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Mechanics' Co-operative Bank ("Mechanics'" or the "Petitioner"), Taunton, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with Bridgewater Co-operative Bank ("Bridgewater"), Bridgewater, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 170, section 25 under the terms of a Consolidation Agreement dated June 19, 2007. The Consolidation Agreement provides for the merger of Bridgewater with and into Mechanics' under the charter, by-laws and name of Mechanics' Co-operative Bank. The sole banking office of Bridgewater 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.
Mechanics' is a state-chartered co-operative bank in mutual form. As of June 30, 2007, it had total assets of approximately $169.2 million. Mechanics' main office is located in Taunton, Massachusetts and it operates one branch office in Taunton and another branch office in Dighton. The deposits of Mechanics' 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.
Bridgewater is a state-chartered co-operative bank in mutual form with its sole banking office in Bridgewater. As of June 30, 2007, Bridgewater had assets of approximately $13.4 million. The deposits of Bridgewater 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 areas of both banks are their respective CRA Assessment Areas, as discussed in the merger application. Mechanics' considers its CRA Assessment Area as the communities of Taunton, Raynham, Berkley and Dighton. Bridgewater considers its CRA Assessment Area as the community of Bridgewater. The continuing bank intends to continue to serve the combined primary service area of both 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 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 Bridgewater operates from only one banking office and has only approximately $13.4 million in assets as of June 30, 2007. Also, as stated above, the communities in the primary service area for the merging banks are different, even though Mechanics' makes loans and takes deposits from Bridgewater. Mechanics' and Bridgewater do not have any banking offices located in the same city or town. Additionally, it is noted that there are approximately twelve banks with banking offices located in the combined primary service area of the merging banks. Therefore, customers will be able to choose 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.
The application notes that, at the time of the merger, the continuing institution's Board of Directors will consist of all of the persons currently serving as directors of Mechanics' and four directors of Bridgewater. 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 the application.
As a result of the merger, Mechanics' 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 Mechanics.' These include a variety of types of loans, deposits, non-deposit products and internet banking services. Mechanics' believes that the products and services that it currently offers include all products and services currently available to customers of Bridgewater. Customers also will benefit from the anticipated development of new 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 plans for capital investments to upgrade the premises and equipment for the Bridgewater office. 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 that there will be no jobs eliminated as a result of the proposed transaction and that the combined bank 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 banks which are parties to this transaction. Such review for a state-chartered bank includes examination of personnel by 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 Mechanics' and Bridgewater received "Outstanding" and "Satisfactory" ratings, respectively, 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 resolved by the submission of supplemental filings dated September 20, 2007 and October 4, 2007.
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 Bridgewater to merge with and into Mechanics' under the charter, by-laws and name of Mechanics' Co-operative Bank pursuant to Massachusetts General Laws chapter 170, section 25. Approval is also granted for Mechanics' to maintain the sole banking office of Bridgewater as a branch office. The approvals granted herein are subject to the following conditions:
October 10, 2007
Steven L. Antonakes
Commissioner of Banks