RELATIVE TO THE PETITION OF
DANVERS BANCORP, INC., DANVERS, MASSACHUSETTS
BEVERLY NATIONAL CORPORATION, BEVERLY, MASSACHUSETTS
Danvers Bancorp, Inc. (the "Petitioner"), Danvers, Massachusetts has petitioned the Board of Bank Incorporation (the "Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 for approval to acquire ownership and control of Beverly National Corporation, Beverly, Massachusetts and its subsidiary bank, Beverly National Bank, Beverly, Massachusetts. The Petitioner is the bank holding company for Danversbank, Danvers, Massachusetts. The Petitioner's application before the Board is part of a multi-step transaction in which Beverly National Corporation will merge with and into the Petitioner. A subsequent merger of the subsidiary banks, Beverly National Bank with and into Danversbank is, by statute, subject to approval by the Division of Banks.
Notice of the application was published and posted as directed by the Board, thereby affording opportunity for interested parties to submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The Board held a public hearing on the petition of Danvers Bancorp, Inc. on September 24, 2009. The comment period on the proposed transaction ended on October 15, 2009. Subsequent to the public hearing and within the public comment period both Danvers Bancorp, Inc. and Beverly National Corporation held their respective stockholders' votes on this proposed transaction, and, in both instances, the stockholders voted in favor of the transaction. No stockholders or other person or entity submitted a comment to the Board after the public hearing or after the announced votes of the shareholders at each institution.
The Board has reviewed the application, the oral testimony received at the public hearing, and other testimony received. That review focused on the statutory and administrative criteria applicable to such transactions which include, among other things, whether competition among banking institutions will be unreasonably affected; whether public convenience and advantage would be promoted; and the record of performance under the Community Reinvestment Act ("CRA") by the subsidiary banks of the holding companies. As in any transaction, consideration is also given to the financial and management components of a proposed acquisition. The additional statutory requirements set out in sections 2 and 4 of said chapter 167A were also significant factors in the Board's deliberations on the matter before it.
One such statutory provision requires the Board to have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and the MHPF's various affordable housing loan programs. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated September 10, 2009.
Danvers Bancorp, Inc. is a Delaware corporation and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended. As a bank holding company, one of its primary purposes is to serve as a source of strength for its subsidiaries and affiliates. In this case, one of Danvers Bancorp Inc.'s principal assets is 100% ownership of the capital stock of Danversbank, a state-chartered stock savings bank. Danvers Savings Bank, which was established in 1850 as a mutual bank, reorganized in 1998 into a mutual holding company with a subsidiary stock savings bank. The mutual holding company converted to a stock holding company in 2008 under the name Danvers Bancorp, Inc. In that stock conversion process, Danvers Bancorp, Inc. raised approximately $170 million. Danversbank accepts deposits and offers a full range of retail and commercial banking services to its customers. It has its main office in Danvers and operates through its network of 16 full-service branches, all of which are located in the Essex, Middlesex and Suffolk counties. Danversbank has approval to open two additional full-service banking offices, one in Boston, and the other in Waltham, Massachusetts. Danversbank has one commercial lending office in Boston. Danversbank has four wholly owned subsidiaries, Conant Ventures, Inc., Conant Investment Corporation, Five Conant Street Investment Corporation, and One Conant Capital LLC.
Danvers Bancorp, Inc. also holds as direct subsidiaries: Danvers Capital Trust I, Danvers Capital Trust II, and Danvers Capital Trust III.
At June 30, 2009, Danversbank had consolidated assets of approximately $1.8 billion. Danversbank's deposits are insured by the FDIC up to the maximum extent allowed by law and for amounts in excess of FDIC coverage limits by the Depositors Insurance Fund (the "DIF").
Beverly National Corporation is a Massachusetts corporation and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended. Beverly National Corporation was organized in 1984 as a bank holding company under the BHC Act. Beverly National Corporation has its corporate office in Beverly. Beverly National Corporation, through Beverly National Bank and one indirect subsidiary, offers a full range of financial products for consumers, businesses, investors and non-profit organizations. Beverly National Corporation is the sole shareholder of Beverly National Bank and its primary business is serving as the holding company of Beverly National Bank.
Beverly National Bank, a national bank headquartered in Beverly, Massachusetts and Beverly National Corporation's sole banking subsidiary, was established on June 23, 1802. Beverly National Bank, as a national bank, is regulated by the Office of the Comptroller of the Currency (the "OCC"), a federal agency. The deposits of Beverly National Bank are insured by the FDIC to the maximum extent permitted by law. Beverly National Bank has 10 full service banking offices, four of which, including the main banking office, are located in Beverly. The other offices are located in Danvers, Hamilton, Manchester-By-The-Sea, Salem, South Hamilton, and Topsfield. At June 30, 2009 Beverly National Bank had consolidated assets of approximately $496 million. Beverly National Bank has one wholly owned subsidiary, Beverly National Securities Corporation.
