Decision relative to the petition of Lawrence Savings Bank to relocate its Lawrence banking office
By the Division of Banks
Lawrence Savings Bank (the "Petitioner" or "LSB") has petitioned the Division of Banks (the "Division") to relocate its existing banking office at 255 Essex Street, Lawrence approximately one tenth of a mile to 300 Essex Street, Lawrence pursuant to section 3 of chapter 167C of the General Laws. This Petition was filed in connection with a related conditional approval from the Board of Bank Incorporation (the "Board") under section 2 of chapter 167C of the General Laws, for permission to re-designate the location of its main office at 255 Essex Street, Lawrence to 30 Massachusetts Avenue, North Andover. ( See Decision Relative to the Petition of Lawrence Savings Bank to Re-Designate its Main Office, (December 19, 1997) (the "BBI Decision").)
Notice of the petition was posted and published as directed by the Division, thereby affording interested parties an opportunity to submit comments. Written comments were received from a number of local and state elected officials. (On May 19, 1998, the Mayor of Lawrence filed a written objection to LSB's proposed banking office relocation. This letter was preceded by a May 18, 1998 written objection from six of the nine members of the Lawrence City Council. The Lawrence City Council members subsequently withdrew their objections in a June 2, 1998 letter after meeting with LSB and taking a tour of the 300 Essex Street facility. Two State Representatives representing Lawrence districts also filed a joint objection on May 19, 1998. LSB invited both legislators to tour the proposed location. One State Representative toured the facility on July 6, 1998. Scheduling conflicts did not permit the other legislator to attend this tour.) The period for submitting comments on this petition expired at 5 o'clock P.M. on May 19, 1998. The Division has reviewed the application and other submissions of the Petitioner and public officials.
Facts
The proposed banking office at 300 Essex Street is a modern renovated banking facility. (On June 25, 1998, the Commissioner of Banks, First Deputy Commissioner of Banks, and Deputy Commissioner of Banks and General Counsel personally inspected this facility. Their tour also included visits to other LSB banking offices and competing Essex Street bank branches. These other locations included LSB's offices at 255 Essex Street, Lawrence and 30 Massachusetts Avenue, North Andover as well as the Essex Street offices of BankBoston and First Essex FSB.) It was previously a branch office of Andover Savings Bank. Originally, it was constructed as the main office of the Lawrence Co-operative Bank (later the Valley Co-operative Bank) prior to its acquisition by Andover Savings Bank in 1983. This facility occupies approximately 2,700 to 3,000 square feet. (All references to square footage in this Decision are general approximations. An apparent discrepancy developed over the number of square feet leased by the Petitioner at both Essex Street locations. Differing estimates of square footage were reported in the Lawrence Eagle Tribune, the Petitioner's May 21,1998 press release, the application and related correspondence from LSB's legal counsel. The Division approved LSB's lease application, the cover letter of which refers to approximately 2,700 square feet, on March 26, 1998. A letter dated July 6, 1998, from LSB's legal counsel subsequently clarified this matter. The actual space leased by LSB at 300 Essex Street is 3,004 square feet based upon a floor plan submitted for the location. Comparisons made by the Lawrence Eagle Tribune or the Petitioner between 255 Essex Street and 300 Essex Street apparently were based upon general estimations of the space actually devoted to the transaction of banking activities. See infra at 4-6 (Discussing the substantive impact of facility size on the adequacy of service levels provided).) It contains several teller stations, including a handicap accessible teller window; a walk up window; a vault with safe deposit boxes; two private office areas; a conference room; an employees lounge; and, a night depository. An electronic branch ("ATM") will not be installed at this location. Public parking is available adjacent to this office. The LSB provides, and will continue to provide, parking stamps for its customers using this parking lot. Based upon the Division's visual inspection, the 300 Essex Street location's physical facilities compare favorably to LSB's 255 Essex Street office. (The Petitioner's main office also is located on Essex Street in Lawrence's downtown retail district. It is a traditional banking office. It occupies approximately 9,000 total square feet of space which is evenly divided between the street and basement levels of the building. The street floor contains approximately 4,500 square feet. The Petitioner states that only approximately 2,300 square feet of this space actually is devoted to banking functions. It is a spacious facility with high ceilings and marble columns. It contains a large open interior area which is underutilized, a vault with safe deposit boxes, several teller windows, a walk up window, and several private offices, most of which are vacant. The basement level also contains approximately 4,500 square feet. It is a large unfinished area with evident water seepage that was originally used for record storage. LSB does not maintain a night depository or an ATM at this office.)
