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Haverhill Bank ("Haverhill" or the "Petitioner"), Haverhill, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with Northeast Community Credit Union ("Northeast"), Haverhill, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 170, section 26F and chapter 171, section 78B. Under the terms of a Consolidation Agreement dated July 25, 2007, Northeast will merge with and into Haverhill under the charter, by-laws and name of Haverhill Bank. The four banking offices of Northeast will be retained as branch offices after the merger.
Notice of the application has been posted and published. The time period for interested parties to submit comments has passed. During the open comment period, four comments, all favorable, were received including letters from public officials, as well as a private citizen and a non-profit organization. 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 financial institution, the competitive effects of the proposed transaction, the interests of the depositors of each financial institution, the future prospects of the financial institutions and the convenience and needs of the communities to be served by the consolidated entity as well as the performance of each financial institution under the Commonwealth's Community Reinvestment Act ("CRA"), General Laws chapter 167, section 14 and its implementing regulation, 209 CMR 46.00 et seq.
The authority for the merger of a state-chartered credit union with and into a state-chartered co-operative bank was established by Chapter 75 of the Acts of 1992 and is codified at section 26F of said chapter 170 and section 78B of said chapter 171 of the Massachusetts General Laws. The application for the merger of Northeast with and into Haverhill Bank is the first application for the merger of a state-chartered credit union with and into a state-chartered co-operative bank before the Division since the law was enacted in 1992. Accordingly, this merger is viewed by the Division and other applicable regulatory agencies as a case of first impression.
As noted above, this is the first such merger application under a Massachusetts statute that was passed seventeen years ago. The record of this transaction reflects that the NCUA has asserted its federal jurisdiction over this merger, particularly relative to procedures for notice to members of Northeast and the voting process for the membership of Northeast relative to this transaction. Copies of correspondence and other materials from Northeast and the NCUA on this matter have been reviewed by the Division. The notices, statements, ballot forms, and other documents and procedures required by the NCUA in its review of this transaction are separate and distinct from those required by Massachusetts law. The extensive review of the documents submitted to the NCUA, as well as the requests of the NCUA for such information, impacted the Division's review and analysis of this merger. The timeline for this application reflects the review process for approval of the information to be distributed to members of Northeast as part of the voting procedure to comply with the procedures established by the NCUA.
Haverhill Bank is a state-chartered co-operative bank in mutual form. As of a call report dated September 30, 2008, it had total assets of approximately $165.1 million. Haverhill Bank operates its main office and its two branch offices in Haverhill, Massachusetts. The deposits of Haverhill 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.
Northeast is a state-chartered credit union which operates its main office and three branch offices in Haverhill. As of June 30, 2008, Northeast had total assets of approximately $97.1 million. The deposits of Northeast are insured by the National Credit Union Administration (NCUA) and the Massachusetts Credit Union Share Insurance Corporation for deposits in excess of the NCUA's insurance limits.
The merger application summarizes the primary service areas of Haverhill and Northeast. Haverhill considers its primary service area to be the communities of Haverhill and Groveland, Massachusetts, as well as the communities of Atkinson and Plaistow in New Hampshire. Northeast considers its primary service area to be the City of Haverhill. It is noted that the membership by-law of Northeast covers persons who work or live in Haverhill and contiguous towns, as well as Essex County and Middlesex County. The continuing bank intends to continue to serve the combined primary service area of both Haverhill and Northeast.
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 minimal increase 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 the overall banking structure of the Commonwealth. Although the Division is aware of one unconsummated transaction, there were nine additional financial institutions, at the time the application was filed by Haverhill and Northeast, that operated banking offices in Haverhill including two national banks, a state-chartered savings bank and a federally-chartered savings bank, as well as four state-chartered credit unions and one federally-chartered credit union. 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 Haverhill Bank, as well as eight directors of Northeast. Additionally, the Board of Directors will include one member of Northeast who may or may not be an existing director of Northeast. The management of the combined institution is also detailed in the application documents. The applicant argues that the combined institution will produce greater efficiencies and achieve higher earnings to allow for steady and sound growth. Upon consolidation, the continuing institution will meet all required capital standards. Accordingly, upon review, financial and managerial considerations support the application.
As a result of the merger, Haverhill Bank 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. It is the intent of the continuing bank to offer all of the products presently offered by Haverhill Bank. These include a variety of types of loans, deposits, non-deposit products and related internet banking services. Haverhill Bank believes that the products and services that it currently offers include all products and services currently available to customers of Northeast. MassSAVE HEAT loans, safe deposit boxes, and night deposit drop boxes for business checking accounts are identified in the application as products and services currently offered by Haverhill Bank to its customers that are not presently available to customers of Northeast. Additionally, the continuing bank will be able to offer to all of its customers larger loans, as well as a wider array of commercial loans. Customers of both institutions also will benefit from the anticipated development of new commercial deposit products by the combined institution. 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. The applicant bank has addressed this requirement based upon its intent to provide the aforementioned products and services to customers, as well as its anticipated investments in signage and facilities upgrades. According to the Petitioner, the merger will enhance the continuing institution'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 institution that there will be no jobs eliminated as a result of the proposed transaction and that the combined institution has the ability to provide future employment opportunities for Massachusetts residents. 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 financial institutions which are parties to this transaction. Such review for sate-chartered banks and state-chartered credit unions includes examination of personnel by the Division as well as analysis of concerns received from the financial institution's community and its response to those concerns fairly raised. A publicly available descriptive rating and evaluation noted that Haverhill Bank and Northeast both received "Satisfactory" ratings in their most recent CRA performance examinations.
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 including comments received, approval is granted for Northeast to merge with and into Haverhill Bank under the charter, by-laws and name of Haverhill Bank pursuant to Massachusetts General Laws chapter 170, section 26F and chapter 171, section 78B. Approval is also granted for Haverhill Bank to maintain the four banking offices of Northeast as branch offices.
The approvals granted herein are subject to the following conditions:
November 20, 2008
Steven L. Antonakes
Commissioner of Banks