increase its ownership stake in the other.

Brookline Bancorp, which has $907 million of assets, filed an application with the Federal Reserve last week seeking permission to acquire a stake of up to 24.9% in $1.2 billion-asset Medford Bancorp. Medford chief executive officer Arthur H. Meehan strongly criticized the move as a threat to its independence.

"We don't think it's in anyone's best interests for a single shareholder to reach voting circumstances where they can frustrate the will of other shareholders," said Mr. Meehan, who was on vacation in Florida when he learned of Brookline's intention. He said his company plans to "submit statements to appropriate regulatory authorities" to oppose the bid.

Brookline Bancorp acquired a 4.9% stake in neighboring Medford Bancorp last April. Brookline chief executive officer Richard P. Chapman said the company wants to increase its stake because it considers its rival's shares to be undervalued. "We think they have a good franchise and a solid balance sheet," he said. "We see it as a good long-term investment."

Medford's shares were trading at $15.625 when Brookline bought its initial stake. Its share price reached $19 in July, but fell below $15 in late September. The stock was trading at $16.25 late Friday.

Mr. Chapman said he was "surprised" that Medford's board would oppose his plan to buy more shares. "We feel we should be regarded as friendly investors," he said.

He added, however, that the bid would likely be amended because Medford has adopted a "poison pill" that would be activated should any investor acquire a stake of more than 14.9%.

Asked whether the filing is a first step toward eventually acquiring Medford, Mr. Chapman said, "We are always interested in making investments in various institutions that might make an attractive fit down the road."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.