Legal and Procedural Requirements
Notice of Equitable Bank’s application was posted and published as directed by the Division thereby affording opportunity for the public 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 Equitable 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.
The merger of South Shore MHC and Equitable Bancorp, MHC will be completed according to the authority set forth in Massachusetts General Laws chapter 167H, section 7. Pursuant to Massachusetts General Laws chapter 167A, section 3, because South Shore MHC will merge with and into Equitable Bancorp, MHC simultaneously with the merger of the respective subsidiary banks and such subsidiary bank merger requires the approval of the Commissioner of Banks, an application to the Commonwealth’s Board of Bank Incorporation was not required to complete this related holding company transaction. However, in reviewing the proposed transaction, the Division must receive notice from the Massachusetts Housing Partnership Fund (MHPF) that satisfactory arrangements have been made consistent with Massachusetts General Laws chapter 167A, section 4 and the MHPF’s affordable housing loan programs. The Division received notice from the MHPF that satisfactory arrangements have been made for this transaction in a letter dated March 11, 2019. In addition, The Co-operative Central Bank confirmed by letter dated December 4, 2018, that satisfactory arrangements have been made relative to providing excess deposit insurance for the deposits of the Continuing Institution.
The Parties
Equitable Bank is a Massachusetts state-chartered co-operative bank and wholly-owned subsidiary banking institution of Equitable Bancorp, Inc., which is itself the wholly-owned subsidiary holding company of Equitable Bancorp, MHC. Upon consummation of the proposed multi-step transaction, the Continuing Institution will remain a wholly-owned subsidiary of Equitable Bancorp, Inc. and the indirect subsidiary banking institution of Equitable Bancorp, MHC. In addition to its main office in East Weymouth, Massachusetts, Equitable Bank operates six full-service branch offices located in the Massachusetts counties of Essex, Norfolk, and Plymouth. As of December 31, 2018, Equitable Bank reported total assets of approximately $324.6 million and total deposits of approximately $286.1 million. Equitable Bank’s deposits are insured up to allowable limits by the Federal Deposit Insurance Corporation (FDIC) and by the Share Insurance Fund of The Co-operative Central Bank for amounts in excess of the FDIC’s insurance limits.
Coastal Heritage Bank is a Massachusetts state-chartered co-operative bank and wholly-owned subsidiary of South Shore MHC. In addition to its main office in Weymouth, Massachusetts, Coastal Heritage Bank operates eight full-service branch offices located in the Massachusetts counties of Norfolk and Plymouth. As of December 31, 2018, Coastal Heritage Bank reported total assets of approximately $523.1 million and total deposits of approximately $404.9 million. Coastal Heritage Bank’s deposits are likewise insured up to allowable limits by the FDIC and by the Share Insurance Fund for amounts in excess of the FDIC’s insurance limits.
Competition
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 authorities to review bank mergers. These guidelines define relevant geographic markets and measure market concentrations as indicators of competitiveness in the local banking markets. 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. For this transaction, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources.
In addition to the HHI 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. Although the branch office networks of Equitable Bank and Coastal Heritage Bank have county overlap in Norfolk County and Plymouth County, the only community in which both banks have a branch office is Quincy, Massachusetts. Any adverse competitive impact in the Quincy community resulting from the proposed transaction is mitigated by the presence of several other banks and credit unions operating banking offices in Quincy. Likewise, the significant presence of other banks and credit unions in the broader Norfolk County and Plymouth County 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 analysis of the competitive impact of this transaction supports its approval.
Public Convenience and Advantage
The Division also considered information provided in the application addressing whether public convenience and advantage will be promoted by the proposed merger. Equitable Bank anticipates that the merger will produce a larger and more competitive banking institution that will be able to support higher lending limits for customers and allow the Continuing Institution to realize operating efficiencies that will yield additional funds for any future capital investments. With no branch office closings anticipated as a result of this transaction, customers of both banks will benefit from access to the larger branch network of the Continuing Institution.
In determining whether to approve a petition under the statutory criteria, the Division is required to consider a showing of “net new benefits” related to the transaction. That term as set out in Massachusetts General Laws chapter 167I, section 3 includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors that the Division may deem necessary. The materials submitted as part of the application indicate that consumers and commercial customers will continue to have access to a full range of banking products and services following the proposed merger with any potential modifications to the portfolio of products and services currently offered by the respective banks being limited to addressing any duplication of substantially similar offerings. The application further explains that expected operational efficiencies resulting from the merger will create opportunities for career advancement, additional jobs, and capital investments in the future as operations are expanded. Accordingly, the factors related to public convenience and advantage, including net new benefits, are consistent with approval of the 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. Equitable Bank received a “Satisfactory” rating in its most recent CRA performance evaluation conducted by the Division as of March 24, 2014. Coastal Heritage Bank also received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of February 5, 2018. The Division’s consideration of the CRA performance of Equitable Bank and Coastal Heritage Banks also support the approval of the proposed merger.
Financial and Managerial Considerations
The Division also reviews and considers the financial and managerial aspects of the proposed transaction. Materials provided indicate that the Continuing Institution will meet all regulatory capital requirements upon consummation of the proposed merger.
The initial board of directors of the Continuing Institution will be comprised of nine members of the current Equitable Bank board of directors and nine members of the current Coastal Heritage Bank board of directors. Materials provided indicate that the Continuing Institution’s senior executive officers will be comprised of senior management from each bank. Accordingly, upon review, the financial and managerial considerations support approval of the application.
Conclusion
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 Coastal Heritage Bank to merge with and into Equitable Bank under the charter and by-laws of Equitable Bank and under the name “Coastal Heritage Bank” pursuant to Massachusetts General Laws chapter 167I, section 3. Upon consummation of the merger, the charter of the former Coastal Heritage Bank will cease to exist and all rights, privileges, powers, franchises, properties, assets, liabilities, and obligations of Coastal Heritage Bank shall be vested in and assumed by the Continuing Institution. The petition to designate the banking office at 195 Washington Street, Weymouth, Massachusetts as the main office of the Continuing Institution is also hereby approved. Approval is also granted for the Continuing Institution to maintain each of the branch offices of Coastal Heritage Bank as branch offices of the Continuing Institution.
The approvals granted herein are subject to the following conditions:
- That the proposed bank 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;
- That the proposed bank merger shall not become effective unless the Articles of Merger with my endorsement thereon are filed with the Secretary of State;
- That the proposed holding company merger of South Shore MHC with and into Equitable Bancorp, MHC shall not become effective unless the Articles of Merger are filed with the Division; and
- That the proposed bank merger shall be consummated within one year of the date of this Decision.
Merrily S. Gerrish
Acting Commissioner of Banks
March 14, 2019
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