Decision on the petition to establish Towne Bank in Revere, Massachusetts
By the Division of Banks
The Incorporators (or the "Petitioners") of the proposed Towne Bank (the "Bank" or "Towne") have submitted an application with related documents to the Board of Bank Incorporation (the "Board") for the issuance of a certificate that public convenience and advantage will be promoted by the establishment of the proposed Bank in Revere, Massachusetts. The Petitioners seek to establish the Bank as a trust company under the provisions of Massachusetts General Laws chapter 172.
Notice of the application, affording opportunity for interested persons to submit comments, has been published and posted in accordance with the requirements of section 6 of said chapter 172 of the General Laws and procedures of the Board. A public hearing was held on October 10, 1996 by the Board to receive comments from interested parties. The public hearing was attended by ten of the Bank's fifteen Incorporators. The time for filing comments and supplementary materials after the hearing has passed. The application and all documents and comments in the record of this matter have been considered by the Board.
The establishment of a state-chartered trust company by statute involves a two-step procedure before the Board. The first is the petition now pending while the second step is a certificate to transact business. In determining whether to issue a certificate that public convenience and advantage will be promoted by the establishment of a new trust company, the Board has reviewed the statutory criteria of the adequacy of banking facilities in the area, the general character of the Bank's management, the adequacy of its capital structure and the convenience and needs of the community to be served. The Petitioners' filings and testimony at the public hearing have addressed each of these matters in conjunction with the application.
In order to receive a certificate to transact business from the Board, the proposed bank must, among other things, comply with the provisions of section 9 of chapter 172 of the General Laws. Those requirements include raising the required capital, identifying satisfactory members of its Board of Directors and operating management, complying with all requirements of law, and submitting other documentation. The proposed bank must also obtain deposit insurance from the Federal Deposit Insurance Corporation. As set out in section 6 of said chapter 172, the proposed bank has one year from the issuance of the certificate of public convenience and advantage to complete its organization.
The Petitioners have designated Revere as the Bank's primary service area. It will also serve surrounding communities identified as Chelsea, East Boston, Everett, Lynn, Malden, Saugus and Winthrop. Upon analysis of the adequacy of banking facilities within the primary service area of the Bank, the Petitioners argue a need exists for Towne Bank for several reasons. In general, they cite recent mergers and acquisitions and a resulting need for a community bank as support for their petition. In particular, they state that these consolidation transactions have resulted in approximately 68% of Revere's deposits concentrated in local branch offices of Boston based banks which are subsidiaries of large regional bank holding companies. In that corporate structure, according to the Petitioners' brief, decisions are not made locally and consumer choice is limited to standardized products marketed throughout the bank holding company's market. Consistent with that analysis, they argue that Revere needs an additional community-based independent bank. The municipalities surrounding Revere which are also to be serviced by the Bank, are similarly impacted by the ongoing consolidation within the banking industry. They seek to establish Towne to provide the banking public a choice of banks as well as products. The Board's review of the adequacy of banking facilities does not preclude its approval of the proposal.
The Petitioners are seeking to establish a management structure which will be comprised of a selected team of professionals who have experience in banking as well as knowledge of the local community. The proposed Bank's President and Chief Executive Officer has been identified to the Board and that individual has served as the lead proponent of this petition. The Chairman of the Board of Directors has also been identified. The application offers that the character and experience of the incorporators, ten of whom are currently scheduled to serve as directors, will further assist the Bank in identifying and fulfilling the needs of the community to be served by the proposed Bank. The background and banking experience of certain of these individuals is known as well as documented. The leading incorporator had served as President and Chief Executive Officer for the former Metropolitan Bank and Trust Company ("Metropolitan"), Melrose. In December of 1994, Metropolitan was acquired by Central Co-operative Bank ("Central"), Somerville. In the final action in that multi-step transaction, Metropolitan merged with and into Central.
