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Eastern Bank Corporation (the "Petitioner"), Boston, Massachusetts has petitioned the Board of Bank Incorporation (the "Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 for approval to acquire ownership and control of Wainwright Bank & Trust Company, ("Wainwright") Boston, Massachusetts. The Petitioner is the mutual holding company for Eastern Bank, Boston, Massachusetts. The Petitioner's application before the Board is part of a multi-step transaction in which an interim Massachusetts trust company will be formed as a wholly owned subsidiary of Eastern Bank Corporation for the purpose of effecting the acquisition of Wainwright. An application for the subsequent merger of Wainwright with and into Eastern Bank is, by statute, subject to approval by the Division of Banks.
Notice of the application was published and posted as directed by the Board, thereby affording opportunity for interested parties to submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The Board held a public hearing on the petition of Eastern Bank Corporation on October 12, 2010. The comment period on the proposed transaction ended on October 20, 2010. Subsequent to the public hearing and within the public comment period Wainwright held its stockholders' meeting on this proposed transaction and the stockholders voted in favor of the transaction. No stockholders or other person or entity submitted a comment to the Board prior to or after the public hearing or after the announced vote of the shareholders.
The Board has reviewed the application and the oral testimony received at the public hearing. That review focused on the statutory and administrative criteria applicable to such transactions which include, among other things, whether competition among banking institutions will be unreasonably affected; whether public convenience and advantage would be promoted; and the record of performance under the Community Reinvestment Act ("CRA") by the bank directly involved in a transaction or as subsidiaries of a holding company. As in any transaction, consideration is also given to the financial and management components of a proposed acquisition. The additional statutory requirements set out in sections 2 and 4 of said chapter 167A were also significant factors in the Board's deliberations on the matter before it.
One such statutory provision requires the Board to have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and the MHPF's various affordable housing loan programs. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated September 27, 2010.
Eastern Bank Corporation is a Massachusetts mutual holding company organized in 1989 under Massachusetts General Laws Chapter 167H and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended ("BHC Act"). Eastern Bank Corporation is headquartered in Boston, Massachusetts. As a bank holding company, one of its primary purposes is to serve as a source of strength for its subsidiaries and affiliates. Eastern Bank Corporation's primary business is serving as the holding company of Eastern Bank. Eastern Bank Corporation has not elected "financial holding company" status under Section 4(1)(1)(C)(i) of the BHC Act.
At June 30, 2010, Eastern Bank Corporation had consolidated assets of approximately $6.7 billion. As of the same date, Eastern Bank Corporation maintained: (a) a total risk-based capital ratio of 18.05%; (b) a Tier 1 risk-based capital ratio of 16.79%; and (c) a Tier 1 leverage capital ratio 10.79%. Eastern Bank Corporation is a "well capitalized" bank holding company under the regulations of the Federal Reserve.
Eastern Bank is a Massachusetts-chartered trust company headquartered in Boston, and is a wholly-owned subsidiary of Eastern Bank Corporation. Eastern Bank was chartered as a mutual savings bank in 1818. Eastern Bank's deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by law. Eastern Bank reorganized to the mutual holding company form of organization in 1989, the first bank to do so in Massachusetts. Eastern Bank accepts deposits and offers a full range of financial products and services for consumers, businesses, investors, government agencies and nonprofit organizations through its network of 81 banking offices located in eastern Massachusetts. On July 31, 2004, Eastern Bank was converted, by operation of law, from a state-chartered savings bank to a state-chartered trust company.
At June 30, 2010, Eastern Bank had consolidated assets of approximately $6.7 billion, and total deposits of approximately $5.4 billion. Eastern Bank is a "well capitalized" bank under the regulations of the FDIC. Eastern Bank's net income was approximately $38 million for the first six months ending June 30, 2010.
Interim Bank is a de novo Massachusetts trust company being formed as a wholly owned subsidiary of Eastern Bank Corporation for the purpose of effectuating the acquisition of Wainwright.
Wainwright is a Massachusetts trust company headquartered in Boston, which was organized on April 24, 1987. The common stock of Wainwright is publicly traded. Wainwright offers a broad range of deposit accounts, loans and other financial products for consumers, businesses, government agencies and non-profit organizations through its network of twelve banking offices in the Boston area.
At June 30, 2010, Wainwright had consolidated assets of approximately $1.1 billion and consolidated stockholders' equity of approximately $75.8 million. As of the same date, Wainwright maintained: (a) a total risk-based capital ratio of 11.76%; (b) a Tier 1 risk-based capital ratio of 9.84%; and (c) a Tier 1 leverage capital ratio 6.96%. Accordingly, Wainwright is a "well capitalized" bank under the regulations of the FDIC. Wainwright's net income was approximately $4.3 million for the first six months ending June 30, 2010.
