Middlesex Makes MHC Request In Run-Up To Strata Buy
Middlesex Savings Bank of Natick has requested that the state approve the creation of a new mutual holding company, Middlesex Bancorp MHC, which is necessary for it to acquire Medway-based Strata Bank.
"We decided to do this before Strata was even a possibility, but now the two processes have become interconnected," said John R. Heerwagen, Middlesex Savings Bank's chairman, president and CEO.
During a public hearing Tuesday, Middlesex Savings Bank officials outlined to the state why it wants to go from being a mutual savings bank to a mutual holding company that owns a mutual savings bank.
"There are long-term benefits to reorganizing. It would let us purchase stock banks and to bring in another bank into common ownership with the holding company, but let that bank have its own separate identity" Heerwagen said.
The new mutual holding company will be called Middlesex Bancorp MHC, and will own Middlesex Savings Bank. Strata's holding company will be folded into the new Middlesex holding company, and Strata Bank will be folded into Middlesex Savings Bank.
Strata Bank is owned by a mutual holding company, Service Bancorp., and suffered dramatic losses in 2008 related to bad construction loans, and investments in Fannie Mae, Freddie Mac and Lehman Brothers Holdings. Strata Bank CEO Pamela Montpelier resigned in September and the bank is being run by former Webster Bank executive Edward A. Hjerpe III.
State law requires that in order for one bank to buy another bank that is a partial or full stock bank, the purchasing bank must be a mutual holding company.
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