Legal and Procedural Requirements
Notice of Bristol County’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 Bristol County 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, and “net new benefits” will be promoted by approval of the proposed transaction. The Division also considered both banks’ records of performance under the Community Reinvestment Act (CRA) as well as financial and managerial factors.
In reviewing the proposed transaction, the Division must receive notice that satisfactory arrangements have been made with the excess deposit insurer. The Depositors Insurance Fund confirmed by letter dated March 20, 2020 that satisfactory arrangements have been made relative to the Merger.
Bristol County is a Massachusetts state-chartered savings bank and is the sole banking subsidiary of Beacon Bancorp, a Massachusetts mutual holding company. In addition to its main office, Bristol County operates 16 branch offices in Massachusetts within Bristol and Norfolk counties and one branch office in Pawtucket, Rhode Island. In addition, Bristol County operates a commercial loan center in Warwick, Rhode Island. As of March 31, 2020, Bristol County had total assets of approximately $2.3 billion and total deposits of approximately $1.9 billion. Bristol County offers a wide range of consumer and commercial products and services. Bristol County’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (FDIC). Deposits in excess of the FDIC limits are insured by the Depositors Insurance Fund.
Freedom National is a national banking association subject to regulation by the Office of the Comptroller of the Currency and is a wholly-owned subsidiary banking institution of Berkshire Financial Services, Inc., a Massachusetts mutual holding company. Freedom National’s main office is in Greenville, Rhode Island. It also operates one branch office in Cumberland, Rhode Island. As of March 31, 2020, Freedom National had total assets of approximately $126.3 million and total deposits of approximately $106.2 million.
Bristol County submitted materials to address the issue that competition among banks will not be adversely 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 the federal authorities to review bank mergers. These guidelines define relevant geographic markets and measure market concentrations as indicators of competitiveness in the local banking markets. 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. Based on the information presented by Bristol County, the HHI analysis demonstrates that consummation of the transaction will not cause a substantial reduction in competition or result in an undue concentration of banking resources in the relevant markets.
In addition to reviewing the HHI analysis submitted by Bristol County, the Division also 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. The Merger will not affect any of the communities in which the two banks do business since Bristol County is planning to maintain all of its current branches, as well as the banking offices of Freedom National. Also, the significant presence of other banks and credit unions in the relevant markets is a further indication that the proposed transaction will not result in an undue concentration of banking resources in the communities to be served by the Continuing Institution. Accordingly, the Division’s analysis of the competitive impact of this transaction supports an approval.
Public Convenience and Advantage
The Division considers information provided in the application addressing whether public convenience and advantage will be promoted by the proposed merger. Bristol County anticipates that the Merger will benefit the public by creating a larger institution that is better suited to compete with other community banks, regional banks, and national financial institutions. As a result of the Merger, customers of both Bristol County and Freedom National will have additional branches and ATMs at which to conduct their banking business. In addition, the customers of Freedom National will have access to enhanced banking products and services offered by Bristol County described further below.
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 Massachusetts General Laws chapter 167I, section 3, 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. To make a determination as to the proposed transaction’s net new benefits, the Division notes the following considerations from the application submission: the Continuing Institution’s initial capital investments are expected to include new bank signage, updated telecommunications equipment, and other improvements as may be necessary following the consummation of the Merger. As noted above, Bristol County plans to maintain the banking offices of Freedom National as branch offices of the Continuing Institution. In terms of employment, the proposed merger is not expected to involve any staffing reductions. Much of Freedom National’s backroom, shared services, and operations staff will remain with Freedom National’s existing parent company, Berkshire, and its other subsidiary banking institution, Lee Bank.
In addition, while Bristol County offers comparable products to Freedom National, it offers some additional products and services as well, including home equity loans and lines of credit, residential mortgage loans, personal installment loans, Mass Save® HEAT Loans, passbook loans, and direct and indirect automobile loans, as well as a greater offering of consumer deposit products. Further, the Continuing Institution will have a larger legal lending limit than Freedom National, thereby enhancing the amount of credit that can be extended to small businesses and other borrowers in Freedom National’s market areas. Freedom National’s customers will also benefit from Bristol County’s membership in the Depositors Insurance Fund, which insures deposits above FDIC limitations. Based upon the review of these factors, the Division finds that the submissions related to public convenience and advantage, including net new benefits, are consistent with approval of the transaction.
Another factor for consideration closely related to the issue of public convenience and advantage is the record of CRA performance by the respective banks. 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. Bristol County received a “High Satisfactory” rating from the Division and a “Satisfactory” rating from the FDIC in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of June 24, 2019. Freedom National received a “Satisfactory” rating in its most recent CRA performance evaluation conducted by the Office of the Comptroller of the Currency as of April 1, 2019. The Division’s review of the CRA performance of Bristol County and Freedom National also supports the approval of the proposed Merger.
Financial and Managerial Considerations
The Division reviews and considers the financial and managerial aspects of the proposed transaction. Bristol County has adequate capital and liquidity on a consolidated basis to complete the Merger without reliance on any external financing.
At the effective time of the Merger, the board of directors of Bristol County, as the Continuing Institution, will consist of individuals who are currently directors of Bristol County before the Merger. According to the application materials, the current executive officers of Bristol County will remain the executive officers of the Continuing Institution while the President and CEO of Freedom National will join Bristol County as Director of Market Development. Accordingly, upon review, the financial and managerial considerations support the Division’s approval of the application.
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 Freedom National to merge with and into Bristol County under the charter, by-laws, and name of Bristol County pursuant to section 3 of chapter 167I of the General Laws. Approval is also granted to maintain the banking offices of Freedom National as branch offices of the Continuing Institution pursuant to Massachusetts General Laws chapter 167C, section 6. In addition, approval is granted for the sale to Bristol County of all Berkshire’s shares of capital stock in Freedom National in accordance with conditions set forth in the 2001 BBI Decision set forth above.
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.
Mary L. Gallagher
Commissioner of Banks
July 8, 2020