Discussion
This Petition is directly related to the December 19, 1997, BBI Decision. That Decision imposed several express conditions that the Petitioner is required to satisfy before it may lawfully re-designate its main office from 255 Essex Street, Lawrence to 30 Massachusetts Avenue, North Andover. (The following conditions were imposed by the Board: (1) that the Petitioner shall negotiate and enter into a commercially reasonable long term lease at prevailing market rates for a suitable branch office facility within Lawrence's Essex Street retail district, within three (3) months of this Decision and that said lease shall be filed with, and approved by, the Division; (2) that the proposed permanent branch office be established and be fully operational by August 12, 1998; (3) that until such permanent branch office is established, the banking hours of the 255 Essex Street main office shall remain unchanged from those in effect on the date of the Petitioner's application to the Board, unless such other hours are approved in writing by the Division for cause shown; and, (4) that the main office re-designation shall not become effective until all of the preceding conditions are fully satisfied by the Petitioner. (Emphasis supplied). BBI Decision at 10-11.) The Board's conditions were designed to ensure that LSB maintained an ongoing and meaningful physical banking presence in the City of Lawrence. The Board specifically expressed concern over the proposed main office relocation on Lawrence, an economically depressed area containing a high concentration of low- to moderate-income residents. ( Id., at 4-10.) It held that it was "...loathe to unconditionally approve, on public convenience and advantage grounds, a main office re-designation of an applicant serving an economically disadvantaged urban area where the applicant has no other branch offices within the community and where there is a limited or conditional commitment to maintain a branch office presence into the future." ( Id., at 10.) Consequently, the Board required the Petitioner to negotiate and enter into a long term lease for a facility within Lawrence's Essex Street retail district and to seek approval from the Division to establish a branch office for its proposed location. (LSB entered into the required lease prior to filing its branch applications with the Division and the Federal Deposit Insurance Corporation (the "FDIC"). The Petitioner's application to the Division is dated April 10, 1998.) The Division fully endorses the BBI Decision and its rationale. (The Commissioner of Banks is a statutory member of the Board of Bank Incorporation and chairs its proceedings. See G. L. c.26, s.5; BBI Decision at 8 n.18 (" ... the Division strives for consistent and coordinated action with the Board and views its application under G. L. c. 167C, s.3, as being closely related and dependent upon the Board's action in this matter.").)
The Petitioner essentially asserts that the 300 Essex Street facility meets all of the conditions and underlying concerns expressed in the BBI Decision. LSB also submits that its application meets the statutory review standard found in section 3 of chapter 167C of the General Laws. (The factors set out in said section 3 include whether competition will be unreasonably affected and whether public convenience and advantage will be promoted which consists, in part, of a showing of net new benefits. As defined in that law, net new benefits includes initial capital investments; job creation plans; consumer and business services and commitments to maintain and open banking offices within an institution's community. An institution's record of performance under the Commonwealth's Community Reinvestment Act, G. L. c.167, s.14 and whether financial and managerial factors support approval also are considered. The Division reviews all documents, materials, testimony and issues raised relative to this application in light of the foregoing factors.) Commenting public officials, however, have questioned this application on public convenience and advantage grounds. (No favorable or unfavorable comments were received from customers of the 255 Essex Street banking office.) They specifically ask: (1) whether this proposed banking office relocation is a physical facility down-sizing; and, (2) whether Lawrence residents and businesses will have diminished access to banking services and products. Both questions are ones of fact and observation relating to the physical size and adequacy of service levels at the 300 Essex Street location compared to the 255 Essex Street location. (A commentator requested that a public hearing on this application be held in Lawrence. Ordinarily, the Division routinely grants requests for public hearings in order to maximize public input into the regulatory application process. After careful consideration, the Division determined that a hearing was not necessary under the unique circumstances presented by this application. The factual issue of whether the 300 Essex Street location was smaller than the 255 Essex Street location can readily be determined from the application and other records. The Division's June 25th site visits in Lawrence also permitted this agency to personally assess the adequacy of the 300 Essex Street facility as a banking office through visual observation The issue as to whether approval of this application would result in a diminution of banking services also may be fairly assessed from the record of this application, the BBI Decision's record and the June 25th inspection. Moreover, the regulatory and public policy issues relative to the Petitioner's obligation to maintain an ongoing, meaningful commitment to the City of Lawrence were fully aired at the Board's lengthy November 12, 1997, public hearing on LSB's related application to re-designate its main office. Finally, the logistics of scheduling and holding a public hearing in Lawrence could have delayed action by the Division beyond the August 1998 termination of the 255 Essex Street banking office's lease and the BBI Decision's deadline for establishing an Essex Street area banking office. Continued uncertainty or a potential disruption in banking services to Lawrence residents could not be ruled out under this scenario. Therefore, on balance, the Division determined that a public hearing on this matter would not have been in the public interest.)
