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Decision

Decision Decision of October 12, 2017

Date: 10/12/2017
Organization: Division of Banks
  • Petitioner: South Shore Bank
  • Respondent: Division of Banks

Table of Contents

Decision relative to the merger of The Braintree Co-operative Bank, Braintree, Massachusetts with and into South Shore Bank, Weymouth, Massachusetts

South Shore Bank, Weymouth, Massachusetts has applied to the Division of Banks (Division) for authority to merge with The Braintree Co-operative Bank, Braintree, Massachusetts (Braintree Bank) pursuant to the provisions of Massachusetts General Laws chapter 167I, section 3. Under the terms of a Merger Agreement and a Plan of Merger, each dated July 12, 2017, Braintree Bank will merge with and into South Shore Bank under the charter, by-laws, and name of South Shore Bank (Continuing Institution). The main office of South Shore Bank will remain the main office of the Continuing Institution after consummation of the proposed merger, and the Continuing Institution will retain the two banking offices of Braintree Bank as branch offices.  The former Braintree Bank branches will, for a period of up to three years, operate under the name “Braintree Co-Operative Bank, a division of South Shore Bank.”  The merger application was filed in connection with a multi-step transaction in which, in addition to the merger of Braintree Bank with and into South Shore Bank, Braintree Bancorp MHC (Braintree MHC), a Massachusetts mutual holding company and the sole stockholder of Braintree Bank, will merge with and into South Shore Bancorp, MHC (South Shore MHC), a Massachusetts mutual holding company and the indirect stockholder of South Shore Bank.      

Legal and Procedural Requirements

Notice of South Shore Bank’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, and no comments were received. The Division reviewed the application and supplementary materials submitted by South Shore Bank in accordance with applicable law, including 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” will be promoted by approval of the proposed transaction. The Division considered both banks’ records of performance under the Community Reinvestment Act (CRA) as well as financial and managerial factors.

The merger of Braintree MHC and South Shore MHC will be completed according to the authority set forth in Massachusetts General Laws chapter 167H, section 7.  Pursuant to Massachusetts General Laws chapter 167A, section 3, because Braintree MHC will merge with and into South Shore MHC simultaneously with the merger of the subsidiary banks and since the bank merger is approved by the Division, an application to the Commonwealth's Board of Bank Incorporation is not required for the merger of the holding companies.   In reviewing the proposed transaction, the Division must receive notice from the Massachusetts Housing Partnership Fund (MHPF) that satisfactory arrangements have been made consistent with Massachusetts General Laws chapter 167A, section 4 and the MHPF’s affordable housing loan programs. The Division received notice from the MHPF that satisfactory arrangements have been made for this transaction in a letter dated September 28, 2017.  In addition, the Depositors Insurance Fund and The Co-operative Central Bank each confirmed in letters dated September 11, 2017 and September 8, 2017, respectively, that satisfactory arrangements have been made in conjunction with the Bank Merger relative to providing excess deposit insurance for deposits of the Continuing Institution. 

The Parties

South Shore Bank is a Massachusetts-chartered stock savings bank and is the sole banking subsidiary of South Shore Bancorp, Inc., a Delaware corporation and wholly-owned subsidiary of South Shore MHC. Upon consummation of the proposed transaction the Continuing Institution will remain a wholly-owned subsidiary of South Shore Bancorp, Inc. and the indirect subsidiary banking institution of South Shore MHC.  In addition to its main office in Weymouth, Massachusetts, South Shore bank operates 15 full-service branch offices, all of which are located in the Massachusetts counties of Norfolk and Plymouth. As of June 30, 2017, South Shore Bank had total assets of approximately $1.1 billion and total deposits of approximately $847.9 million. South Shore Bank offers a full range of personal and business checking, deposit, and loan products and services. South Shore Bank’s deposits are insured up to allowable limits by the Federal Deposit Insurance Corporation (FDIC), and amounts in excess of FDIC insurance are insured by the Depositors Insurance Fund. 

Braintree Bank is a Massachusetts-chartered co-operative bank and is the sole banking subsidiary of Braintree MHC. Braintree Bank’s main office and sole branch office are located in Braintree, Massachusetts, which is located in Norfolk County.  As of June 30, 2017, Braintree Bank had total assets of approximately $258.6 million and total deposits of approximately $237.2 million. Braintree Bank also offers a range of personal and business checking, deposit, and loan products and services. Braintree Bank’s deposits are insured up to allowable limits by the FDIC, and amounts in excess of FDIC insurance are insured by the Share Insurance Fund of the Co-operative Central Bank.

Competition

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 upon, 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 the affected market into a single value. In this case, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources. 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.  In that regard, South Shore Bank presented information that the proposed transaction will not have a significant adverse effect on competition nor result in an undue concentration of banking resources in the communities served by the Continuing Institution.  South Shore Bank and Braintree Bank each have banking offices located in Norfolk County, Massachusetts.  However, Braintree is the only city or town in which both banks operate at least one banking office.  A number of other banks and financial institutions also maintain banking offices in Braintree, thereby minimizing any impact that the proposed transaction will have on the citizens and banking structure in that community.  Furthermore, the application indicates that the banking offices of Braintree will be maintained as branch offices of the Continuing Institution.  Accordingly, the review of the transaction’s impact on competition supports its approval.

