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Mellon Financial Corporation, Pittsburgh, Pennsylvania and The Bank of New York Company, Inc., New York, New York, (collectively the "Petitioner") have petitioned the Board of Bank Incorporation ("the Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 to merge and acquire ownership and control of Mellon Trust of New England, N.A., Boston, Massachusetts. The Petitioner seeks to combine their businesses and operations through a two-step merger involving the formation of a Delaware bank holding company known as The Bank of New York Mellon Corporation ("BNY-Mellon Corporation"). The proposed transaction will be structured so that The Bank of New York Company, Inc. will first merge with and into BNY-Mellon Corporation and immediately following that merger, Mellon Financial Corporation will merge with and into BNY-Mellon Corporation. The transaction does not involve the merger of any banks.
As directed by the Board, notice of the application was published and posted and a public hearing was held, thereby affording an opportunity for interested parties to attend or submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The public hearing was held on May 8, 2007. Representatives of the Petitioner and Mellon Trust of New England, N.A. offered testimony and responded to questions from the members of the Board. The Board received six comment letters in support of the proposed transaction. The public comment period closed on May 31, 2007.
Mellon Financial Corporation is the 33 rd largest bank holding company in the United States measured by total assets with approximately $41.6 billion in total assets as of December 31, 2006. It has more than forty-five bank branches in seven states and three foreign countries and approximately 17,092 employees. Mellon Financial Corporation's lead banking subsidiary is Mellon Bank, N.A., a national banking association headquartered in Pittsburgh, Pennsylvania with a total of twenty-one branches in four states and an additional three branches overseas. Mellon Bank has no branches or offices in the Commonwealth.
In the Commonwealth, Mellon Financial Corporation owns Mellon Trust of New England, N.A., a national bank headquartered in Boston which operates two banking offices in Massachusetts. The main office is located in Boston. A branch office is located at the operations center in Everett which handles only a small number of public transactions. As of March 31, 2007, Mellon Trust of New England, N.A. had approximately $7.82 billion in total assets. Mellon Trust of New England, N.A. has two wholly-owned subsidiaries: Boston Safe Deposit Finance Company, Inc., a Massachusetts corporation headquartered in Boston that holds and sells residential and commercial mortgage loans and has total assets of less than $600,000; and TBC Securities Co. Inc., a Massachusetts securities corporation, which, as a passive investor, buys, holds and sells marketable securities. Mellon Trust of New England, N.A. accepts deposits and makes loans, but the focus of its business is in providing money management, custody and related services to individuals, institutions and governmental agencies throughout the United States.
The Bank of New York Company is a New York based bank holding company and its lead banking subsidiary, The Bank of New York, is a New York chartered bank with no retail banking offices in the Commonwealth. The Bank of New York Company is the 16 th largest bank holding company in the U.S. measured by total assets with approximately $103 billion in total assets as of December 31, 2006. The Bank of New York provides the following four products lines: General Corporate Trust Services such as bond trustee, transfer agency, paying agency, registrar and other similar agency services; Corporate Services such as trustee and agency services to corporate issuers of conventional and other debt securities; Collateral Debt Obligation Services such as trustee, administration, and agency services for securities issuances; Real Estate Investment Management Issues through two registered investment adviser subsidiaries, provides real estate investment management services to institutional investors seeking private equity investments.
As an interstate transaction and pursuant to requirements of chapter 167A, the reciprocity laws of The Bank of New York Company, Inc. are subject to the review of the Commissioner of Banks. Under the Bank Holding Company act, 12 U.S.C. § 1841 et seq., and the test set out therein, New York is the home state of The Bank of New York Company, Inc. Consistent with prior decisions, the Commissioner of Banks has determined that the banking holding company laws of New York relative to reciprocity have been repealed. Accordingly, the Board will proceed to consider whether other statutory requirements are met by this application.
Prior to approving an application under chapter 167A, the Board must have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and MHPF's various affordable housing loan programs. The Board received notice in a letter dated June 15, 2007 that satisfactory arrangements had been made by the Petitioner with the MHPF.
The Board's review of this transaction focuses on the applicable statutory and administrative criteria which include, among other things, whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In determining whether the public convenience and advantage are promoted by the proposed transaction, the Board considers, among other things, whether there has been a showing of "net new benefits." Net new benefits are defined as initial capital investments, job creation plans, consumer and business services, commitment to maintain and open branch offices within a bank's delineated local community, and such other matters as the Board may deem necessary or advisable. The Board also considers the record of performance of the banks involved in this transaction under the Community Reinvestment Act ("CRA") and any relevant public testimony or commentary submitted into the record.
