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Butler Bank ("Butler'" or the "Petitioner"), Lowell, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with Marlborough Co-operative Bank ("Marlborough"), Marlborough, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 170, section 26D under the terms of a Consolidation Agreement and Plan of Consolidation (the "Agreement") dated September 8, 2008. The Agreement provides for the merger of Marlborough with and into Butler under the charter, by-laws and name of Butler Bank. Butler and Marlborough are direct subsidiaries of Butler Bancorp, Inc., a wholly owned subsidiary of Butler Bancorp, MHC, a mutual holding company. Accordingly, Butler and Marlborough are affiliates. The two banking offices of Marlborough will be retained as branch offices of the continuing bank 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"), section 14 of chapter 167 of the General Laws and its implementing regulation, 209 CMR 46.00 et seq.
Butler was chartered as a mutual co-operative bank in 1901. Butler reorganized into a mutual holding company, Butler Bancorp, MHC, with a mid-tier holding company, Butler Bancorp, Inc. in 2006. Marlborough was chartered as a mutual co-operative bank in 1890. In 1999, Marlborough was reorganized into a mutual holding company, Marlborough Bancorp, MHC. The two mutual holding companies, Butler Bancorp, MHC, and Marlborough Bancorp, MHC, merged in 2007. The merger of the mutual holding companies resulted in Butler Bancorp, Inc., continuing as a wholly-owned subsidiary of Butler Bancorp, MHC, and controlling two state-chartered co-operative banks in stock form, Butler and Marlborough.
As of June 30, 2008, Butler had total assets of approximately $244 million. Butler maintains its main office in Lowell and it operates its only branch office in Andover. The deposits of Butler 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 coverage limits.
As of June 30, 2008, Marlborough had total assets of approximately $86.9 million. Marlborough operates its main office and its only branch office in Marlborough. The deposits of Marlborough 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 coverage limits.
The merger application summarizes the primary service areas of both banks. Butler considers its primary service area to be the communities of Lowell, Andover, Billerica, Chelmsford, Dracut, Dunstable, Groton, Pepperell, Tewksbury, Tyngsboro, and Westford, Massachusetts and Pelham, New Hampshire. Marlborough considers its primary service area to be the City of Marlborough. 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. In analyzing the impact of a proposed transaction on banking competition, the Division considers various factors including the competitive impact of the proposed transaction on a community-by-community basis, as well as on the overall banking structure of the Commonwealth. As stated above, the communities in the primary service area for the merging banks are different. Butler and Marlborough do not have any banking offices located in the same city or town and there are no communities in Butler's primary service area that are contiguous to the City of Marlborough, the only community in Marlborough's primary service area. Additionally, the Division has noted that a diverse number of banks and credit unions operate banking offices within the combined primary service area of the merging banks. Therefore, customers will continue to be able to choose from a variety of banking options. Additionally, weight must be given to the fact that Butler Bancorp, Inc. could negate competition in any form between its bank subsidiaries. Accordingly, the Division's review of the transaction's impact on competition does not raise concerns which would preclude its approval.
As a result of the merger, Butler 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 Butler. These include a variety of types of lending products including commercial real estate lending. Butler believes that the products and services that it currently offers include, at a minimum, all products and services currently available to customers of Marlborough. Customers also will benefit from improved efficiency in the delivery of the products and services of the combined affiliates. 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 banking premises. According to the Petitioner, the merger will enhance the continuing bank's financial capability to invest in the communities it serves, develop new products and services for its customers and create new jobs in the future. These and other factors are also cited as support for meeting such statutory 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 Butler and Marlborough received "Satisfactory" and "High Satisfactory" ratings, respectively, in their most recent CRA performance examinations.
The application notes that, upon consummation of the merger, the persons serving on the continuing institution's Board of Directors will be all of the directors of Butler Bancorp, MHC and Butler Bancorp, Inc. The management of the combined bank is also detailed in the application documents. Financial economies and service capabilities which would result from the transaction of these two affiliated banks 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 approval of the application.
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 Marlborough to merge with and into Butler under the charter, by-laws and name of Butler Bank pursuant to Massachusetts General Laws chapter 170, section 26D. Approval is also granted for Butler to maintain the two banking offices of Marlborough as branch offices. The approvals granted herein are subject to the following conditions:
October 17, 2008
Steven L. Antonakes
Commissioner of Banks