considerations support approval of the application.
Upon review of the complete record of the application with reference to the relevant statutory and regulatory requirements, the Division has concluded 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 North Middlesex to merge with and into Marlborough Bank under the charter and by-laws of Marlborough Bank pursuant to section 4 of chapter 167I of the General Laws. The parties will select a new name for the Continuing Institution on or before the closing date of the proposed transaction. Upon consummation of the merger, the charter of North Middlesex will cease to exist; the separate existence of North Middlesex shall cease; and all rights, privileges, powers, franchises, properties, assets liabilities, and obligations of North Middlesex shall be vested in and assumed by the Continuing Institution.
The approval granted herein is subject to the following conditions:
January 30, 2017
Terence A. McGinnis
Commissioner of Banks