On the issue of whether banking competition will be unreasonably affected by the proposed transaction, the Board considers, but does not rely exclusively on, the guidelines used by federal authorities to review bank mergers. In this transaction, Petitioner states that the markets for the custody and investment management services provided by Mellon Financial Corporation and Bank of New York are national and global in scope and there are many other strong, well-capitalized competitors in this market. Such competitors include State Street Corporation, Bank of America Corporation, Citigroup, J.P. Morgan Chase Corporation, Charles Schwab Corporation and many securities firms and other non-banking organizations. Bank of New York has no banking subsidiaries that have branches or offices in the Commonwealth. Petitioner also states that the total Massachusetts deposits and Massachusetts loans of Bank of New York subsidiaries are less than $10 million and $42 million respectively (less than 1% of the Federal Reserve Board Boston market). Accordingly, it is Petitioner's position that the proposed transaction will have no significant adverse effect on competition in the Massachusetts banking market or elsewhere. Petitioner also notes that following the consummation of the transaction, BNY-Mellon Corporation will hold an aggregate of approximately 6.56% of Massachusetts deposits. The Board finds that banking competition will not be unreasonably affected by the proposed transaction.
Petitioner submitted information relating to the public convenience and advantage that will result from the proposed transaction. Following the consummation of the proposed transaction, Mellon Trust of New England's three core businesses will continue to be based in Boston, to offer all of the services it currently offers as well as enhanced products and services adopted from the Bank of New York array of products and services. In addition, Mellon Trust of New England will retain its two existing office locations in the Commonwealth and will continue to be governed by the same Board of Directors and senior management team.
The proposed transaction is expected, over time, to increase the consolidated organization's strength and efficiency through strengthening its capital base; diversifying its mix of assets and revenue; retaining the stronger of the alternative Bank of New York or Mellon financial products or services; strengthening its branch office network, enhancing the delivery of its products and services; and the achievement of other operating efficiencies. As a result of these enhancements, Petitioner asserts that BNY-Mellon will be able to compete more effectively than either entity could as separate institutions, particularly in the national and global markets for custody and investment management services. Petitioner is designing a three year integration plan designed to incorporate effectively the diverse elements of Bank of New York and Mellon Financial Corporation and to lead to a new, combined enterprise that will further increase in size and revenue. This growth is expected to result, over time, in significant revenue growth, which will drive the development of additional and improved products and services, capital investment and job creation.
With respect to the impact on employment in the Commonwealth, Petitioner stated there are currently approximately 2,700 employees of Mellon Trust of New England in Massachusetts. In testimony responsive to a Board member inquiry, Petitioner stated there will be a limited reduction in the number of employees in Massachusetts occurring over the first three years after consummation of the proposed transaction. These reductions will be managed through attrition to the extent possible. In addition, Petitioner anticipates over time to experience an overall job growth in the Commonwealth as the synergies of the transaction are realized.
Petitioner anticipates making initial capital investments to its information systems technologies in the Boston area and expects to invest in real estate and capital improvements for the Massachusetts offices.
Based on the foregoing, and on the entire record of this matter, the Board finds that the public convenience and advantage will be promoted by the proposed transaction, and that the criteria for net new benefits has been established.
The Board's review of this transaction includes an assessment of the subsidiary banks' performance under the Community Reinvestment Act ("CRA"). Such assessment for a state-chartered bank includes examination by Division of Bank personnel, as well as an analysis of the legitimate concerns raised by the community and the bank's response to those concerns. For other institutions, the Board reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency. Here, the relevant evaluations were submitted as part of Petitioner's application materials. Mellon Trust of New England, N.A. and Mellon Bank, N.A. each received an "Outstanding" rating from the Office of the Comptroller of the Currency in most recent CRA Performance Evaluations. The Bank of New York received a "Satisfactory" rating from the Federal Reserve Board in its most recent CRA Performance Evaluation.
Based on the record of this matter and considered in light of all relevant statutory and administrative requirements, the Board concludes that competition among banking institutions in the Commonwealth will not be unreasonably affected and that the transaction will promote the public convenience and advantage. The Board's review of the financial, managerial and operational considerations supports the transaction. The Board also finds that the banks involved in this transaction have a satisfactory record of performance under CRA. In accordance with these findings and pursuant to the statutory authority cited herein, the Board approves the application and authorizes Mellon Financial Corporation and The Bank of New York Company, Inc. to merge and acquire ownership and control of Mellon Trust of New England, N.A.
The approval granted herein is subject to the condition that the transaction is completed within one year of the date of this Decision.
June 25, 2007
Steven L. Antonakes
Commissioner of Banks
Alan L. LeBovidge
Commissioner of Revenue
Timothy P. Cahill
Treasurer and Receiver-General