The proposed 300 Essex Street location clearly contains less raw total square feet of space than the current 255 Essex Street location. A determination as to whether a particular proposed banking office offers adequate physical facilities for conducting a banking business, however, is not a mathematical exercise. The focus is properly on staffing levels and the types of banking products and services being offered and whether the physical surroundings will accommodate these services. Based upon the Division's observations, the space leased by the Petitioner at 300 Essex Street is adequate to accommodate the banking services being offered. In many respects, the smaller 300 Essex Street site is superior to 255 Essex Street office in terms of pedestrian access, configuration or layout, interior finish, access to parking and employee amenities.
The more significant question is whether Lawrence residents and businesses will have diminished access to banking services as a result of this proposed banking office relocation. The record, however, indicates that staffing levels, banking hours and the array of available services will remain unchanged at 300 Essex Street. The Division notes that the Petitioner's proposed location will not be staffed with full or part time mortgage loan originators or commercial loan officers. The 255 Essex Street office also is not staffed by these lending personnel. LSB's branch manager, however, will retain her consumer loan lending authority at the proposed location. The Division shares a commentator's concern that Lawrence residents and businesses, particularly small and minority owned businesses, should have equal access to all residential mortgage loan, small business and commercial loan products offered by the Petitioner. Upon inquiry, however, the Division was informed by the Petitioner that these products are readily available to all existing and potential Lawrence banking office customers. LSB further represented that its residential mortgage loan and commercial loan lending functions have been centralized throughout its branch system for over a decade. The Division notes that this approach is relatively common within the Massachusetts banking industry. (This strategy reflects the growth within the banking industry of incentive compensated mortgage loan originators who "go to the customer" and calling programs where loan officers similarly solicit businesses directly for commercial loan opportunities at their places of business.) Centralization of lending functions does not appear to have adversely effected the Petitioner's ability to serve the credit needs of Lawrence's low- to moderate-income residents and businesses. (The Board, citing the Petitioner's HMDA data and past CRA Performance Ratings, specifically noted that LSB was an active lender in Lawrence. See BBI Decision at 4, n. 8-9.)
The underlying and important issue of whether the Petitioner will continue to meet its clear statutory, as well as historical, obligation to provide needed banking and credit services to the Lawrence community is much larger than the scope of LSB's petition to relocate its banking office in the City of Lawrence. The Division believes that this regulatory issue is properly addressed by the state and federal Community Reinvestment Acts (the "CRA") and the examination and enforcement authorities entrusted to the Division and federal bank regulatory agencies under the CRA. (Under the CRA, banks have a "... continuing and affirmative obligation to help meet the credit needs of the communities in which offices and branches are maintained including ... low and moderate income neighborhoods, consistent with the safe and sound operation of such banks." G. L. c.167, s.14; 209 CMR 46.00.) The Board and the Division also have clearly and forcefully stated in both the BBI Decision and this Decision, respectively, that the Commonwealth expects the Petitioner to maintain a long term and meaningful banking presence which will provide needed services to the City of Lawrence. The Petitioner's success or failure in meeting this obligation will be measured under the CRA. If going forward, LSB is found to have a less than "satisfactory" record of performance under the CRA, it would be a critical and potentially adverse factor in future applications before the Board and Division. ( See 209 CMR 46.29 (CRA performance may form the basis for denying or conditioning approval of the enumerated regulatory applications).)
Public convenience and advantage, as well as financial and managerial factors do not preclude approval. The Division has also considered the competitive effects of this petition. Competitive considerations are not present in this banking office relocation. The Petitioner's record of performance under the state and federal CRA statutes also support approval by the Division. (LSB's most recent CRA Performance rating is a "high satisfactory" from the Division. (The final CRA Examination Report was signed and mailed on January 9, 1998.) This rating was preceded by an "outstanding" CRA Performance rating from the FDIC on March 11, 1996 and an "outstanding" CRA Performance rating from the Division on March 20, 1995.)
Conclusion
Based upon the Petitioner's application and the full record before the Division, approval is hereby granted pursuant to section 3 of Chapter 167C of the General Laws for Lawrence Savings Bank to relocate its banking office at 255 Essex Street, Lawrence to 300 Essex Street, Lawrence. The Petitioner shall notify the Division in writing when the 300 Essex Street location opens to transact business.
| July 10, 1998 Date | Thomas J. Curry Commissioner of Banks |