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Pursuant to the provisions of Massachusetts General Laws chapter 167H, section 7, clause (2), as well as General Laws chapter 168, section 34A and chapter 170, section 26A, East Boston Savings Bank ("East Boston"), East Boston, Massachusetts has applied to the Division of Banks (the "Division") to merge with Mt. Washington Co-operative Bank ("Mt. Washington"), South Boston, Massachusetts. Under the terms of the Agreement and Plan of Merger dated as of July 20, 2009, Mt. Washington will merge with and into East Boston under the charter and by-laws of East Boston Savings Bank. All of the banking offices of Mt. Washington will be retained after the merger. Meridian Interstate Bancorp, Inc., ("Bancorp"), East Boston, Massachusetts is the stock holding company for East Boston. Bancorp's parent is Meridian Financial Services Incorporated, East Boston, Massachusetts, a mutual holding company. Although Mt. Washington is in mutual form and East Boston is in stock form, the transaction is authorized under Massachusetts General Laws chapter 167H, section 7, clause (2) since Meridian Financial Services Incorporated is a mutual holding company and East Boston is its subsidiary banking institution.
Notice of the application has been posted and published. The time period for interested parties to submit comments has passed. During the open comment period, one comment was received from a housing group related to both banks' mortgage programs. The Division received a response to that comment as well as a separate supplemental filing. That supplemental filing included responses to inquiries made by the Division, as well as independent appraisal analyses of the fair value of Mt. Washington. 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 the 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.
East Boston was chartered as a mutual savings bank in 1848. It reorganized into the mutual holding company form of organization after receiving such approvals from the Division and the Board of Bank Incorporation in 1991. Accordingly, East Boston is the subsidiary banking institution in stock form of a mutual holding company, Meridian Financial Services Incorporated. In 2006, approval was granted for the organization of the mid-tier holding company Meridian Interstate Bancorp, Inc. In January 2008, a minority stock offering was completed by Meridian Interstate Bancorp, Inc. in which $89 million in net proceeds was raised. As of June 30, 2009, East Boston had total assets of approximately $1.1 billion. East Boston operates its main office and two branch offices in East Boston. Additionally, East Boston has two branch offices in Saugus and eight branch offices in Everett, Lynn, Melrose, Medford, Peabody, Revere, Wakefield and Winthrop, Massachusetts. Its deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") and the Deposit Insurance Fund ("DIF") of the Depositors Insurance Fund for amounts in excess of the FDIC's insurance limits.
Mt. Washington was chartered as a mutual co-operative bank in 1893. As of June 30, 2009, it had total assets of approximately $503.9 million. The main office of Mt. Washington is located in South Boston. Mt. Washington also operates two branch offices in South Boston, two branch offices in Dorchester and one branch office in Jamaica Plain, as a result of a merger. Its deposits are insured by the FDIC and the Share Insurance Fund of The Co-operative Central Bank for amounts in excess of the FDIC's insurance limits.
The merger application summarizes the primary service areas of both banks. East Boston's primary service area is its CRA Assessment Area, specifically the community of East Boston in the City of Boston, as well as the municipalities of Revere, Winthrop, Saugus, Peabody, Melrose, Everett, Lynn, Wakefield and Medford. Mt. Washington also considers its primary service area as the communities within its CRA Assessment Area, specifically the City of Boston neighborhoods of South Boston, Dorchester, Roxbury, Mattapan, Jamaica Plain, Roslindale, Hyde Park, and West Roxbury.
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 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 minimal increase in the HHI for the geographical areas analyzed. 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. East Boston and Mt. Washington do not have any banking offices located in the same city or town, except for the City of Boston. In fact, this transaction will result in East Boston expanding its geographic footprint into South Boston and other Boston neighborhoods, on the other side of the City. The Division has noted that there are numerous banks with banking offices located in the City of Boston. Therefore, customers of Mt. Washington will continue to be able to choose from a variety of banking options. The Division's analysis of the competitive impact of the merger weighs in favor of the proposed transaction.
The continuing institution's Board of Directors will consist of all of the persons currently serving as directors of East Boston immediately prior to the merger, although some senior management of Mt. Washington will remain with the continuing bank. The entire management team of the combined bank is detailed in the application documents. The applicant bank argues that the combined institution will produce some financial economies and additional service capabilities. Upon consolidation, the continuing bank will meet all required capital standards. The merger will address the issues raised in the public order entered into by Mt. Washington with the Division and the FDIC. Upon review, financial and managerial considerations support the application.
As a result of the merger, East Boston 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 to customers of East Boston and Mt. Washington. In particular, customers of Mt. Washington will benefit from a variety of types of deposits, loans, and non-deposit products not currently offered to them including certain business deposit accounts, reverse mortgages, consumer lines of credit and safe deposit boxes. 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 as set out in section 34A of said chapter 168 and section 26A of said chapter 170 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. In the application and a subsequent filing, the Petitioner has addressed this requirement of statute including capital investments. The continuing bank intends to make available to customers of both banks the aforementioned products and services presently offered by both banks. Additionally, the continuing institution will have a larger lending limit and believes that the merger should facilitate future job creation. Moreover, customers of both banks will have access to the banking offices of both banks which will be enhanced by capital investments in the form of improvements to branch facilities. 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 state-chartered banks includes examination by personnel of 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. The Division has noted that East Boston and Mt. Washington received "Outstanding" and "Satisfactory" ratings respectively in their most recent CRA performance examinations.
Upon review of the application with reference to the relevant statutory and regulatory requirements, this Division has concluded that the consummation of the proposed consolidation would be in the public interest. On the basis of these considerations including the one comment received, approval is granted to merge Mt. Washington with and into East Boston under the charter, by-laws and name of East Boston Savings Bank under the provisions of said clause (2) of section 7 of chapter 167H, said section 34A of chapter 168 and said section 26A of chapter 170 of the General Laws.
The approval granted herein is subject to the following conditions:
October 28, 2009
Steven L. Antonakes
Commissioner of Banks