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People's United Financial, Inc. (the "Petitioner" or "People's United"), Bridgeport, Connecticut, 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 LSB Corporation, North Andover, Massachusetts and its subsidiary bank, River Bank, North Andover, Massachusetts. The Petitioner is the bank holding company for People's United Bank, Bridgeport, Connecticut. The Petitioner's application before the Board is part of a multi-step transaction in which LSB Corporation will merge with and into the Petitioner. A merger of the subsidiary banks, River Bank with and into People's United 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 People's United Financial, Inc. on October 12, 2010. The comment period on the proposed transaction ended on November 4, 2010. Subsequent to the public hearing and within the public comment period LSB Corporation 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 votes of the shareholders.
The Board has reviewed the application and the oral testimony received at the public hearing. At the Board's request the Petitioner supplemented its application with documents submitted on October 7, 2010. The 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 subsidiary banks of the holding companies. 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 29, 2010.
People's United is a Delaware corporation and savings and loan holding company under the Home Owners Loan Act of 1933, as amended. People's United was formed for the purpose of effectuating the conversion of People's Bank and People's Mutual Holdings from a mutual holding company in structure to a stock holding company structure. People's United is regulated by the Office of Thrift Supervision (the "OTS") and subject to OTS examination, supervision and reporting requirements. At June 30, 2010, People's United had total assets of approximately $21.9 billion. As a bank holding company, one of People's United's primary purposes is to serve as a source of strength for its subsidiaries and affiliates. In this case, one of People's United's principal assets is 100% ownership of the capital stock of People's United Bank, a federally-chartered stock savings bank which is also subject to OTS examination, supervision and reporting requirements.
People's United Bank, ("the Bank") a diversified financial services company, was established as a state-chartered bank in 1842. The Bank reorganized under the mutual holding company structure in 1988. The Bank changed to a federally-chartered mutual holding company and a federal savings bank charter. In April 2007, People's United completed a conversion from a mutual holding company structure to a full publicly owned stock company. The Bank established a $60 million community foundation, at that time. The Bank officially changed its name to People's United Bank in June 2007. The Bank provides commercial banking, retail and small business banking, as well as insurance, retail investment, wealth management, brokerage and financial advisory and trust services to personal and business customers. It has its main office in Bridgeport, Connecticut and operates through its network of 300 branches in Connecticut, Vermont, New Hampshire, Maine, Massachusetts and New York. On December 28, 2007, the Board approved the application of People's United to acquire Chittenden Corporation, Burlington, Vermont and its six subsidiary banks. In Massachusetts, Flagship Bank and Trust Company, Worcester, and The Bank of Western Massachusetts, Springfield, were subsidiaries of Chittenden and acquired by People's United. At June 30, 2010, the Bank had consolidated assets of approximately $20 billion. The Bank's deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation.
LSB, a Massachusetts corporation headquartered in North Andover, Massachusetts is a one-bank holding company that conducts business through River Bank, a Massachusetts- chartered savings bank and wholly-owned subsidiary of LSB. River Bank was founded in 1868 as Lawrence Savings Bank (hence LSB Corporation). River Bank converted from mutual to stock form in 1986, and changed its name from Lawrence Savings Bank to "River Bank" in 2006. River Bank offers a range of commercial and consumer loan and deposit products from the five full-service branches it operates in Massachusetts and two full-service branches it operates in New Hampshire. As of June 30, 2010, LSB had total assets of approximately $796.9 million. As of June 30, 2010 River Bank had total deposits of approximately $492.5 million. LSB and River Bank were "well capitalized" for bank regulatory capital purposes as of June 30, 2010.
Bridgeport Merger Corporation, a Massachusetts corporation, is a wholly-owned subsidiary of People's United. Bridgeport Merger Corporation, which was formed solely for the purpose of effecting the acquisition of LSB, has not engaged in any business other than activities incidental to its organization and in connection with the ongoing transactions.
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, as well as on the overall banking structure of the Commonwealth of Massachusetts instead of by variously grouped markets. The Board has considered that River Bank and People's United Bank compete in one geographic market, the Boston-Cambridge-Quincy, MA-NH Metropolitan Statistical Area, where they rank 21 st and 35 th, respectively, in terms of deposit market share. People's United Bank and River Bank have market shares of 0.58% and 0.29%, respectively. Upon consummation of the transaction, the Herfindahl-Hirschman Index ("HHI") would not increase at all and numerous competitors would remain in the market. Consequently, such a combination would not have a significantly adverse effect on competition or on the concentration of banking resources in the Boston-Cambridge-Quincy, MA-NH Metropolitan Statistical Area. The only overlap of banking offices of River Bank's and the Bank's branch network in Massachusetts involves both banks having a branch office in Andover. Both banks also have a branch office in Derry, New Hampshire. Upon review, the Board does not believe the transaction will 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 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. As stated above, the transaction will permit People's United Bank and River Bank 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. Customers of River Bank will have access to numerous added products and services including but not limited to: wealth management, brokerage, retirement planning services, insurance services and expanded commercial loan capacity. People's United Bank, as a result of the transaction, will bring its extensive expertise as a provider of residential mortgage and other services to the communities served by River Bank. Customers of River Bank will be provided, among other things, with an expanded branch and ATM network. People's United Bank has approximately 300 branches and 400 ATMs across New England, compared to the seven branches, five in Massachusetts, and 10 ATMs of River Bank. 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 also 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. Testimony by the Petitioner and in response to questions by the Board addressed all of the components of the statutory test. 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 subsidiary banks which are the parties to this 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, People's United Bank, has an "Outstanding" rating in its most recent examination of performance under CRA by the OTS. The Board has noted that River Bank has an "Outstanding" rating at its most recent examination conducted by the FDIC and the Massachusetts Division of Banks.
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 acquisition is being accomplished by the merger of the two holding companies in a transaction financed by an exchange of cash. The cash consideration payable to eligible stockholders is being paid by People's United from cash on hand. At the public hearing extensive testimony was given to the financial analysis considered by LSB Corporation in supporting this proposed transaction. Upon consummation of the transaction, People's United will remain a well capitalized holding company under applicable bank regulatory guidelines. The Board is also aware of and has considered the fact that People's United is also currently seeking regulatory approval for the acquisition in New York of an institution which has $2.3 billion in assets. The Board is aware that the management organization of People's United will remain unchanged if this transaction is approved. The Board's consideration of the financial and managerial factors are supportive of approval of this transaction.
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 subsidiary 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 People's United Financial, Inc. to acquire LSB Corporation provided that the transaction is 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