Decision  Decision of July 10, 2015

Date: 07/10/2015
Organization: Division of Banks
  • Petitioner: Wessagussett Mutual Holding Company, Wessagussett Bancorp, Inc.
  • Respondent: Board of Bank Incorporation

Table of Contents

Decision relative to the application of Wessagussett MHC and Wessagussett Bancorp, Inc. to become bank holding companies through the acquisition of Equitable Bancorp MHC and Equitable Bancorp, Inc., and Equitable Co-operative Bank

Wessagussett Mutual Holding Company (“Wessagussett MHC”), and its wholly-owned subsidiary Wessagussett Bancorp, Inc. (“Wessagussett Bancorp”) (collectively “Petitioner”), East Weymouth, Massachusetts, have petitioned the Board of Bank Incorporation (the “Board”) to each become a bank holding company through a merger with Equitable Bancorp MHC (“Equitable MHC”) and its subsidiary, Equitable Bancorp, Inc. (“Equitable Bancorp”), and the indirect acquisition of Equitable Co-operative Bank, Lynn, Massachusetts (“Equitable”), under the provisions of General Laws chapter 167A, sections 2 and 4 (hereinafter the “Merger”).  Wessagussett Bancorp’s banking subsidiary is Weymouth Bank, East Weymouth, Massachusetts.  The merger of two mutual holding companies is authorized under General Laws chapter 167H, section 7, paragraph 3.  Equitable MHC, a mutual holding company headquartered in Lynn, Massachusetts, and Equitable Bancorp, a Maryland corporation and wholly-owned subsidiary of Equitable MHC, are the mutual holding company and the mid-tier holding company, respectively, for Equitable.   The proposed transaction will result in Wessagussett Bancorp continuing as a wholly-owned subsidiary of Wessagussett MHC, and controlling two state-chartered banks, Weymouth Bank and Equitable.   The resulting mutual holding company will operate under the name “Equitable Bancorp, MHC” and the resulting mid-tier subsidiary will operate under the name “Equitable Bancorp, Inc.”  Weymouth Bank and Equitable will not merge immediately following the consummation of the Merger, but rather, will operate as separate wholly-owned subsidiaries for a period of up to two (2) years following the proposed Merger.

Petitioner published notice of the petition as directed by the Board, thereby affording opportunity for interested parties to submit comments.  The Board held a public hearing relative to this application on May 20, 2015 and the period for filing comments expired on June 1, 2015.  The Board reviewed the application, testimony received at the public hearing, and all related documents.  That review focused on the statutory and administrative criteria applicable to such transactions which include, 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”) by the respective subsidiary banks of the holding companies.  The financial and management components of the proposed transaction were also considered.  The additional statutory requirements set out in sections 2 and 4 of said chapter 167A were also notable 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 (“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 satisfactory arrangements had been made for this transaction in a letter dated May 5, 2015. 

Weymouth Bank, Petitioner’s sole banking subsidiary, is a Massachusetts-chartered co-operative bank established in 1889 with its main office in East Weymouth.  Weymouth Bank reorganized into the mutual holding company structure in July 2006.  As of December 31, 2014, Weymouth Bank had total consolidated assets of approximately $209 million.  At the hearing, Petitioner’s representatives testified that as of March 31, 2015, that amount had grown to approximately $221 million in total assets.  Weymouth Bank operates from three locations, including its main office in East Weymouth, as well as two branches located in South Weymouth and Kingston.  Weymouth Bank offers a range of personal banking financial products and services, including checking accounts, savings accounts, club accounts, money market deposit accounts, CDs, energy club accounts, online banking, individual retirement accounts, ATMs, residential mortgage loans, and consumer loans, among other products and services.  Additionally, Weymouth Bank offers commercial banking services, including business checking and savings accounts, club accounts, money  market  deposit accounts, energy club accounts, lines of credit, commercial and industrial loans, real estate loans, Small Business Administration Loans, single payment term notes, cash management services, merchant card processing, night depositary services, and payroll services.  Weymouth Bank’s deposits are insured to allowable limits by the FDIC and deposits in excess of those limits are insured by the Share Insurance Fund of the Co-operative Central Bank.  Weymouth Bank is a member of the Federal Reserve Bank of Boston and the Federal Home Loan Bank of Boston.

Equitable MHC’s sole indirect banking subsidiary, Equitable, was originally chartered in 1877 and reorganized into the mutual holding company form of organization in January 2014.  As of March 31, 2015, Equitable had total assets of approximately $104 million.  Equitable’s main office is located in Lynn, Massachusetts and it operates one branch in Nahant, Massachusetts.  Equitable offers a variety of personal banking services, including residential mortgage loans, Massachusetts Housing mortgage loans, FHA/VA mortgage loans, home equity and lines of credit, Massachusetts Save Heat loans, automobile loans, checking and savings accounts, money market accounts, CDs, individual retirement accounts, and ATMs, among other services.  At the hearing, the Board received testimony that Equitable focuses primarily on retail consumer products, particularly residential lending.  Equitable’s commercial banking services are relatively limited, however, and are currently comprised of commercial loans, commercial checking and savings accounts, and night depository services.  Equitable also has two subsidiaries, Oxford Street Holdings Corporation and Oxford Street Securities Corporation.  The principal activity of Oxford Street Holdings Corporation is to hold bank real estate owned (OREO) property.  The principal activity of Oxford Street Securities Corporation is making investments in marketable securities.  Equitable’s deposits are insured to the allowable limits by the FDIC and deposits in excess of those limits are insured by the Share Insurance Fund of the Co-operative Central Bank.  Equitable is a member of the Federal Home Loan Bank of Boston.