As part of the process to establish a new bank, however, the Board reviews the general character of all the incorporators and the qualifications of the proposed management including the board of directors since proper management is vital to the organization and initial operation of a new bank. It is a factor reviewed by the Board at both stages of this two-step process to establish a trust company. Accordingly, the Board would emphasize that the incorporators cannot rely solely on one individual and must develop a competent and complete management team prior to the issuance of a certificate to transact business. The information on the management structure of Towne submitted for this stage of review is sufficient for the Board to make a determination on this petition.
Another statutory criteria to be considered by the Board is the adequacy of the capital structure of the proposed Bank. The Board has determined, as policy, that a minimum initial capitalization of $8 million, net of organizational expenses, must be attained. See Decision On The Petition To Establish Asian American Bank and Trust Company in Chinatown, Boston, Massachusetts, December 28, 1992. The Incorporators of Towne intend to raise between $8.5 and $11 million in capital. As set out in submitted documents, they plan to raise such funds primarily through a combination of management and incorporator participation and contacts. If necessary. the efforts of an investment banking firm will be utilized. The Petitioners' projections for an initial three-year period of operation show that the proposed Bank would meet all regulatory capital requirements from their initial offering without the need to further access the market. The actual amount raised, the manner by which all such funds were obtained as well as the shareholders of Towne are all matters to be analyzed by the Board during the next stage of this two-step process to form a trust company.
A major factor to be considered by the Board in its analysis of an application to establish a new bank is the public convenience and advantage that will be served by its operation. That review includes the products and services to be offered as well as the means by which such banking business will be provided. As set out in the brief, stated in oral testimony and included in related materials filed, the proposed Bank intends to offer a full array of credit and deposit services to the community it will serve. Moreover, it will customize its loan products to meet a borrower's needs. As a community bank, it will focus on customer service with access to senior management and timely decisions on various applications.
The Petitioners describe Towne as a full-service community bank offering both commercial and consumer banking services. Its targeted customers would include small businesses, professionals, not for profits corporations, homeowners and consumers in general. Credit products offered would include commercial loans, commercial and residential real estate loans, home equity and installment loans. Deposit accounts would include both demand deposits and NOW accounts as well as regular savings and time deposit accounts. In particular, a free, no balance checking account was emphasized at the public hearing as a means to provide a service need to the banking public. Electronic banking services will also be provided through nationwide networks. Other general banking services will be available according to the application.
Another important factor reviewed by the Board is the Petitioners' compliance with the provisions of the Community Reinvestment Act ("CRA"). The petition contains the information on the proposed lending activities of the Bank. It adequately cites the Bank's intentions for meeting local credit needs and promoting community involvement by the Bank. Moreover, the Board has reviewed the prior performance of Metropolitan Bank and Trust Company under CRA. That review clearly shows that while under the direction certain of the proposed management of Towne, the CRA performance of Metropolitan Bank and Trust Company was found to have been satisfactory.
Having considered the record established by the Petitioners on the adequacy of the banking facilities in the area, the general character of its management, the adequacy of its capital structure and the convenience and needs of the community to be served, the Board has found that the applicable statutory and administrative criteria have been fulfilled and that the establishment of the proposed bank is in the public interest. In accordance with the Board's
findings, this application is approved and a certificate that public convenience and advantage will be promoted by the establishment of Towne Bank is hereby issued.
Both the Petitioners and the general public are advised that the proposed Bank must fulfill its statutory obligations to obtain a certificate to transact business according to the provisions of Massachusetts General Laws chapter 172, section 9. These preconditions for initiating transactions at this new Bank must be completed within one year from this approval date. If the proposed Bank does not complete its organization within that period then, by operation of law, as set out in section 6 of said chapter 172, this certificate of public convenience and advantage is revoked. During this organization period the proposed bank shall be referred to in all public materials as "in organization". All organization documents and policies must be submitted to the Board for review.
| Thomas J. Curry Commissioner of Banks | |
| Frederick A. Laskey Senior Deputy Commissioner of Revenue | Board |
| Joseph D. Malone Treasurer and Receiver-General | |
| November 1, 1996 Date |