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Decision

Decision Decision of March 25, 2019

Date: 03/25/2019
Organization: Division of Banks

North Easton Savings Bank, South Easton, Massachusetts has applied to the Division of Banks (Division) to merge with Mutual Bank, Whitman, Massachusetts (Mutual) pursuant to the provisions of Massachusetts General Laws chapter 167I, section 2.  Under the terms of the Merger Agreement and the Plan of Merger, each dated November 5, 2018, Mutual will merge with and into North Easton Savings Bank under the charter, by-laws, and name of North Easton Savings Bank (North Easton or Continuing Institution).  The main office of North Easton will remain the main office of the Continuing Institution after consummation of the proposed merger, and the banking offices of Mutual will be retained as branch offices by the Continuing Institution.

Table of Contents

Notice of North Easton’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.  The Division reviewed the application and supplementary materials submitted by North Easton 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 merger.  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 March 22, 2019 that satisfactory arrangements have been made relative to the proposed merger of Mutual with and into North Easton.  In addition, The Co-operative Central Bank confirmed by letter dated January 14, 2019 that satisfactory arrangements have been made relative to the proposed merger.

The Parties

North Easton is a Massachusetts-chartered savings bank in mutual form. In addition to its main office in South Easton, Massachusetts, North Easton operates eight branch offices, all of which are located in Bristol County, Massachusetts.  As of December 31, 2018, North Easton had total assets of approximately $554.8 million and total deposits of approximately $502.6 million.  North Easton offers a full range of retail and commercial banking products and services to its customers.    North Easton’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.  The Division notes that North Easton has the following two wholly-owned subsidiaries, North Easton Security Corporation and Washington 555 Corporation, each of which is a Massachusetts corporation.  North Easton Security Corporation buys, sells and holds permissible securities on its own behalf.  Washington 555 Corporation holds certain real estate assets of North Easton, including real estate acquired through foreclosure.  Each subsidiary would be operated as a subsidiary of the Continuing Institution following the consummation of the proposed merger.    

Mutual is a Massachusetts-chartered co-operative bank in mutual form and a member of the Federal Reserve System.  In addition to its main office in Whitman, Massachusetts, Mutual operates eight branch offices, all of which are located in Plymouth County.  As of December 31, 2018, Mutual had total assets of approximately $517.5 million and total deposits of approximately $423.8 million.  Mutual also offers a range of retail and commercial banking products and services to its customers.    Mutual’s deposits are insured up to allowable limits by the FDIC, and amounts in excess of FDIC insurance are insured by the Share Insurance Fund of The Co-operative Central Bank. Mutual has two wholly-owned subsidiaries, MFSB Securities Corp. and Legion Parkway Securities Corporation, each of which is a Massachusetts corporation that buys, sells and holds permissible securities on its own behalf.  Each subsidiary would be operated as a subsidiary of the Continuing Institution following the consummation of the proposed transaction. 

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 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 proposed 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.  There are 26 depository institutions, with a total of approximately $23 billion in deposits, in both Bristol and Plymouth Counties (Combined Market).  Following the proposed merger, the Continuing Institution would hold approximately 4% of deposits in the Combined Market, and would be the 10th largest institution in the Combined Market by deposit market share.  In that regard, North Easton presented information that the proposed transaction will not have a significant adverse effect on competition or result in an undue concentration of banking resources in the communities served by the Continuing Institution.  North Easton and Mutual do not have any banking offices located in the same city or town, or county, and the application indicates that the banking offices of Mutual will be maintained as branch offices of the Continuing Institution.  Accordingly, the review of the proposed transaction’s impact on competition supports its approval.

Public Convenience and Advantage

The Division next considered the record of the application to determine whether public convenience and advantage will be promoted.  North Easton indicates that the banking public will benefit as a result of the proposed merger.  The proposed merger is expected to increase financial strength, marketing visibility, and capacity of the Continuing Institution as well as improve services, product offerings, and convenience for its customers.  In addition, customers of both North Easton and Mutual will have additional branch locations at which to conduct their banking businesses.        

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 proposed transaction.  That term as set out in section 2 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 Division may deem necessary.  North Easton addressed this requirement of the statute.  The materials submitted as part of the application indicate that customers of both banks will benefit from expanded and enhanced products and services from which to choose.  As mentioned above, North Easton plans to maintain and operate the banking offices of Mutual as branch offices of North Easton following the proposed merger.  Customers of both banks will, therefore, find additional convenience conducting their banking business from the larger branch and ATM networks of the Continuing Institution.  With regard to employment, North Easton anticipates that all employees of both banks will be retained.  The application further explains that expected operational efficiencies resulting from the proposed merger will, over time, create additional jobs, and will provide opportunities for capital investment and branch expansion.  With regard to initial capital investment, North Easton intends to invest a total of approximately $1 million in signage and business equipment, including networks, computer systems and telephone systems, in connection with the proposed merger.  Accordingly, the factors related to public convenience and advantage, including net new benefits, are consistent with approval of North Easton’s application.

Related to the issue of public convenience and advantage is the record of CRA performance by the banks that are parties to the proposed merger.  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.  North Easton received a “Satisfactory” rating in its most recent CRA examination, dated November 13, 2017, and conducted jointly by the Division and the FDIC.   Mutual received a “Satisfactory” rating in its most recent CRA performance evaluation conducted concurrently by the Division and the Federal Reserve Bank of Boston as of August 29, 2016.  The Division’s consideration of the CRA performance of North Easton and Mutual 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 trustees of the Continuing Institution will be comprised of all 14 individuals serving as trustees of North Easton and all 14 individuals serving as directors of Mutual immediately before the effective time of the proposed merger.  Materials provided indicate that the Continuing Institution’s initial management 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 Mutual to merge with and into North Easton under the charter, by-laws, and name of North Easton Savings Bank pursuant to section 2 of chapter 167I of the General Laws.  Upon consummation of the proposed merger, the charter of Mutual will cease to exist; the separate existence of Mutual shall cease; and all rights, privileges, powers, franchises, properties, assets liabilities, and obligations of Mutual shall be vested in and assumed by the Continuing Institution.  Approval is also granted for the Continuing Institution to maintain the banking offices of Mutual as branch offices.

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 167I, section 2 has been returned with my endorsement thereon;
  2. That the proposed merger shall not become effective unless the Articles of Merger with my endorsement thereon are filed with the Secretary of State; and 
  3. That the proposed merger shall be consummated within one year of the date of this Decision.

 

Merrily S. Gerrish
Acting Commissioner of Banks

March 25, 2019
Date

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