FEDERAL DEPOSIT INSURANCE CORPORATION
RE: North Shore Bank, a Co-operative Bank
Peabody, Essex County, Massachusetts
Applications for Federal Deposit Insurance and for Consent to Merge
ORDER AND BASIS FOR CORPORATION APPROVAL
Applications have been filed on behalf of North Shore Bank, a Co-operative Bank, Peabody,
Massachusetts, for the FDIC's consent to merge with North Shore Interim Subsidiary Bank, Peabody,
Massachusetts (to be known as North Shore Bank, a Co-operative Bank). North Shore Bank, a Co-
operative Bank, had total resources of $163,037,000 and total deposits of $138,863,000, as of September
30, 1997. North Shore Interim Subsidiary Bank is a proposed new state-chartered co-operative Bank
Insurance Fund ("BIF") member. Also, applications for federal deposit insurance have been filed for North
Shore Interim Subsidiary Bank and North Shore MHC Co-operative Bank, Peabody, Massachusetts. The
applications are required by Sections 5 and 18(c) of the Federal Deposit Insurance Act ("FDI Act").
This transaction is the result of North Shore's plan of reorganization from a state-chartered mutually owned
co-operative bank to a mutual holding company/stock subsidiary bank structure. The reorganization will be
accomplished in four steps:
1. North Shore will organize a new co-operative bank known as North Shore MHC Co-
operative Bank chartered under Massachusetts law.
2. North Shore MHC Co-operative Bank will amend and restate its mutual co-operative
bank charter to the charter of a mutual holding company known as North Shore Bancorp.
3. North Shore Bancorp will simultaneously form a Massachusetts-chartered subsidiary co-
operative bank, in the stock form of organization, known as North Shore Interim Co-
4. North Shore will promptly merge with North Shore Interim Co-operative Bank. The latter
institution will be the legally surviving entity and will be titled North Shore Bank, a
By virtue of the merger, North Shore will transfer substantially all of its assets and all of its liabilities to
North Shore Interim Co-operative Bank, which will be a wholly-owned subsidiary of North Shore Bancorp.
Following consummation of the merger, the resultant bank will operate the same banking business with the
same management at the same locations now being served by North Shore. The new bank's principal office
will be at 32 Main Street, Peabody, Massachusetts, the present main office of North Shore. Notice of the
proposed transaction, in a form approved by the FDIC, has been published pursuant to the FDI Act.
A review of available information, including the Community Reinvestment Act ("CRA") Statement of
the proponent discloses no inconsistencies with the purposes of CRA. The postmerger institution is
expected to continue to meet the credit needs of its entire community, consistent with the safe and
sound operation of the institution.
In connection with the applications, the FDIC has taken into consideration the financial and managerial
resources and future prospects of the proponent bank and the resultant bank, and the convenience and
needs of the community to be served. Having found favorably on these statutory factors and having
considered other relevant information, including all reports on competitive factors furnished by the
Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift
Supervision, and the Attorney General of the United States, it is the FDIC's judgement that the applications
should be and hereby are approved, subject to the following conditions:
1. That any changes in proposed management, including the board of directors or proposed
ownership (ten percent or more of the stock) and new acquisitions of or subscriptions to ten
percent or more of the stock, will render this commitment null and void unless such proposal is
approved by Regional Director (Supervision) of the Corporation's Boston Regional Office prior to
the opening of the institution.
2. That the subsidiary co-operative bank shall not issue minority shares without the prior
Notice to, and non-objection of, the FDIC.
3. That, consistent with commitments made to the FDIC, any subsequent issuance of minority
shares by the subsidiary co-operative bank will require a depositor vote in compliance with
FDIC requirements, including waiver standards similar to those that have been applied to full
conversions of Massachusetts co-operative banks in the past.
4. That the holding company 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 securities regulators in connection with any proposed conversion of
the mutual holding company to stock form.
5. That, consistent with commitments made to the FDIC, any subsequent conversion of North
Shore Bancorp to stock form will require a depositor vote in compliance with FDIC requirements,
including waiver standards similar to those that have been applied to full conversions of
Massachusetts co-operative banks in the past.
6. That, should any shares of stock be issued to persons other than the holding company,
any dividends waived by the holding company must be retained by North Shore and
segregated, earmarked, or otherwise identified on the books and records; such amounts
must be taken into account in any valuation of the bank and holding company 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 the
holding company 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.
7. That until the proposed transaction is consummated, the Corporation shall have the right to
alter, suspend, or withdraw its approval should any interim development be deemed to warrant
8. That the transaction shall not be consummated sooner than 15 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.
By Order of the Associate Director of the Division of Supervision, acting pursuant to delegated authority
of the Board of Directors of the Corporation.