The Petitioner has addressed the issue of whether competition among banks will be unreasonably affected by the proposed transaction.  Part of that analysis includes various guidelines utilized by the federal agencies.  The application contained an analysis under the Herfindahl-Hirschmann Index (“HHI”), a key test utilized by federal agencies in assessing the competitive effects of a proposed bank merger.  In this case, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources in the Commonwealth.  The Board’s review, however, is not limited to such federal standards.  It is the practice of the 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.  In that regard, Petitioner has presented information that the proposed transaction will not a have significant adverse effect on competition among banking institutions in any relevant market.  Specifically, the towns in which Weymouth Bank and Equitable operate do not overlap in any fashion, and indeed, the communities in which the banks operate are not contiguous.  The separate and distinct markets served by the subsidiary banks were discussed at the public hearing.  Upon review, the Board does not believe the transaction will unreasonably affect competition for the reasons cited, as well as the fact that a number of diverse financial institutions will continue to provide competitive deposit and credit services throughout the affected areas and banking markets served by the continuing institution.

The Board had also considered whether public convenience and advantage will be promoted by this transaction.  The Board received testimony that the Merger will allow the resulting entity to compete more effectively.   The maintenance of separate bank charters will allow Petitioner to expand into new markets using a well-established brand, Equitable Co-operative Bank.  The Merger will also allow the effective sharing of strengths between Equitable and Weymouth Bank.  At the hearing, Petitioner also provided testimony praising Equitable’s focus on residential lending, including the fact that Equitable has originators for residential loans.  Petitioner further testified that Weymouth Bank does not maintain residential loan originators, and therefore Weymouth Bank and its customers would benefit from this additional service.   In addition, Petitioner states that there will be no branch office closures of either bank as a result of the transaction and each bank will remain committed to its community.

Related to the issue of public convenience and advantage is the record of CRA performance by the subsidiary banks of 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, Weymouth Bank, received a “Satisfactory” rating in its most recent examination, dated March 24, 2014, and conducted jointly by the Federal Reserve Bank of Boston and the Division.  Equitable received a “Satisfactory” rating in its most recent CRA examination conducted jointly by the Division and the FDIC as of July 15, 2013.  Accordingly, the Board’s review of factors related to public convenience and advantage are supportive of approval.

The Board has also considered the Petitioner’s analysis of “net new benefits” related to the transaction with respect to the statutory criteria.  The term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors.  Through its written submissions and testimony, Petitioner stated that there will be no branch closures as a result of the Merger, and likewise no reductions in staff.  Petitioner submitted information that the Merger will allow the combination of back office support and personnel, resulting in efficiencies and synergies to improve the profitability of each institution.  Particularly, the Board received testimony that the Merger is expected to reduce increasing compliance costs for the parties through the shared compliance function.  The expected increase in profitability as a result of the Merger will provide funds for any future plans for capital investment, job creation, and the expansion of consumer and business services.   Petitioner testified that while there are no current plans to open any new branches, the parties have already begun discussing the possibility for anticipated future growth.

The financial and managerial aspects of any transaction are also a significant consideration of the Board, as they may affect the continuing holding company’s ability to serve the banking public, to actively compete with other financial institutions, and to maintain its capital ratio standards for a safe and sound institution.  Following the Merger, the Board of Directors of Weymouth Bank will consist of the directors of Weymouth Bank serving immediately before the consummation of the Merger, plus two individuals serving as directors of Equitable immediately prior to consummation of the Merger, to be selected mutually by Weymouth Bank and Equitable.  Likewise, the Board of Directors of Equitable will consist of the directors of Equitable serving immediately prior to the consummation of the Merger, plus two individuals serving as directors of Weymouth Bank immediately before consummation of the Merger, to be mutually selected by Equitable and Weymouth Bank.  The Board’s consideration of the financial and managerial aspects of the transaction also supports its approval.

The application, supporting documents, the testimony received at the public hearing, as well as additional information submitted, have established a complete record on this petition, which has been reviewed in accordance with statutory provisions and 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, 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 Wessagussett MHC and Wessagussett Bancorp to each become a bank holding company and to directly and indirectly own and control Weymouth Bank and Equitable through the acquisition of Equitable MHC and its subsidiary, Equitable Bancorp, provided that the transaction is completed within one year of the date of this Decision.


                              David J. Cotney                                           

                              Commissioner of Banks                                                                                                                       

Board of Bank Incorporation

                             Deborah B. Goldberg                                                                       Treasurer and Receiver-General                                                 

                             Donald Twomey

                             Designee of the Commissioner of Revenue        

      July 10, 2015

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