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  • Division of Banks

Decision  Decision of June 11, 2012

Date: 06/11/2012
Organization: Division of Banks
  • Petitioner: Framingham Co-operative Bank
  • Respondent: Division of Banks

Table of Contents

Decision relative to the merger of Natick Federal Savings Bank, Natick, Massachusetts with and into Framingham Co-operative Bank, Framingham, Massachusetts

Framingham Co-operative Bank ("Framingham"), Framingham, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with Natick Federal Savings Bank ("Natick"), Natick, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 170, section 26B, and under the terms of a Consolidation Agreement dated March 13, 2012 ("the Agreement"). The Agreement provides for the merger of Natick with and into Framingham, under the charter and by-laws of Framingham. The continuing institution will have a new name. The main office of Framingham would remain the main office of the continuing institution and the sole banking office of Natick would be retained as a branch office of the continuing institution. Subsequent to the filing of the application appropriate votes were taken and documents were amended to reflect that the name of the continuing institution will be MutualOne Bank.

Notice of the application was posted as directed by the Division thereby affording opportunity for interested parties to submit comments. The period for filing comments has expired. The Division reviewed the application and all related documents in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage and net new benefits would be promoted by approval of the proposed transaction. The record of performance under the Commonwealth's Community Reinvestment Act ("CRA"), Massachusetts General Laws chapter 167, section 14 and its implementing regulation, 209 CMR 46.00 et seq. also were factors considered by the Division.

Framingham is a Massachusetts co-operative bank that was established in 1889. Its deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by law, and by the Share Insurance Fund ("SIF") of the Co-operative Central Bank for all deposits in excess of FDIC coverage. Framingham had consolidated assets of approximately $402 million as of March 31, 2012.

In addition to its main office in Framingham, Petitioner operates one other full service branch office and a loan operations center, all located in Framingham.

Natick is a federally chartered savings association which was chartered in 1886 as a Massachusetts-chartered co-operative bank1. As of March 31, 2012, Natick had total consolidated assets of approximately $157 million. It does not operate any branch offices. Its deposits are insured by the FDIC to the maximum extent permitted by law. Natick has one wholly-owned subsidiary, Natick Savings Security Corporation, a Massachusetts corporation which holds certain bank permissible securities.

In analyzing the impact of a proposed transaction on banking competition, the Division considers, but does not rely exclusively on, 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, an arithmetic measure of market concentration that synthesizes the distribution of market shares and the number of banks in an affected market into a single value. In this case, the merger application presents a negligible and de minimis increase in the HHI for the geographical area analyzed according to the application. 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. In Middlesex County, where Framingham and Natick both operate banking offices, Framingham is the 24th largest of 54 depository institutions, with approximately $308 million of deposits in the market. Natick is the 42nd largest depository institution in Middlesex County, with approximately $137 million of deposits. Following the consolidation, the continuing institution would be the 20th largest institution in Middlesex County. By comparison, the largest institution in Middlesex County, Bank of America N.A., controls approximately 19.36% of the deposits in Middlesex County.

In the Boston Metropolitan Statistical Area ("MSA"), where Framingham and Natick both operate banking offices, Framingham is the 50th largest and Natick is the 94th largest of 145 depository institutions. Following the consolidation, the continuing institution would be the 40th largest institution in the Boston MSA.

As specified previously, each bank only has offices in its hometown. However, the seven communities which make up Framingham’s primary service area are contained entirely within Natick’s larger primary service area of twenty-one communities and both banks derive deposits and make loans in those communities. The Division also has noted, as detailed above, that there are numerous banks with banking offices located in the primary service area of the merging banks. Therefore, customers of Framingham and Natick will continue to be able to choose from a variety of banking options. Accordingly, the Division's analysis of the competitive impact of the merger does not preclude approval of the proposed transaction.

