BOARD OF GOVERNORS

OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551

SCOTT G. ALVAREZ
GENERAL COUNSEL

February 8, 2017

Stanley V. Ragalevsky, Esq.
K&L Gates LLP

State Street Financial Center
One Lincoln Street

Boston, Massachusetts 02111

Dear Mr. Ragalevsky:

This is in response to your letter, dated January 5, 2017, and received on
January 6, to the Federal Reserve Bank of Boston requesting a waiver from a filing
requirement under the Bank Holding Company Act of 1956, as amended (“BHC Act”),!
for Salem Five Bancorp (“SFB”), Salem, Massachusetts, a bank holding company, to
acquire Georgetown Bancorp, Inc. (“Georgetown”), a savings and loan holding company,
and thereby indirectly acquire its wholly-owned subsidiary federal savings bank,
Georgetown Bank, both of Georgetown, Massachusetts.

The purpose of the proposed transaction is to facilitate the merger of
Georgetown Bank with and into SFB’s wholly-owned subsidiary state savings bank,
Salem Five Cents Savings Bank (“Salem Five”), Salem, Massachusetts: The transaction
would occur as follows: (1) Georgetown would merge with and into Bright Star, Inc., a
wholly-owned subsidiary of SFB formed solely for the purpose of facilitating the
transaction, with Georgetown as the surviving entity; (2) Georgetown Bank would then
merge with and into Salem Five, with Salem Five as the surviving entity (“Bank
Merger”), and (3) following consummation of the Bank Merger, Georgetown would be
dissolved. You have indicated that Georgetown Bank would exist as a wholly-owned
subsidiary of SFB for only a moment in time and that SFB would not operate
Georgetown Bank as a separate entity.

Section 4 of the BHC Act generally requires a bank holding company to
give prior notice to the Board before acquiring more than 5 percent of the shares of any

1 12 U.S.C. § 1841 et seq.


2

nonbanking company, including a savings association.” Through the transaction
described above, SFB would acquire Georgetown Bank, a nonbanking company that is a
savings association under the BHC Act.? Accordingly, SFB would be required to obtain
the Board’s approval under section 4 of the BHC Act before acquiring Georgetown Bank.

In certain circumstances, however, in order to avoid duplication of
regulatory review by federal banking regulators, the Board’s rules provide that a bank
holding company seeking to acquire shares of a bank need not obtain the Board’s prior
approval. Specifically, section 225.12(d)(2) of the Board’s Regulation Y provides that a
bank holding company need not receive the Board’s approval if the transaction is subject
to review by a federal banking agency under section 18(c) of the Federal Deposit
Insurance Act (“the Bank Merger Act”),* and meets certain other criteria.” While section
225.12(d)(2) does not apply specifically to transactions involving a banking holding
company acquiring a savings association, your proposal is consistent with the purposes of
section 225.12(d)(2) of the Board’s Regulation Y.

The Bank Merger requires the prior approval of the Federal Deposit
Insurance Corporation (“FDIC”) under the Bank Merger Act.§ In acting on the merger
proposal, the FDIC must consider the impact the acquisition would have on competition,
the financial and managerial resources and future prospects of the combined organization,
the convenience and needs of the communities served by Salem Five and Georgetown
Bank, the institutions’ records of performance under the Community Reinvestment Act,
the institutions’ effectiveness in combating money laundering activities, and risks to the
stability of the United States banking or financial system.” These criteria are
substantially similar to the criteria the Board would consider under section 4 of the BHC
Act8

2 12 U.S.C. § 1843(c)(8), (i), and (j).
3 12 US.C. § 1841(j).

4 12 US.C. § 1828(c).

5 12 CFR 225.12(d)(2).

6 12 U.S.C. § 1828(c). Salem Five filed a Bank Merger Act application with the FDIC
dated November 15, 2016, requesting prior approval of the Bank Merger. SFB has
provided the Board with a copy of the application.

7 12 U.S.C. §§ 1828(c)(5) and (11), 2902(3)(E), 2903(a)(2).
8 See 12 U.S.C. § 1843(c)(8), (i), and (j).


Additionally, SFB would acquire control of Georgetown Bank only for the
short time necessary to complete the merger of Georgetown Bank with and into Salem
Five. At no time would Georgetown Bank operate as a separate subsidiary of SFB.
Following the transaction, the separate corporate existence of Georgetown Bank would
cease, and Salem Five would continue to operate as a state savings bank. Under these
circumstances, review of the transaction under section 4 of the BHC Act would be
duplicative of the review under the Bank Merger Act.

Based on a review of these and other facts presented, the Legal Division
believes that no regulatory purpose would be served by requiring SFB to file a notice
under section 4 of the BHC Act. The Legal Division, therefore, would not recommend
that the Board take action to require a filing of a formal notice by SFB in connection with
the transaction described above. This opinion is subject to the receipt by SFB, Salem
Five, Georgetown, and Georgetown Bank of all other necessary regulatory approvals and
compliance with any terms and conditions that may be imposed upon approval of the
proposal.

This opinion is based on all the facts and representations presented to
Federal Reserve staff. Any material change in those facts or representations should be
communicated immediately to Federal Reserve staff and may cause this opinion to be
reconsidered. This opinion is limited to this proposal and does not apply to any other
transaction.

If you have any questions regarding this matter, please contact
Michelle Kidd at (202) 736-5554 or Evans Muzere at (202) 452-2621, of my staff.

cc: Federal Deposit Insurance Corporation