Legal and Procedural Requirements
Notice of Cambridge Trust’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 Cambridge Trust 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.
Pursuant to Massachusetts General Laws chapter 167A, section 3, an application to the Commonwealth’s Board of Bank Incorporation was not necessary for this transaction because Wellesley Bancorp is merging with and into Cambridge Bancorp simultaneously with the merger of the subsidiary banks and the bank merger requires the Division’s approval. 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 February 26, 2020.
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 18, 2020 that satisfactory arrangements have been made relative to the Merger.
In addition, Cambridge Trust provided information to the Division showing that it notified Wellesley Bank’s customers that the excess deposit insurance from the Depositors Insurance Fund will end following consummation of the merger.
The Parties
Cambridge Trust is a Massachusetts state-chartered trust company and is the sole banking subsidiary of Cambridge Bancorp. In addition to two wholly-owned securities corporations, Cambridge Trust is also the parent company of Cambridge Trust Company of New Hampshire, Inc., a New Hampshire state-chartered non-depository trust company offering wealth management services in New Hampshire. Cambridge Trust operates ten full-service banking offices in eastern Massachusetts and six banking offices in New Hampshire. As of March 31, 2020, Cambridge Trust had total assets of approximately $2.8 billion and total deposits of approximately $2.4 billion. Cambridge Trust’s services are primarily focused on the areas of wealth management, personal and commercial banking, and residential lending. Cambridge Trust’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (FDIC).
Wellesley Bank is a Massachusetts state-chartered co-operative bank and is the sole banking subsidiary of Wellesley Bancorp. Wellesley Bank operates out of its main office in Wellesley, Massachusetts and has six branch offices located in Wellesley (2), Boston, Needham, Newton Center, and Wellesley Hills, Massachusetts, through which it offers traditional community bank loan and deposit products. As of March 31, 2020, Wellesley Bank had total assets of approximately $948 million and total deposits of approximately $736 million. The deposits of Wellesley Bank are insured up to applicable limits by the FDIC. Deposits in excess of the FDIC limits are currently insured by the Depositors Insurance Fund (since the merger of The Co-operative Central Bank with and into the Depositors Insurance Fund became effective on March 17, 2020). Once the merger is consummated, however, the Continuing Institution as a trust company will not be eligible for excess deposit insurance.
Competition
Cambridge Trust submitted materials 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 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 Cambridge Trust, 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 Cambridge Trust, 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 Cambridge Trust is planning to maintain all of its current branches, as well as all of the branches of Wellesley Bank. Also, the significant presence of other banks, credit unions, and non-depository lenders 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. Cambridge Trust anticipates that the Merger will produce a larger and more competitive banking institution that will be able to support higher lending limits for customers and allow the Continuing Institution to increase efficiencies in several areas, especially in operations and technology. Cambridge Trust states that the Merger will enhance the commercial banking services offered by the Continuing Institution and will enable Wellesley Bank customers to access Cambridge Trust’s wealth management services while maintaining their existing banking relationships. With no branch office closings anticipated as a result of this transaction, customers of both banks will also benefit from access to the larger branch office and ATM network of the Continuing Institution.
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. In terms of capital investments, Cambridge Trust plans to update office signage and hopes to invest in new branches in the future based on market growth. With regard to employment, Cambridge Trust has confirmed that there will be initial staffing reductions, particularly of back office functions, but they believe that the anticipated expansion of the Continuing Institution will produce future growth and create opportunities for additional employment. The materials submitted also indicate that consumers and commercial customers will continue to have access to a full range of banking products and services following the proposed Merger. Finally, Cambridge Trust plans to maintain all of Wellesley Bank’s branches and customer facing personnel. Based upon the review of these factors, the Divisions 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. Cambridge Trust received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of August 14, 2017. Wellesley Bank received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of May 15, 2017. The Division’s review of the CRA performance of Cambridge Trust and Wellesley Bank 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. At the effective time of the Merger, each share of issued and outstanding Wellesley Bancorp common stock will be converted into the right to receive a number of shares of Cambridge Bancorp common stock, or cash, in accordance with the agreed upon exchange ratio. No financing arrangements are necessary to fund the transaction. Materials provided indicate that upon consummation of the transaction, the Continuing Institution will meet all applicable regulatory capital requirements.
At the effective time of the Merger, the number of persons constituting the boards of directors of Cambridge Bancorp and Cambridge Bank will be increased by three directors each to be selected by Cambridge Bancorp upon consultation with Wellesley Bancorp. According to the application materials, the current president and chief executive officer of Wellesley Bank will be appointed to the respective board of directors of Cambridge Bancorp and Cambridge Trust and will also become Chief Banking Officer at Cambridge Trust. No other changes in the senior management of Cambridge Bancorp were proposed in conjunction with the Merger. Accordingly, upon review, the financial and managerial considerations support the Division’s 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 Wellesley Bank to merge with and into Cambridge Trust under the charter, by-laws, and name of Cambridge Trust pursuant to section 3 of chapter 167I of the General Laws. Approval is also granted to maintain the former banking offices of Wellesley Bank as branch offices of the Continuing Institution pursuant to Massachusetts General Laws chapter 167C, section 3.
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
May 15, 2020
