The Petitioner has addressed the issue of whether competition among banks will be unreasonably affected by the Proposed Transaction. The application contained an analysis under the Herfindahl-Hirschmann Index (HHI), a key test utilized by federal agencies in assessing the competitive effects of a proposed acquisition. In this case, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources. The Board’s review, however, is not limited to such federal standards. It is the practice of the 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. In that regard, the Petitioner has presented information that the Proposed Transaction will not have a significant adverse effect on competition among banking institutions in any relevant market. There is no overlap in the branch networks of each bank. Specifically, Cape Cod Five and Fidelity Bank do not maintain banking offices in any of the same municipalities. Analyzing the branch networks on a more general level, Cape Cod Five’s primary service area consists of Barnstable County, Nantucket County, Dukes County, Town of Wareham, and Town of Plymouth. Fidelity Bank’s primary service area consists of certain municipalities located in Worcester, Middlesex, and Norfolk Counties. Consequently, Cape Cod Five and Fidelity Bank do not directly compete with one another and do not derive any significant number of loans or deposits from each other’s primary service areas. 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 each bank.
The Board also considered whether public convenience and advantage will be promoted by this transaction. For the Petitioner, the Proposed Transaction represents a strategic growth opportunity that will result in a stronger combined banking organization with a larger lending capacity which will be better positioned to compete against the larger, national banking organizations in the markets served by Mutual Bancorp and Fidelity MHC. The combined organization’s larger scale and customer base will lead, over time, to enhanced and technologically improved delivery of its financial products and services. The Petitioner believes that because Fidelity Bank will be a part of a larger banking organization serving communities throughout Eastern and Central Massachusetts, Cape Cod, the Islands and Southeastern Massachusetts, the customers of Fidelity Bank and the general community will benefit from the even greater financial strength and stability of the combined organization. As a result, Mutual Bancorp will become a stronger organization able to enhance Cape Cod Five’s and Fidelity Bank’s capacity to serve the communities each institution currently serves. The Petitioner has stated that Cape Cod Five and Fidelity Bank will continue to offer all of the products and services each currently offers to its respective customers. It has also been noted that Cape Cod Five currently provides a full suite of services and products, including, but not limited to, deposit, residential, commercial, and consumer lending, as well as some specialized products and services such as trust and wealth management, which are not currently offered by Fidelity Bank but are expected to be added or offered by referral following the Proposed Transaction. The Petitioner has also stated that the Proposed Transaction will strengthen Fidelity Bank’s capital position and increase Fidelity Bank’s ability, through loan participations with Cape Cod Five, to meet the borrowing needs of its larger commercial banking clients without increasing potential concentration risks at the respective banks.
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. As noted in their application, the existing main office and branches of Fidelity Bank will be maintained after the Proposed Transaction. The Petitioner also noted in its application that it expects to retain all of Fidelity Bank’s employees, thereby providing continuity for its customers and communities. The application provides that the Proposed Transaction will afford back-office efficiencies for the banks and should allow the combined organization to compete more effectively and improve profitability for each institution, thereby providing funds for future plans for capital investment, job creation, and expansion of consumer and business services.
Related to the issue of public convenience and advantage is the record of CRA performance by the subsidiary banks of the parties to this transaction. Such a review for a state-chartered bank includes examination by personnel of the Division. A publicly available descriptive rating and evaluation by a federal or other state bank regulatory agency may also be considered. The Board notes that Cape Cod Five received an “Outstanding” rating in its most recent CRA evaluation conducted jointly by the Division and the FDIC as of July 13, 2020. The Board further notes that Fidelity Bank received a “Satisfactory” rating in its most recent CRA evaluation conducted jointly by the Division and the FDIC as of November 29, 2021. Accordingly, the Board’s review of factors related to public convenience and advantage are supportive of approval.
The financial and managerial aspects of any transaction are also a significant consideration of the Board, as they may affect the continuing holding company’s ability to serve the banking public, to actively compete with other financial institutions, and to maintain its capital ratio standards for a safe and sound institution. As a mutual holding company merger, there will be no monetary consideration for the Proposed Transaction, and the subsidiary banks will continue to be well-capitalized after consummation. The Petitioner has provided an opinion of tax counsel and asserts that the transaction will be exempt from taxation at the entity level and that there will be no gain or loss recognized for federal income tax purposes by the depositors of Fidelity Bank on the receipt of the Mutual Bancorp Equity Interests in exchange for their Fidelity MHC Equity Interests in connection with the Proposed Transaction. Upon the closing of the Proposed Transaction, Mutual Bancorp’s Board of Trustees will consist of nine trustees, five of which will be current trustees of Mutual Bancorp, and four of which will be current directors of Fidelity MHC. In addition, Cape Cod Five will appoint the current President and Chief Executive Officer of Fidelity MHC to the Cape Cod Five Board of Directors, and Fidelity Bank will appoint the current President and Chief Executive Officer of Mutual Bancorp to the Fidelity Bank Board of Directors. Following the consummation of the Proposed Transaction, the principal officers of each Fidelity Bank and Cape Cod Five will remain unchanged. The Board’s consideration of the financial and managerial aspects of the transaction also supports its approval.
The application, supporting documents, the testimony received at the public hearing, as well as additional information submitted, have established a complete record on this petition, which has been reviewed in accordance with statutory provisions and 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, 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. In accordance with the findings expressed herein and pursuant to the statutory authority cited herein, the Board hereby approves the petition and authorizes Mutual Bancorp to acquire Fidelity MHC and LDHC, and to directly and indirectly own and control its wholly-owned depository institution subsidiary, Fidelity Bank, provided that: (1) the transaction shall not be consummated until all necessary additional regulatory approvals have been obtained; and (2) the transaction is completed within one year of the date of this Decision. Mutual Bancorp will also continue to be subject to the provisions of Massachusetts General Laws chapter 167H and other applicable statutes.
Board of Bank Incorporation
Mary L. Gallagher, Commissioner of Banks
Deborah B. Goldberg, Treasurer and Receiver-General
Donald Twomey, Designee of the Commissioner of Revenue