Public Convenience and Advantage

The Division next considered the record of the application to determine whether public convenience and advantage will be promoted. South Shore Bank indicates that improved asset size and operational efficiencies resulting from the proposed transaction will enable it to better compete with larger banks to the benefit the banking public.  Specifically, and as discussed further below, the customers of both banks will have access to a larger branch and ATM network, and new or improved products and services, including a separate online system built specifically for businesses. 

In determining whether to approve a petition under the statutory criteria, the Division is required to consider a showing of “net new benefits” related to the transaction. That term as set out in section 3 of said chapter 167I includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors that the Division may deem necessary. South Shore Bank addressed this requirement of the statute. The Continuing Institution plans to make capital investments in new signage and equipment in connection with the integration of the banks’ systems, operations, and banking offices. With regard to employment, South Shore Bank does not expect any reductions in its workforce.  South Shore Bank also believes that additional jobs will be created over time as a result of the merger.  The materials submitted as part of the application indicate that customers of Braintree Bank may benefit from expanded and enhanced products and services, including access to insurance products and services.  As mentioned above, in connection with the merger, the Continuing Institution plans to maintain all of the banking offices of Braintree Bank as branch offices.  South Shore Bank disclosed, however, that it intends to close its existing branch office in Braintree, Massachusetts in early 2018 due to the expiration of its real estate lease.  Customers of both banks will find additional convenience conducting their banking business from the larger branch and ATM network of the Continuing Institution. Accordingly, the factors related to public convenience and advantage, including net new benefits, are consistent with approval of South Shore Bank’s application.

Related to the issue of public convenience and advantage is the record of CRA performance by the banks that are parties to this transaction. Such review for Massachusetts-chartered banks includes examination by personnel of the Division. A publicly available descriptive rating and evaluation by a federal bank regulatory agency may also be considered. South Shore Bank received “Satisfactory” ratings in its most recent CRA performance evaluations conducted concurrently by the Division and the Federal Reserve Bank of Boston, each as of April 9, 2012. Braintree Bank also received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of October 1, 2015.  The Division’s consideration of the CRA performance of South Shore Bank and Braintree Bank also supports the approval of the proposed merger.

Financial and Managerial Considerations

The Division also reviews and considers the financial and managerial aspects of the proposed transaction. No consideration will be paid to consummate the proposed transaction.  Materials provided as part of the application indicate that upon consummation of the transaction, the Continuing Institution will meet all regulatory capital requirements.

Materials submitted in connection with the merger application indicated that upon consummation of the proposed transaction the Board of Trustees of South Shore MHC and the Board of Directors of South Shore Bancorp, Inc. will consist of all of the individuals currently serving as trustees and directors of the respective institutions and all of the individuals currently serving on the Board of Directors of Braintree MHC.  The Board of Directors of the Continuing Institution will consist of all of the individuals currently serving on the Board of Directors of South Shore Bank and all of the individuals currently serving on the Board of Directors of Braintree Bank.  Materials provided indicate that upon consummation of the proposed transaction, the initial senior management of South Shore MHC, South Shore Bancorp, Inc., and the Continuing Institution’s will consist of current executives from each bank. Accordingly, upon review, the financial and managerial considerations support approval of the application.

Conclusion

Upon review of the complete record of the application with reference to the relevant statutory and regulatory requirements, the Division concludes that all such requirements have been met, and that consummation of the proposed transaction is in the public interest. On the basis of these considerations, and subject to the conditions set forth below, approval is granted for Braintree Bank to merge with and into South Shore Bank under the charter, by-laws, and name of South Shore Bank pursuant to section 3 of chapter 167I of the General Laws. Upon consummation of the merger, the charter of Braintree Bank will cease to exist; the separate existence of Braintree Bank shall cease; and all rights, privileges, powers, franchises, properties, assets liabilities, and obligations of Braintree Bank shall be vested in and assumed by the Continuing Institution.  Approval is also granted for South Shore Bank to maintain the banking offices of Braintree Bank as branch offices.

The approvals granted herein are subject to the following conditions:

  1. That the proposed merger shall not become effective until a Certificate signed by the Presidents      and Clerks, or other duly authorized officers of each bank, indicating that each institution has complied with the provisions of Massachusetts General Laws chapter 167I, section 3 has been returned with my endorsement thereon;
  2. That the proposed merger shall not become effective unless the Articles of Merger with my endorsement thereon are filed with the Secretary of State; and
  3. That the proposed merger shall be consummated within one year of the date of this Decision.

 

 

 

 

       Terence A. McGinnis_____                                              October 12, 2017____

     Commissioner of Banks                            

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