As a result of the merger, Petitioner indicates that the banking public will benefit in several ways. Petitioner states that the geographic area in which the continuing institution will operate is very competitive, with many larger banks having greater resources to develop and offer products and services to the market. Petitioner states that while both Framingham and Natick have had a history of success throughout the years, operating a bank under the present competitive environment is especially difficult for the smallest of banks. Accordingly, each of the banks has determined that it will need to grow and to offer a wider array of products and services in order to compete in the extremely competitive banking market in which it is located. The consolidation is a means, Petitioner states, of accomplishing such an objective. The consolidation would allow the banks to pool their resources, increasing the financial strength, marketing visibility and capacity of the continuing institution. The consolidation would put the consolidated bank in a position to compete more effectively against the larger national and regional financial institutions that now dominate the market. The same factors that would allow the continuing institution to better serve its depositors and the community at large. The banks believe that their pooled resources would create the opportunity to deliver more to their communities, in the form of deposit and credit products, business and retail services, and community reinvestment. Both banks view the consolidation as a transaction through which their respective borrowers, depositors, customers and employees would all benefit from a larger, stronger institution that will draw on the historical strengths of each constituent institution. Natick’s customers would have the added benefit of insured-in-full deposit insurance from the SIF. Additionally, Natick’s customers would benefit from the expanded products and services offered by the continuing institution, specifically, a wider variety of residential mortgage options and online services that are not currently available through Natick as well as deposit services and commercial loan and deposit products, which Natick does not presently offer. The Division considered these reasons and others cited in the submitted documents in determining that public convenience and advantage will be promoted by approval of this transaction.

In determining whether or not 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 26B of said chapter 170 includes initial capital investments, job creation plans, consumer and business services and commitments to maintain and open branch offices, among other factors, which the Commissioner may deem necessary. In the application the Petitioner has addressed this requirement of statute including capital investments. Petitioner is committed to maintain the current Natick banking office as a branch. The continuing institution will continue to evaluate new opportunities as they arise, including opening new branch offices, whether de novo or through acquisition. For the reason that the consolidation represents an expansion of services and creates no redundancies, Petitioner represents that no job loss is expected as a result of the transaction. Moreover, the Petitioner states that the continuing institution will be more competitive, resulting in a greater probability that jobs may be created in the future. These and other factors are also cited as support for meeting the statutory criteria.

Related to the issue of public convenience and advantage is the record of performance under CRA by the banks which are parties to this transaction. Such review for a state-chartered bank includes examination by personnel of the Division as well as analysis of concerns received from the bank's community and its response to those concerns fairly raised. A publicly available descriptive rating and evaluation by a federal bank regulatory agency will also be considered. The Division has noted that Framingham received a "Satisfactory" rating on its most recent CRA performance evaluation, which was conducted jointly by the Division and the FDIC. The Division is also aware that Natick received a "Satisfactory" rating conducted, at the time, by the Office of Thrift Supervision in its most recent CRA performance evaluation, as well.

The application states that, in connection with the merger that all eight of the current Directors of Framingham and four of the current directors of Natick will serve on the Board of Directors of the continuing institution. The management of the combined bank is also detailed in the application documents. Economies and service capabilities which would result from the transaction are set out in the submitted documents. Upon consolidation, the continuing bank will meet all required capital standards. Overall, financial and managerial considerations support the application.

Upon review of the application with reference to the relevant statutory and regulatory requirements, this Division has concluded that the consummation of the proposed consolidation would be in the public interest. On the basis of these considerations, approval is granted to merge Natick Federal Savings Bank with and into Framingham Co-operative Bank under the charter and by-laws of Framingham Co-operative Bank and the name MutualOne Bank under the provisions of said Massachusetts General Laws chapter 170, section 26B.

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 170, section 26B or other applicable statute has been returned with my endorsement thereon;
  2. that the proposed merger shall not become effective until Articles of Merger with my endorsement thereon are submitted to the Secretary of State; and
  3. that the proposed merger shall be consummated within one year of the date of this Decision.


June 11, 2012

David J. Cotney
Commissioner of Banks

1Natick was originally founded as a state-chartered bank, the Henry Wilson Co-operative Bank, and converted to a federal charter in 1937.

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