Decision on the petition to obtain a Certificate of Public Convenience and Advantage in the formation of Middlesex Bank & Trust Company in Newton, Massachusetts
By the Division of Banks
An application with related documents was filed with the Board of Bank Incorporation (the "Board") to obtain a certificate that public convenience and advantage would be promoted by the establishment of the proposed Middlesex Bank & Trust Company (the "Bank" or "Middlesex") to be located in Newton. The proposed Bank would operate as a state-chartered trust company under chapter 172 of the General Laws. In addition to Newton, the proposed Bank would also serve the municipalities of Wellesley, Needham and Brookline.
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 December 5, 1996 by the Board to receive comments from interested parties. 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 Petitioner's filings and testimony at the public hearing have addressed each of these matters in conjunction with the application.
This matter is before the Board for the second time. The original application was heard by the Board in February of 1995. The Certificate of Public Convenience and Advantage was issued by the Board on May 19, 1995 in conjunction with its written findings that applicable provisions of law had been met. See Decision On The Petition To Establish Middlesex Bank & Trust Company In Newton, Massachusetts (hereinafter the "Prior Decision"). Several documents relating to the initital organization and operation of the Bank were submitted to the Board for review and approval subsequent to the Prior Decision. All such documents were consistent with the timely and successful completion of the organization of Middlesex. The Board, however, was subsequently informed that the proposed Bank would not be able to complete its organization within the one year set out in statute. Accordingly, by operation of law, the first certificate expired once Middlesex did not complete its organization by May 18, 1996.
The submitted application is substantially similar to the original filing in 1994 and arguments in support of this petition tract those previously offered. The documents, however, reflect the continued and ongoing consolidation within the banking industry which serve as one of the proponents primary reasons for seeking the establishment of a local commercial bank to service the public within the specified communities. The difference in the two proposals to charter Middlesex concerns the method of raising the minimum capitalization requirement. The inability to raise the necessary amount from the communities to be served resulted in the first proposal's organization from being complete.
At the public hearing the Board was informed that the proponents of Middlesex were discussing an arrangement whereby the $8 million dollar capitalization would be provided in whole or in part by Affiliated Community Bancorp, Inc. ("Affiliated"), Waltham, Massachusetts. Affiliated is the bank holding company for Lexington Savings Bank and The Federal Savings Bank, Waltham, Massachusetts. The oral testimony at the public hearing supported this funding mechanism as a means for the determination of public convenience and advantage as set out in the Board's Prior Decision to be implemented while ensuring that a source of financial strength exists for the proposed Bank. Based on the testimony of this likely change to the petition, the Board asked several questions and received responses on the potential ramifications to the management structure, operations, products and independence of Middlesex as a subsidiary of a bank holding company.
On December 18, 1996 the Board received copies of a Stock Subscription Agreement between Affiliated and Middlesex. The Agreement was dated as of December 17, 1996. It provides for Affiliated to acquire 100% ownership interest of Middlesex and to do so for the $8 million capitalization requirements, net of organizational expenses. Such expenses are also addressed in the Agreement as are other matters relative to the operation of Middlesex.
This capitalization proposal, as structured by the Agreement, triggers additional and distinct statutory provisions. Of significance to the Board is the requirement that Affiliated now petition for authority to acquire Middlesex under the bank holding company statute, chapter 167A of the General Laws. Provisions of that law, as amended by Chapter 238 of the Acts of l996 governing, in part, interstate banking and branching, will also require a separate determination solely by the Commissioner of Banks. The Board recognizes that Affiliated has filed the required application which will be heard on February 27, 1997. Since all necessary regulatory filings and procedures have at least been initiated, the Board has determined it can proceed separately on the matters before it knowing that all regulatory approvals must be obtained prior to the organization of Middlesex.
As described in the Board's Prior Decision and stated at the recent hearing, Middlesex still intends to serve small and emerging companies, not for profit institutions, professionals and the public within its described service area. It would offer a complete range of commercial banking services. Middlesex may use various products now offered by the bank subsidiaries of Affiliated. It argues that any such support from Affiliated will allow the Bank to move and develop faster in its efforts to serve the banking public.
The proposed Bank's President and Chief Executive Officer was identified to the Board in the initial process and remains the lead proponent in this second filing. The individual would hold the same positions upon the organization of Middlesex. According to the Agreement with Affiliated, other remaining officers of Middlesex will be agreed to by both parties. The Board of Directors would consist of four members of Middlesex and one designated by Affiliated. The two remaining members would be chosen by Middlesex from a list of candidates provided by Affiliated.
The Board has again reviewed Middlesex's proposal to comply with the Community Reinvestment Act ("CRA"). The information provided adequately cites the Bank's projections for meeting local credit needs and promoting community involvement.
The Board's consideration of this matter has included the record established by Middlesex's initial application; the Board's Prior Decision; the current application and testimony at the public hearing and the Agreement with Affiliated. Based on this record, the Board finds that the applicable statutory criteria as to the adequacy of banking facilities in the area, the general character of management, the adequacy of capital structure and the convenience and needs of the communities to be served had been fulfilled and that the establishment of the proposed banks is now in the public interest. In accordance with these findings, the petition is approved and a certificate that public convenience and advantage will be promoted by the establishment of Middlesex Bank & 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 Middlesex must be completed within one year from the date of this approval as set out in section 6 of said chapter 172 of the General Laws. Additionally, all statutory requirements applicable to Affiliated must be completed within this one year period.
|Thomas J. Curry |
Commissioner of Banks
|Mitchell Adams |
Commissioner of Revenue
|Joseph D. Malone |
Treasurer and Receiver-General
|September 29, 1997 |