The financial aspects of any transaction are a significant consideration of the Board as they may affect the continuing holding company's ability to serve the banking public and to actively compete with other financial institutions as well as to maintain its capital ratio standards for a safe and sound institution. In this transaction the common stock of Danvers Bancorp, Inc. is the sole consideration for the acquisition of Beverly National Corporation. No cash will be paid by the Petitioner to the stockholders of Beverly National Corporation. The exchange ratio agreed to and subsequently approved by stockholders is that one share of common stock of Beverly National Corporation will be converted to 1.66 shares of common stock of Danvers Bancorp, Inc. Upon consummation of the transaction, if approved, Danvers Bancorp, Inc. will remain a well capitalized holding company under applicable bank regulatory guidelines. As noted above, Danvers Bancorp, Inc. raised approximately $170 million in a stock offering last year.
The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. The application contained an analysis utilizing the various tests used by federal agencies. The analysis demonstrates that consummation of the transaction will not result in undue concentration of banking resources in the specified banking markets in Massachusetts. Traditionally, however, this Board has not limited its review to those previously cited federal standards in its consideration of whether competition will be unreasonably affected. Rather it is the position of this Board to consider a transaction in light of its impact on the citizens, communities and banking structure in the Commonwealth on a community by community basis instead of by variously grouped markets. The Board has considered that the subsidiary banks each have branch offices in three communities and that their CRA assessment areas, although not exact, do overlap in eleven communities. Testimony at the public hearing acknowledged that the subsidiary banks operate somewhat within the same footprint which in the Petitioner's view would be a benefit as a combined institution. Upon review, the Board does not believe the transaction will unreasonably affect competition for the reasons cited as well as the fact that a number of diverse financial institutions will continue to provide competitive deposit and credit services throughout the affected areas and banking markets served by the continuing institution.
The Board has considered whether public convenience and advantage will be promoted by the proposed transaction. The Petitioner states that the enhanced financial strength of the combined banks will ensure that the resulting institution will be able to offer financial products and services at competitive rates. The transaction will permit Danversbank and Beverly National Bank to pool their financial resources, to reduce costs, to diversify risk, and better to serve their communities by offering a broader array of products and services to consumers and businesses. Customers of Beverly National Bank will have access to more sophisticated products and services including, among others: enhanced on-line banking services; cash management services; Small Business Administration loans; commercial and industrial loans; and mutual funds and other nondeposit investment products. Customers of Danversbank will have access to the broader range of trust and investment management services offered by Beverly National Bank.
In connection with the transaction Danversbank has current plans to close one branch office of Beverly National Bank, which office is located directly across the hall in the same industrial park as a branch office of Danversbank. Therefore, customers of both banks will be able to conduct their banking business at a greater number of locations over a much larger geographic area. The Board has considered the Petitioner's analysis of "net new benefits" related to the transaction with respect to the statutory criteria. The term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors. Testimony by the Petitioner and in response to questions by the Board indicated that while there would be some immediate reduction of staff levels, it was anticipated that there would be future growth in such levels resulting from the proposed transaction if approved. With respect to the statutory test of job creation plans within net new benefits the Board has past precedent to guide it. In prior Decisions, the Board has concluded that the statutory test can be met by prospective direct and indirect employment gains resulting from continued growth of a larger and stronger institution as well as through its subsidiary bank's lending programs which ultimately fund jobs. Those precedents involve some of the largest transactions, including in-market acquisitions, to have come before the Board. Accordingly, the Board's consideration of the transaction's impact on employment does not preclude its approval. The Board has considered the application and testimony submitted by the Petitioner and finds that consideration of public convenience and advantage including net new benefits weighs in favor of approving the proposed transaction.
Related to the issue of public convenience and advantage is the record of performance under the CRA by the subsidiary banks which are the parties to this transaction. Such a review for a state-chartered bank includes examination by personnel of the Division of Banks as well as analysis of concerns received by the bank's community and its response to those concerns fairly raised. For other institutions, the Board looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency. The Board has noted that the Petitioner's subsidiary bank, Danversbank, has a "High Satisfactory" rating in its most recent examination of performance under CRA by the Division of Banks. The Board has noted that Beverly National Bank has a "Satisfactory" rating at its most recent examination conducted by the Office of the Comptroller of the Currency.
The application, supporting documents, as well as the testimony received at the public hearing have established a comprehensive record on this petition, which has been reviewed consistent with statutory provisions and the policies of the Board. Based on the record of this matter considered in light of all relevant statutory and administrative requirements, the Board finds that public convenience and advantage will be promoted and that competition among banking institutions will not be unreasonably affected and that the record of performance under CRA by the subsidiary banks involved in this transaction are consistent with its approval. Having considered the record established on this application, the Board has found that the applicable statutory and administrative criteria have been met. Accordingly, the Board has concluded that the petition should be approved.
In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Danvers Bancorp, Inc. to acquire Beverly National Corporation and Beverly National Bank provided that the transaction is completed within one year of the date of this Decision.
Board of Bank
Steven L. Antonakes
Commissioner of Banks
Navjeet K. Bal
Commissioner of Revenue
Timothy P. Cahill
Treasurer and Receiver-General
October 29, 2009