The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. The application contained an analysis utilizing the various tests used by federal agencies. The analysis demonstrates that consummation of the transaction will not result in undue concentration of banking resources in the specified banking markets in Massachusetts. Traditionally, however, this Board has not limited its review to those previously cited federal standards in its consideration of whether competition will be unreasonably affected. Rather it is the position of this Board to consider a transaction in light of its impact on the citizens, communities and banking structure in the Commonwealth on a community-by-community basis instead of by variously grouped markets. The Board has considered that the branch locations of Eastern Bank and Wainwright are largely complementary, overlapping only in the municipalities of Boston and Newton. Upon consummation of the transaction, the Herfindahl-Hirschman Index ("HHI") will increase by approximately 2.07 points in the relevant geographic market, the area comprised of the cities and towns of Arlington, Belmont, Boston, Brookline, Cambridge, Chelsea, Everett, Malden, Medford, Newton, Somerville, Waltham and Watertown, and the resulting bank will control less than 2.10% of all deposits in the market. On review, the Board finds that the transaction will not unreasonably affect competition for the reasons cited as well as the fact that a number of diverse financial institutions will continue to provide competitive deposit and credit services throughout the affected areas and banking markets served by the continuing institution.
The Board has considered whether public convenience and advantage will be promoted by the proposed transaction. The transaction will permit Eastern Bank and Wainwright to pool their financial resources, to reduce costs, to diversify risk, and to better serve their communities by offering a broader array of products and services to consumers and businesses with a greater range of features through a more extensive network of banking offices. Customers of both banks will benefit from the increased number of branch and ATM locations. Customers of Wainwright will have access to more products and services including, among others: enhanced on-line banking services; cash management services; Small Business Administration loans; commercial and industrial loans; and mutual funds and other nondeposit investment products.
In connection with the transaction, Eastern Bank has no current plans to close any of its or Wainwright's branch offices. Therefore, customers of both banks will be able to conduct their banking business at a greater number of locations over a much larger geographic area. The Board has considered the Petitioner's analysis of "net new benefits" related to the transaction with respect to the statutory criteria. The term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors. In its written and oral testimony the Petitioner directly addressed the statutory criteria. Among other matters, it detailed the capital investments to be made in technology, operations and improvements to Wainwright's branch office network. The Petitioner also commented on the overall increase in employment at Eastern Bank since its last acquisition approved by this Board. The recent authority granted for Eastern Bank to open a branch office in West Roxbury is also cited as evidence of continued job growth and the expansion of Eastern Bank's branch network as well as the convenient office availability of its banking services. The Board has considered the application and testimony submitted by the Petitioner and finds that consideration of public convenience and advantage including net new benefits weigh in favor of approving the proposed transaction.
Related to the issue of public convenience and advantage is the record of performance under the CRA by the banks or subsidiary banks which are the parties to a transaction. Such a review for a state-chartered bank includes examination by personnel of the Division of Banks as well as analysis of concerns received by the bank's community and its response to those concerns fairly raised. For other institutions, the Board looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency. The Board has noted that the Petitioner's subsidiary bank, Eastern Bank, has an "Outstanding" rating in its most recent examination of performance under CRA by the FDIC. The Board has noted that Wainwright also has an "Outstanding" rating at its most recent examination conducted by the FDIC.
The financial and managerial aspects of any transaction are a significant consideration of the Board as they may affect the continuing holding company's ability to serve the banking public and to actively compete with other financial institutions as well as to maintain its capital ratio standards for a safe and sound institution. The Board has noted that this is a cash transaction in the amount of approximately $163 million to be paid by Eastern Bank Corporation. The Petitioner states that the enhanced financial strength of the combined banks will ensure that the resulting institution will be able to offer financial products and services at competitive rates. Upon consummation of the transaction Eastern Bank Corporation will remain a well capitalized holding company under applicable bank regulatory guidelines. At the public hearing there was extensive discussion, in general, on the various measures of capital adequacy and the distinctions among the analysis of the different ratios. Pursuant to the terms and conditions of the Merger agreement Eastern Bank Corporation and Eastern Bank will cause two current members of Wainwright's Board of Directors to become directors of Eastern Bank, trustees of Eastern Bank Corporation, and corporators of Eastern Bank Corporation immediately after the effective time of the transaction. This fact and other aspects of the managerial structure of the continuing entities have been reviewed by the Board. The Board's consideration of the financial and managerial factors are consistent with approval of the application.
The application, supporting documents, as well as the testimony received at the public hearing have established a comprehensive record on this petition, which has been reviewed consistent with statutory provisions and the policies of the Board. Based on the record of this matter considered in light of all relevant statutory and administrative requirements, the Board finds that public convenience and advantage will be promoted and that competition among banking institutions will not be unreasonably affected and that the record of performance under CRA by the banks involved in this transaction are consistent with its approval. Having considered the record established on this application, the Board has found that the applicable statutory and administrative criteria have been met. Accordingly, the Board has concluded that the petition should be approved.
In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Eastern Bank Corporation to acquire Wainwright Bank & Trust Company. In addition, the Board also grants approval for the formation of a new bank in the form of a trust company for the purpose of effecting this transaction.
The approvals herein are subject to the condition that all related transactions are completed within one year of the date of this Decision.
Steven L. Antonakes
Commissioner of Banks
Navjeet K. Bal
Commissioner of Revenue
Timothy P. Cahill
Treasurer and Receiver-General
November 9, 2009