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Hyde Park Co-operative Bank ("Hyde Park" or the "Petitioner"), Hyde Park, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with The Commonwealth Co-operative Bank ("Commonwealth"), Boston, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 170, section 25 under the terms of an Agreement and Plan of Merger ("Merger Agreement") dated as of August 20, 2008. The Merger Agreement provides for the merger of The Commonwealth Co-operative Bank with and into Hyde Park Co-operative Bank under the charter and by-laws of Hyde Park Co-operative Bank and the name Commonwealth Co-operative Bank. The sole banking office of The Commonwealth Co-operative Bank will be retained as a branch office after the merger.
Notice of the application has been posted and published. The time period for interested parties to submit comments has passed. Accordingly, all documents and materials related to this transaction have been reviewed. That record has been considered with regard to the financial and managerial resources of each bank, the competitive effects of the proposed transaction, the interests of the depositors of each bank, the future prospects of the institutions and convenience and needs of the communities to be served by the consolidated entity as well as the performance of each bank under the Commonwealth's Community Reinvestment Act ("CRA"), General Laws chapter 167, section 14 and its implementing regulation, 209 CMR 46.00 et seq.
Hyde Park is a state-chartered co-operative bank in mutual form. As of a thrift financial report dated September 30, 2008, Hyde Park had total assets of approximately $142.4 million. The main office of Hyde Park is located at 1172 River Street in the Boston neighborhood of Hyde Park. Additionally, Hyde Park operates a branch office in Jamaica Plain. The deposits of Hyde Park are insured by the Federal Deposit Insurance Corporation ("FDIC") and the Share Insurance Fund of The Co-operative Central Bank for deposits in excess of the FDIC's insurance limits.
Commonwealth is a state-chartered co-operative bank in mutual form with its sole banking office located at Two Center Plaza in downtown Boston. As of a call report dated September 30, 2008, Commonwealth had assets of approximately $45 million. The deposits of Commonwealth are insured by the FDIC and the Share Insurance Fund of The Co-operative Central Bank for deposits in excess of the FDIC's insurance limits.
The primary service area of both banks is the City of Boston, Massachusetts. The continuing bank intends to continue to serve this same primary service area upon the merger of the banks.
Materials have been submitted to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. On the issue of whether banking competition will be unreasonably affected by the proposed transaction, 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, there will be a de minimis increase of less than 1% in the HHI. 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. Specifically, the Division has considered the fact that Commonwealth operates from only one banking office and has only approximately $45 million in assets as a call report dated September 30, 2008. Additionally, it is noted that a diverse number of banks operate banking offices within the combined primary service area of the merging banks which is the City of Boston. Therefore, customers will be able to choose from a number of banking options. Accordingly, the review of the transaction's impact on competition does not raise concerns which would preclude its approval.
The application notes that, at the time of the merger, the continuing institution's Board of Directors will consist of all of the persons serving as directors of Hyde Park and three directors of Commonwealth. 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. Accordingly, upon review, financial and managerial considerations support approval of the application.
As a result of the merger, Hyde Park indicates that the banking public will benefit in several ways. According to the application, such benefits include an expanded branch office network and a broader range of products and services which will include all of the products presently offered by Hyde Park. Customers of Commonwealth will benefit from the wide array of loans, deposits and internet banking services, as well as several enhanced business products, which will become available to them upon the merger. The additional resources from the merger will facilitate the possible future development of products and services. 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 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. As discussed in the application, the continuing bank intends to provide the aforementioned products and services to customers, as well as make capital investments in the form of improvements for its continuing banking offices in connection with the merger. According to the Petitioner, the merger will enhance the continuing bank's financial capability to invest in the communities it serves and to develop new products and services for its customers. Also noted is the statement by the continuing bank relative to its plans concerning the retention of employees at the combined bank in connection with the merger. Additionally, Hyde Park will maintain the current main office of Commonwealth as a branch office. 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 the CRA by the banks which are parties to this transaction. Such review for a state-chartered bank includes examination of 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. Upon review, the Division has noted that both Hyde Park and Commonwealth received "Satisfactory" ratings in their most recent CRA performance examinations.
Other matters related to this transaction were the subject of telephone conversations or written communications. Certain of these matters were addressed in supplemental filings dated October 29, 2008 and November 17, 2008.
Upon review of this application with reference to the relevant statutory and regulatory criteria, the Division has concluded that all such requirements have been met and that consummation of the proposed merger would be in the public interest. On the basis of these considerations, approval is granted for Commonwealth to merge with and into Hyde Park under the charter and by-laws of Hyde Park and the name Commonwealth Co-operative Bank pursuant to Massachusetts General Laws chapter 170, section 25. Approval is also granted for Hyde Park to maintain the sole banking office of Commonwealth as a branch office.
The approvals granted herein are subject to the following conditions:
November 19, 2008
Steven L. Antonakes
Commissioner of Banks