Decision relative to the merger of the Sandwich Co-Operative Bank, Sandwich with and into Compass Bank for Savings, New Bedford
By the Division of Banks
Compass Bank for Savings ("Compass" or the "Petitioner"), New Bedford, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with The Sandwich Co-operative Bank ("Sandwich"), Sandwich, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 168, section 34D and under the terms of an Affiliation and Merger Agreement (the "Agreement") dated as of March 23, 1998. The Agreement provides for the merger of Sandwich with and into Compass under the name, charter and by-laws of Compass. The banking offices of Sandwich will become branch offices of Compass. The merger is part of a multi-step transaction whereby the holding company for Compass, Seacoast Financial Services Corporation ("Seacoast") will acquire the holding company of Sandwich, Sandwich Bancorp, Inc. The acquisition application is before the Commonwealth's Board of Bank Incorporation. In connection with this transaction, Seacoast will convert from a mutual holding company governed by Massachusetts General Laws chapter 167H to a stock holding company.
Notice of the application was posted as directed by the Division thereby affording opportunity for interested parties to submit comments. The period for filing comments which was subsequently extended to October 30, 1998 has expired. The Division reviewed the application and all related documents in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether any net new benefits as well as public convenience and advantage would be promoted by approval of the proposed transaction. The record of performance under the Commonwealth's Community Reinvestment Act ("CRA"), Massachusetts General Laws chapter 167, section 14 and the Division's regulations, 209 CMR 46.00 et seq. also were factors considered by the Division.
Compass is the subsidiary banking institution in stock form resulting from its 1994 reorganization into a mutual holding company, The 1855 Bancorp, Inc, which subsequently changed it name to Seacoast. It operates from twenty-five banking offices, most of which are located in southeastern Massachusetts and on Martha's Vineyard. Compass' primary business is making residential mortgage loans, consumer loans, including indirect automobile loans, and various commercial loans. At March 31. 1998, it had total assets of approximately $1.15 billion.
Sandwich Bancorp, Inc. is the stock holding company for Sandwich as a result of that bank's reorganization into a one bank holding company structure in September of 1997. Sandwich converted from mutual to stock form in 1986. It operates nine banking offices on Cape Cod with one branch office in Wareham and one branch office in the Cedarville area of Plymouth. Sandwich's primary business consists of making residential mortgage loans and consumer loans as well as making commercial loans. Sandwich had total assets of approximately $526 million at March 31, 1998.
Materials have been submitted to address the issue of whether competition among banks will be unreasonably affected by the proposed transaction. Some of that analysis is detailed according to various tests relative to the size of each institution and its competitors within delineated markets used by federal agencies. Moreover, Compass has also submitted information on the transaction as it impacts the counties in Massachusetts in which Compass and Sandwich have banking offices. According to the Petitioner, there is very little overlap. Compass' banking offices are primarily in Bristol and Dukes Counties with three offices in Plymouth County. Sandwich's banking offices are located primarily in Barnstable County with two offices in Plymouth County. It is the position of the Division to consider a transaction in the 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 or counties. The Division had noted that each bank had offices within the town of Plymouth. Upon review and with recognition of the several other banking options for the public in the town of Plymouth, the Division's analysis of the competitive impact of this transaction does not preclude its approval.
The Division has also considered whether public convenience and advantage will be promoted by this transaction. As described in the filed documents, Compass believes the statutory test is met in a number of ways. Upon consummation of this multi-step transaction, customers of Sandwich will have access to Compass' telephone call center through which accounts can be opened and loans applied for as well as other services obtained. Two new services to be offered by Compass are internet banking and a telephone bill paying service. The combined branch office network will also allow business to be conducted over a significantly larger geographic area. Additional services and proposed programs are set out in the application and provide the basis for determining that this statutory test and a showing of net new benefits has been met.
The record of performance under CRA by the banks involved in a transaction is also a consideration by the Division. For financial institutions not directly under the jurisdiction of the Commonwealth, the Division initially looks to the publicly available descriptive rating and evaluation by a federal or another state's banking regulatory agency. Such review for state-chartered banks such as Compass and Sandwich includes examination by personnel of the Division as well as analysis of concerns received from a bank's community and a bank's response to those concerns fairly raised. The Division is aware that Compass has a "Satisfactory" rating and Sandwich has an "Outstanding" rating in their most recent examination of performance under CRA. Accordingly, the Division's view of this factor is consistent with approval.
The application states that upon consummation of the transaction, three current directors of Sandwich Bancorp, Inc. will be added to the Board of Directors of Seacoast and one of the three directors will be added to the Board of Directors of Compass. The operating officers of Compass will continue in their positions and may be supplemented by certain officers from Sandwich. Economies and service capabilities which would result from the transaction are set out in the submitted documents. Following consummation of all parts of the transaction, which includes the conversion of Seacoast, all regulatory capital standards will continue to be met. Upon review, financial and managerial considerations support the petition.
Compass and Sandwich have addressed the Year 2000 ("Y2K") issue by dedicating senior personnel and funds to the task. Moreover, ongoing system testings are being done for compliance with Year 2000 requirements. To date, the banks' reviews of their Y2K compliance programs have been acceptable. This transaction will not effect that compliance effort.
Based on the record on this matter including the testimony received at the public hearing considered in light of all relevant statutory and administrative requirements, the Division finds that competition among banking institutions will not be unreasonably affected, that public convenience and advantage will be promoted by consummation of the proposed transaction and that records of performance under CRA by the banks involved in this transaction are consistent with its approval. Therefore, in accordance with these findings and pursuant to the statutory authority cited herein, the Division hereby approves the application and authorizes The Sandwich Co-operative Bank to merge with and into Compass Bank for Savings. Approval is also granted for Compass to maintain the eleven banking offices of Sandwich as branch offices under General Laws chapter 167C, section 3.
The approvals granted herein are subject to the following conditions:
- That no merger shall become effective until a certificate signed by the Presidents and Clerks or other duly authorized officers of the banks involved in the merger indicating that each such institution has complied with the provisions of Massachusetts General Laws chapter 168, section 34D and chapter 170, section 26D, or other applicable statute has been returned with my endorsement thereon;
- that the proposed merger shall not become effective until Articles of Merger with my endorsement thereon are filed with the Secretary of State; and
- that the proposed merger shall be consummated within one year of the date of this decision.
| November 16, 1998 Date | Thomas J. Curry Commissioner of Banks |