Dated at Washington D.C., this 10th day of February, 1998.
Mark S. Schmidt
Division of Supervision
FEDERAL DEPOSIT INSURANCE CORPORATION
RE: North Shore Bank, a Co-operative Bank
Peabody, Essex County, Massachusetts
Request for Limited Waiver of Federal Deposit Insurance Corporation's
Depositor Voting Requirements in 12 C.F.R. Section 333.4(d)(2)
North Shore Bank, a Co-operative Bank, Peabody, Massachusetts ("North Shore"), has filed an
application with the FDIC for a limited waiver of the FDIC's depositor voting requirements for mutual-to-
stock conversions (See Footnote). The Board of Directors of the FDIC ("Board") has fully considered all available facts
related to the application, considers the facts in this case to present an unusual situation, and has
concluded that the application should be granted for the reasons discussed below.
The FDIC's regulations at 12 C.F.R. Section 333.4(d)(2) require that the following depositor voting
procedures be implemented:
The proposed conversion shall be approved by a vote of at least a majority of the bank's directors
and, as reasonably determined by the bank's directors or trustees, other stakeholders of the bank
who are entitled to vote on the conversion, unless the applicable state law requires a higher
percentage, in which case the higher percentage shall be used. Voting may be in person or by
Massachusetts law requires approval of mutual-to-stock conversion plans by more than two-thirds of
the depositors present and voting at a special meeting called to vote on a plan and prohibits voting by
proxy for co-operative banks.
North Shore called a special meeting of the depositors on June 24, 1997, to vote on a plan of
conversion. The special meeting was attended by 132 eligible depositors from an estimated 11,000
eligible depositor total. Of the 132 eligible depositors in attendance, 131 participated in the balloting,
and 104, or 78.8 percent, voted in favor of the plan of conversion. If it is assumed that all 48 directors
and employees in attendance voted in favor of the plan, it can be deduced that of the independent
depositors who voted, 67.5 percent voted in favor of the plan. The FDIC has determined that the vote
to ratify the plan by depositors present and voting was in conformance with the bank's by-laws and
Massachusetts statute. The FDIC is also of the opinion that depositors who were not insiders of the
bank and who did not have a potential conflict of interest were given an opportunity to participate in
North Shore made concerted efforts to attract depositors to the special meeting held on June 24, 1997.
They provided depositors with 15 days' written notice of the special meeting, instead of the seven days
required by Massachusetts law. A cover letter with Notice and Information
Statement was mailed to all depositors and provided details about the plan of conversion. In addition to the
published notice required by Massachusetts law, North Shore placed advertisements of the meeting in the
front section of the Salem Evening News, a widely circulated newspaper in North Shore's community.
Two weeks prior to the meeting, the bank held a well publicized open house to celebrate renovation of the
main office. During the open house, the president spoke at length about the proposed reorganization and
urged the depositors to attend the upcoming shareholders meeting. Directors and employees made phone
calls to depositors to urge them to attend the meeting. Management selected a time and place for the
meeting designed to facilitate maximum depositor participation.
The FDIC recognizes that the 132 depositors who participated in the special meeting represent an increase
over the numbers of participants at previous depositor meetings for North Shore, which were typically
attended by only 30 to 60 depositors. The FDIC also recognizes that further efforts are not likely to attract
significantly higher numbers of depositors to another special meeting.
The FDIC has undertaken an explanation of the Board's approval of North Shore's waiver request to
emphasize the special circumstances of the case. Despite concerted effort, North Shore was unable to
meet the FDIC's requirement of majority approval by depositors of the plan of conversion because
Massachusetts law prohibits the use of proxies. Consequently, the FDIC accepts as a practical impossibility
the ability of North Shore to obtain majority approval solely through in-person voting. The FDIC
acknowledges North Shore's effort to inform depositors about the time, location, and purpose of the special
meeting. North Shore's dilemma in trying to satisfy the laws and rules of both the Commonwealth of
Massachusetts and the FDIC is also recognized. Therefore, the Board has approved North Shore's waiver
Based upon careful evaluation of all available facts and information, the Associate Director of the Division
of Supervision, acting under delegated authority, has concluded that approval of the application is
Dated at Washington, D.C., this 10th day of February, 1998.
DIVISION OF SUPERVISION
(Footnote) FDIC Regulations at 12 C.F.R. Section 333.4(a) provide that the Board of Directors of the FDIC may grant a waiver from any requirement of Section 333.4 for good cause shown.