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Decisions on Bank Applications

Mutual to Stock Conversions

Lenox Savings Bank

April 14, 1998

Board of Trustees
Lenox Savings Bank
25 Main Street
Lenox, Massachusetts 01240

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 Lenox Savings Bank (Mutual Bank) 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, Mutual Bank has requested, in accordance with 12 C.F.R. Section 333.4(a), waiver of a certain provision of the FDIC's regulations with respect to mutual-to-stock conversions, specifically, the depositor vote requirement (12 C.F.R. Section 333.4(d)(2)).

Under the conversion regulations, Mutual Bank'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 333.4(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 Mutual Bank 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 Mutual Bank'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 Mutual Bank 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: George W. Tetler, III
Bowditch & Dewey, LLP
311 Main Street
Worcester, Massachusetts 01608-1552


RE: Lenox Savings Bank Lenox, 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 LSB Interim Savings Bank, Lenox, Massachusetts, a newly formed, Bank Insurance Fund member, state-chartered mutual savings bank and Lenox Savings Bank, Lenox, Massachusetts (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 Stock Bank with Lenox Savings Bank, Lenox, Massachusetts (Mutual Bank, a Bank Insurance Fund member, state-chartered mutual savings bank with total resources of $102,252,000 and total deposits of $90,896,000 as of December 31, 1997.

This transaction is the result of Mutual Bank's plan of reorganization which, solely to facilitate this undertaking, includes:

1) the formation of a de novo mutual savings bank to be named LSB Interim Savings Bank;

2) the immediate reorganization of LSB as a State-chartered mutual holding company to be named Lenox Financial Services corporation (LFSQ)

3) the formation of a new stock savings bank, a subsidiary of LFSC, which will be named Lenox Savings Bank (Stock Bank).

4) the merger of Mutual Bank and Stock Bank, with the resultant institution retaining the charter and by-laws of Stock Bank and the name Lenox Savings Bank.

Lenox Savings Bank will be a wholly owned subsidiary of LFSC. The principal office will be at 25 Main Street, Lenox, Massachusetts, the present location of Mutual Bank.

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 LFSC has been established as a mutual holding company by the State authority.

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

3. That LFSC shall provide written notification to the Corporation prior to its conversion to stock form and shall provide the Corporation with copies of all documents filed with state and federal banking and/or securities regulators in connection with any proposed conversion of the mutual holding company to stock form.

4. That, should any shares of stock be issued to persons other than LFSC, any dividends waived by LFSC must be retained by the savings bank and segregated, earmarked, or otherwise identified on its books and records; such amounts must be taken into account in any valuation of the bank and LFSC and factored into the calculation used in establishing a fair and reasonable basis for exchanging bank shares for holding company shares in any subsequent conversion of LFSC to stock form; such amounts shall not be available for payment to or the value thereof transferred to minority shareholders of the 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 14th day of April 1998.

Mark S. Schmidt
Associate Director