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Decisions on Bank Applications

Mutual to Stock Conversions

Cambridge Savings Bank

July 28, 1998

Board of Trustees
Cambridge Savings Bank
1374 Massachusetts Avenue
Cambridge, Massachusetts 02238

Members of the Board:

The Notice to effect a mutual holding company reorganization with the organization of a mutual savings bank to be reorganized simultaneously into a mutual holding company, the organization of a stock savings bank owned by the mutual holding company and the merger of Cambridge Savings Bank (CSB) with the stock savings bank has been reviewed by the Federal Deposit Insurance Corporation (FDIC) pursuant to 12 C.F.R. Section 303.15 and other pertinent FDIC regulations.

As part of the Notice, CSB has requested in accordance with 12 C.F.R. Section 333.4(a), waiver of a certain provision of the FDIC's regulation with respect to mutual-to-stock conversions, specifically, the depositor vote requirements (12 C.F.R. Section 333.4(d)(2)).

Under the conversion regulations, CSB's waiver request is appropriate for consideration by the FDIC's Board of Directors under the "good cause" exception to the Conversion Regulations, 12 C.F.R. Section 331.4(a), rather than the "conflicts with State law" exception under 12 C.F.R. Section 333.4(b). The FDIC Board has determined that the depositor vote requirement in the Conversion Regulations does not present a conflict with Massachusetts law, but rather is supplemental to Massachusetts law and procedures for mutual-to-stock conversions.

The FDIC Board has considered the information provided by CSB with respect to the commercial borrowings and commercial relationships of the respective corporators of the bank in light of the following standards presented in the preamble to the Conversion Regulations with respect to the waiver of the depositor vote requirement:

" ... on a case-by-case basis, the Board will consider waiving the depositor voting requirement if it is demonstrated, to the Board's satisfaction, that the alternative voting mechanism established under the applicable state law satisfies the concerns expressed above about the need for a vote on, the conversion by parties that are not insiders and do not have a potential conflict of interest in reviewing the proposed conversion." 59 Fed Reg. 61233, 61238 (November 30, 1994).

Applying this standard, the FDIC Board has determined that a sufficient number of CSB's corporators are not insiders and have no apparent potential for conflict of interest and that a majority of the independent corporators voted to approve the Plan of Reorganization.

Based on the information presented and representations made, the FDIC approves the waiver of the requirement for the depositor vote and does not object to the proposed conversion transaction.

Enclosed is our Order and Basis for the applications filed on behalf of CSB in conjunction with its Notice of Mutual Holding Company Reorganization. These include considerations of deposit insurance and merger applications.

Please advise the Boston Regional Office in writing when you have consummated the transactions. If an extension of the time limitation included in the Order is required, a letter requesting a specific extension of the limitation including reasons therefore should be submitted to the Boston Regional Office.


Mark S. Schmidt
Associate Director


cc: Goodwin, Procter & Hoar, LLP
Exchange Place
Boston, Massachusetts 02109-2881


RE: Cambridge Savings Bank Cambridge. Massachusetts

Applications for Federal Deposit Insurance and Consent to Merge


Pursuant to Sections 5 and 18(c) and other provisions of the Federal Deposit Insurance Act (FDI Act), applications have been filed on behalf of Cambridge Interim Mutual Bank (New Mutual), Cambridge, Massachusetts, a newly formed. Bank Insurance Fund member, state-chartered mutual savings bank and Cambridge Interim Stock Bank. Massachusetts (Subsidiary Stock Bank), a newly formed, Bank Insurance Fund member, state-chartered stock savings bank for federal deposit insurance and for the Corporation's consent to merge Subsidiary Stock Bank with Cambridge Savings Bank, Cambridge, Massachusetts (CSB), a Bank Insurance Fund member, state-chartered mutual savings bank with total resources of $1,095,909,000 and total deposits of $989,918.000 as of March 31, 1998.

This transaction is the result of CSB's plan of reorganization which. solely to facilitate this under-taking, includes:

1) the formation of a de novo mutual savings bank to be named Cambridge Interim Mutual Bank (New Mutual);

2) the immediate reorganization of New Mutual as a State-chartered mutual holding company to be named Cambridge Financial Group, Inc. (CFG);

3) the formation of a new stock savings bank, a subsidiary of CFG, which will be named Cambridge Interim Stock Bank (Subsidiary Stock Bank);

4) the merger of CSB and Subsidiary Stock Bank, with the resultant institution retaining the charter and by-laws of Subsidiary Stock Bank and the name Cambridge Savings Bank (Resultant Bank).

Resultant Bank will be a wholly owned subsidiary of CFG. The principal office will be at 1374 Massachusetts Avenue, Cambridge, Massachusetts, the present location of CSB.

A review of available information, including the Community Reinvestment Act (CRA) Statements of the proponent, discloses no inconsistencies with the purposes of the CRA. The new institution is expected to continue to meet the credit needs of its entire community, consistent with the safe and sound operation of the institution.

Favorable findings have been accorded to all factors considered pertinent to each application. Accordingly. it is the Corporation's judgment that the applications should be and hereby are approved subject to the following conditions:

1. That federal deposit insurance shall not become effective unless and until the applicants have been established as a stock savings bank and a mutual savings bank by the State authority and CFG has been established as a mutual holding company by the State authority.

2. That Resultant Bank shall not issue minority shares without prior written notification to. and non-objection from, the FDIC.

3. That, prior to a sale, transfer or other disposition of any shares Resultant Bank by CFG to any person (including any Employee Stock Ownership Plan), or a conversion of the mutual holding company to stock form. Resultant Bank will provide written notification to the FDIC and provide the FDIC with copies of all documents filed with state and federal banking and/or securities regulators in connection with any such sale. transfer, disposition or conversion.

4. That, should any shares of stock be issued to persons other than CFG, any dividends waived by CFG must be retained by the Resultant Bank and segregated, earmarked. or otherwise identified on its books and records. such amounts must be taken into account in any valuation of the Resultant Bank and CFG and factored into the calculation used in establishing a fair and reasonable basis for exchanging Resultant Bank shares for holding company shares in any subsequent conversion of CFG to stock form-, such amounts shall not be available for payment to or the value thereof transferred to minority shareholders of the Resultant Bank, by any means including through dividend payments or at liquidation.

5. That the transaction shall not be consummated sooner than fifteen calendar days after the date of this Order nor later than six months after the date of this Order unless such period is extended for good cause by the Corporation.

6. That until the conditional commitment herein granted becomes effective, the Corporation shall have the right to alter, suspend, or withdraw the said commitment should any interim development be deemed to warrant such action.

Dated at Washington, D.C., this 28th day of July 1998.

Mark S. Schmidt
Associate Director