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  • Division of Banks

Decision  Decision of November 13, 2014

Date: 11/13/2014
Organization: Division of Banks
  • Petitioner: Cape Ann Savings Bank
  • Respondent: Division of Banks

Table of Contents

Decision relative to the merger of Granite Savings Bank, Rockport, Massachusetts with an into Cape Ann Savings Bank, Gloucester, Massachusetts

Cape Ann Savings Bank (“Cape Ann” or the “Petitioner”), Gloucester, Massachusetts has applied to the Division of Banks (the “Division”) for authority to merge with Granite Savings Bank (“Granite”), Rockport, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 168, section 34 and under the terms of a Consolidation Agreement dated as of July 16, 2014 and a Plan of Consolidation dated as of July 16, 2014 (together, the “Agreement”).  The Agreement provides for the merger of Granite with and into Cape Ann, under the charter, by-laws and name of Cape Ann (“Continuing Institution”).   The main office of Cape Ann would remain the main office of the Continuing Institution and the sole banking office of Granite would be retained as a branch office of Cape Ann. 

Notice of the bank merger application was published and 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 would 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 of each bank 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. were also factors considered by the Division.

Cape Ann is a Massachusetts-chartered savings bank that was established in 1846.  Its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the maximum extent permitted by law, and by the Depositors Insurance Fund (“DIF”) for deposits in excess of FDIC coverage.  Cape Ann had consolidated assets of approximately $473 million as of June 30, 2014.  In addition to its main office in Gloucester, the Petitioner operates two other full service branch offices in Gloucester and Manchester. 

Granite is a Massachusetts-chartered savings bank that was established in 1884.  As of June 30, 2014, Granite had total consolidated assets of approximately $70 million.  Its deposits are insured by the FDIC to the maximum extent permitted by law and by the DIF for deposits in excess of FDIC coverage limits.  Granite has its main office in Rockport and has no branch offices.

            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 (“HHI”), 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 HHI would change a negligible 1.18 points as a result of the proposed merger and remain less than 1800 in the relevant geographic market.  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.  Cape Ann and Granite do not have any banking office located within the same city or town.  In Essex County, Cape Ann is the 17th largest of 42 depository institutions and would remain the 17th largest institution following the consolidation with Granite. Accordingly, the review of the transaction’s impact on competition does not raise concerns which would preclude its approval.

The Division has also considered whether public convenience and advantage will be promoted by this proposed transaction.  According to the application, Cape Ann indicates that the banking public will benefit in several ways as a result of the merger.  The post consolidation increase in size and resources will provide the Continuing Institution with the ability to offer its products and services in a more efficient manner, spreading fixed costs over a larger asset base.  All existing products and services currently offered by either bank will be retained. Further benefits include access to a larger branch office network and the added asset base will increase the Continuing Institution’s ability to expand its lending limits for individual loans. The application lists a number of additional benefits that Cape Ann cites in support of the merger. The Division considered these matters 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 34 of said chapter 168 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. Cape Ann has addressed this requirement of the statute in the application.  As stated in the submitted documents, customers of both banks will have access to a larger network of banking offices which will be enhanced by capital investments in the form of signage and business equipment, as may be necessary, following the consummation of the consolidation.  According to the Petitioner, it is anticipated that the merger should facilitate future job creation and provide opportunities for career advancement for employees.  It was also noted in the application that no job losses are expected as a result of the proposed merger.  These and other factors are also cited as support for meeting such 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 Cape Ann received a "High Satisfactory" rating on its most recent CRA performance evaluation.  The Division is also aware that Granite received a "Satisfactory" rating in its most recent CRA performance evaluation.

The Consolidation Agreement provides that the Board of Trustees of the Continuing Institution will consist of all the current trustees of Cape Ann and four current trustees of Granite selected by Granite.  In addition, Cape Ann will establish an advisory committee of former members of the Board of Trustees of Granite who are not continuing as a trustee for Cape Ann. The management of the Continuing Institution 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 Institution will meet all required capital standards. In addition, 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 Granite Savings Bank with and into Cape Ann Savings Bank under the charter, by-laws and name of Cape Ann Savings Bank under the provisions of said Massachusetts General Laws chapter 168, section 34.

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 168, section 34 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 filed with the Secretary of State;
  3. that the proposed merger shall be consummated within one year of the date of this Decision.



11/13/14                                                           David J. Cotney                              

Date                                                                 Commissioner of Banks

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