Decision  Decision of November 28, 2012

Date:	11/28/2012
Organization:	Division of Banks

• Petitioner: Eastern Bank
• Respondent: Division of Banks

Decision relative to the merger of The Community Bank, a Massachusetts Co-operative Bank, Brockton, Massachusetts with and into Eastern Bank, Boston, Massachusetts

Eastern Bank (the "Petitioner"), Boston, Massachusetts, has applied to the Division of Banks (the "Division") for permission to merge with The Community Bank, A Massachusetts Co-operative Bank ("Community Bank"), Brockton, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 170, section 26D and Massachusetts General Laws chapter 172, section 36 under the terms of an Agreement and Plan of Merger. The Agreement provides for the merger of Community Bank with and into Eastern Bank under the charter, by-laws and name of Eastern Bank. After the merger, the banking offices of Community Bank will be retained as branch offices of Eastern Bank. The proposed merger is part of a multi-step transaction involving an application before the Board of Bank Incorporation by Eastern Bank Corporation to acquire Community Bank’s parent company, Campello Bancorp. Eastern Bank Corporation is the mutual holding company for Eastern Bank. The Board of Bank Incorporation approved the transaction in its Decision of this same date. As set out in the submitted documents, after the acquisition of Campello Bancorp by means of its merger with and into Eastern Bank Corporation, Community Bank will merge with and into Eastern Bank.

Notice of the Petitioner’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 Board of Bank Incorporation was informed that the Division had received correspondence from a consumer that questioned the implications of the transaction before the BBI and this transaction relative to excess insurance coverage. During the Board of Bank Incorporation hearing, Eastern Bank stated that it would allow this consumer and other depositors of Community Bank who may choose to withdraw funds that would no longer be covered by excess insurance to do so without penalty. The Division engaged in several discussions with the aforementioned consumer informing him that no financial penalty would result in his withdrawal of funds in excess of deposit insurance limits held in certificates of deposit at Community Bank.

The Division reviewed the application and all related documents in accordance with 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 would be promoted by approval of the proposed transaction. The record of performance under the Commonwealth's Community Reinvestment Act ("CRA"), Massachusetts General Laws chapter 167, section 14 and the Division's regulation, 209 CMR 46.00 et seq. also were factors considered by the Division.

Eastern Bank is the subsidiary banking institution in stock form resulting from a 1989 reorganization into a mutual holding company, Eastern Bank Corporation. On July 31, 2004, Eastern Bank was converted, by operation of law, from a state-chartered savings bank to a state-chartered trust company. As of June 30, 2012, Eastern Bank had total assets of approximately $8.1 billion and total deposits of approximately $6.5 billion. Eastern Bank’s main office is located in Boston, Massachusetts. According to its application, Eastern Bank operates approximately 94 banking offices, which are located primarily in eastern Massachusetts, stretching from Newburyport on the North Shore to Cape Cod. Eastern Bank’s deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by law.

Community Bank, founded in 1877, is a Massachusetts chartered co-operative bank with its main office in Brockton, Massachusetts. As of June 30, 2012, Community Bank had total assets of approximately $324.2 million and total deposits of approximately $280 million. Community Bank is not considered to be a "well capitalized" or "adequately capitalized institution." Community Bank is subject to a 2010 consent order with the Commissioner of Banks and the FDIC. In addition to its main office in Brockton, Community Bank operates four branch offices. Community Bank’s branch office locations are in Brockton, Bridgewater, Lakeville and Sandwich. Community Bank’s deposits are insured to allowable limits by the FDIC and by the Co-operative Central Bank for amounts in excess of the FDIC limits.

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 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 in the HHI for the geographical areas analyzed. 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. Although both Eastern Bank and Community Bank have banking offices in the municipalities of Brockton, Lakeville and Sandwich, it is noted that there are numerous banking offices of other banks located in those municipalities. Therefore, customers will continue to be able to choose, if they desire, from a variety of banking options. Accordingly, the review of the transaction’s impact on competition does not raise concerns which would preclude its approval.

As a result of the merger, Eastern Bank indicates that the banking public will benefit in several ways. According to the application, because of the weakened condition of Community Bank, the current customers of Community Bank and the communities it serves will benefit from Community Bank becoming part of a strong, financially sound organization that is well-managed and well-capitalized. Since Community Bank has been operating under the constraints of the 2010 Consent Order, it has had limited ability to pursue lending and other opportunities in the communities it serves. Accordingly, the greater financial strength of Eastern Bank Corporation will allow it and Eastern Bank to pursue such opportunities and to meet more fully the needs of the communities served by Community Bank. In the currently challenging environment, Eastern Bank’s financial strength will allow the resulting bank to be more flexible in modifying and restructuring delinquent residential home mortgages, an area in which Eastern Bank has had much success. An institution in a weakened financial condition or subject to a regulatory order, such as Community Bank, prior to the consummation of the merger, furthermore, does not have the available capital resources necessary to address problem loans. 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. In connection with the transaction, the Division also notes that Eastern Bank intends to maintain all of the current branch offices of Community Bank as branch offices of Eastern Bank. As set out in the application, as a result of the transaction, the current customers of Community Bank will acquire, as customers of the continuing bank, access to their accounts through Eastern Bank’s far larger network of branch offices and ATMs throughout Greater Boston and eastern Massachusetts. The resulting bank will offer many specialized lending and educational programs that assist low-and moderate- income borrowers and small businesses to obtain credit, including programs and services focused on financial literacy, first time home buyers, veterans, elders, and underserved and "under-banked" communities. The resulting bank will offer investment management products specifically tailored to meet the needs of non-profit organizations, furthermore. 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. Upon review, the Division has noted that Eastern Bank received an "Outstanding" rating in its most recent CRA performance evaluation and that Community Bank received a "Satisfactory" rating in its most recent CRA performance evaluation.

The application states that, in connection with the merger, the continuing institution's principal officers following the transaction will consist of the persons currently serving as principal officers of Eastern Bank, as well as certain individuals affiliated with either Community Bank or its parent corporation identified by Eastern Bank Corporation. 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 the application.

Based on the entire record of this matter and considered in light of all relevant statutory and administrative requirements, the Division concludes 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 conclusions, and subject to the conditions set forth below, approval is granted for The Community Bank, A Massachusetts Co-operative Bank to merge with and into Eastern Bank in conformity with the Agreement and pursuant to the provisions of Massachusetts General Laws chapter 170, section 26D, and Massachusetts General Laws chapter 172, section 36 as part of this multi-step transaction.

The approvals granted herein are subject to the following conditions:

1. that the merger of The Community Bank, A Massachusetts Co-operative Bank and Eastern Bank shall not become effective until a Certificate, signed by the Presidents and Clerks or other duly authorized officers of the banks involved in the merger, indicating that the institution has complied with the provisions of Massachusetts General Laws chapter 170, section 26D and Massachusetts General Laws chapter 172, section 36, has been returned with my endorsement thereon.
2. that such Certificate and Articles of Merger of The Community Bank, A Massachusetts Co-operative Bank and Eastern Bank shall be filed with the Secretary of State of the Commonwealth of Massachusetts and the Articles of Merger of Campello Bancorp and Eastern Bank Corporation be placed on public record with the Secretary of State of the Commonwealth of Massachusetts; and
3. that the proposed mergers shall be consummated within one year of the date of this Decision.

November 28, 2012
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Date


David J. Cotney
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Commissioner of Banks