Decision on the petition to establish South Shore Community Bank And Trust Company in Braintree, Massachusetts
By the Division of Banks
The Incorporators (or the "Petitioners") of the proposed South Shore Community Bank and Trust Company (the "Bank" or "South Shore") 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 Braintree, 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 Thursday, July 10, 1997 by the Board to receive comments from interested parties. The time for filing comments and supplementary materials after the hearing has passed. The application, all documents submitted and the oral and written comments received on 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 the issuance of 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 the second certificate from the Board authorizing the corporation to transact banking business, a 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 and obtain the second certificate.
The Petitioners have defined the proposed Bank's primary service area as the city of Quincy and the towns of Braintree, Hingham and Weymouth. As implied by its name, the Bank also seeks to serve the more than twenty towns in the area known as the South Shore. The main office of the Bank would be in Braintree. Upon analysis of the adequacy of banking facilities within the primary service area of the proposed Bank, the Petitioners argue a need exists for the Bank for several reasons. In general, they cite recent mergers and acquisitions, an overall reduction in banking offices and a resulting need for a community bank as support for their petition. In particular, they state that the number of community commercial banks on the South Shore have been reduced from five to one in the last several years. Additionally, their application notes that in the past five years the number of branch offices in the proposed service area has been reduced by fourteen with twenty-five branch offices closed and eleven opened. Based on this analysis, the incorporators seek to establish South Shore to provide the banking public another option for their banking services. The Board's review of the adequacy of banking facilities weighs in support of this application.
The proposed Bank's President and Chief Executive Officer has been identified to the Board and that individual has served as lead proponent of this petition. The application offers that the character and experience of the incorporators, thirteen 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 Braintree Savings Bank, Braintree. He had worked for that institution in various capacities for over twenty-five years. In January of 1997 Braintree was acquired by UST Corp., Boston. In the final action in that multi-step transaction, Braintree merged with and into USTrust, Boston, a bank subsidiary of UST Corp.
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. The Board has noted that the application details a three member senior management team which will also include a chief financial officer and a chief lending officer. Neither of those individuals have been identified to date. 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 South Shore 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, Boston, Massachusetts, December 28, 1992. The incorporators of South Shore intend to raise $12 million in capital. As set out in submitted documents, they plan to raise such funds primarily through a combination of a private placement to a group of investors and, in part, through a public offering. The Petitioners have stated their intent to establish South Shore as long as the minimum capital requirement is raised. As part of the organization of the Bank, warrants for additional stock would be granted to the initial proponents. 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 Petitioners state that cash dividends are not intended to be paid during the first three years of operation. The actual amount raised, the manner by which all such funds were obtained as well as the shareholders of South Shore 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 included 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. As a community bank, South Shore will focus on customer service by knowing its clients and their financial needs and offering high quality, personalized service. South Shore intends for its trained staff to operate as a team to ensure that clients always speak to an informed individual. This approach and an emphasis on small business lending, will distinguish South Shore in the market according to the Petitioners.
As a full service bank, credit products would include commercial loans and commercial real estate loans in amounts up to $1 million dollars consistent with its plans to target the small to medium business market segment. Numerous consumer loans are cited in the brief in support of the application A wide array of depository services are also planned and summarized in the submitted documents. As stated therein, customers of South Shore will be offered a choice between deposit accounts with low minimum balances and higher fees or the opposite, higher balances yet lower fees. Numerous other banking services will also be offered at the Bank which intends to be open ten and one-half hours a day during the regular work week. Electronic banking services will also be available. The Board's analysis supports a finding that public convenience and advantage would be promoted by the transaction.
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 Braintree Savings Bank under CRA. That review clearly shows that while under the direction certain of the proposed management of South Shore, the CRA performance of Braintree Savings Bank 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 South Shore Community Bank and Trust Company 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 | |
| Mitchell Adams Commissioner of Revenue | Board |
| Joseph D. Malone Treasurer and Receiver-General | |
| August 13, 1997 Date |