Decision relative to the petition to establish Navis Bank in Gloucester, Massachusetts
By the Division of Banks
The Incorporators (or the "Petitioners") of the proposed Navis Bank (the "Bank" or "Navis") 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 Gloucester, Massachusetts. (The proposed Bank's name is derived from the latin word for "ship.") 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 Wednesday, October 10, 2001 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 Gloucester and the municipalities of Rockport, Essex and Manchester, which make up the geographic region known as Cape Ann. The Bank also expects to draw customers located in the communities of Beverly, Ipswich, Hamilton and Wenham. The main office of the Bank would be in Gloucester. 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 significant consolidation in the banking industry during the last two decades which has resulted in a decline in the number of locally owned and locally controlled banks on Cape Ann. They further state that these mergers and acquisitions have transformed Gloucester-based commercial banks into branch outposts of larger regional institutions. In particular, they assert that there is a need in the primary service area for a locally owned and locally managed commercial bank with a solid understanding of the local community and the relatively unique banking needs of its businesses and consumers. Based on this analysis, the Petitioners seek to establish Navis 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. This individual had served as President and Chief Executive Officer for the Gloucester Co-Operative Bank and had worked for that institution in various capacities since 1986. He also held a senior position with Gloucester Bank & Trust Company. Gloucester Bank & Trust Company was acquired by Andover Bancorp, Inc. in a transaction effective July 1, 2000. On the same hearing date of the Navis petition, the Board heard the petition filed by Banknorth Group, Inc. of Portland, Maine to acquire Andover Bancorp, Inc. Upon consummation of that transaction, Gloucester Bank & Trust Company will be merged with and into a Massachusetts based national bank. The Board approved the Banknorth petition on October 25, 2001. The Board determined that benefits would result from that transaction and, notwithstanding its decision in that transaction, continues to support the formation and operation of community based financial institutions.
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 states that the Bank has identified qualified professionals for each of the senior roles within the organization, including chief financial officer, chief lending officer, chief operations officer and marketing manager, however, at the date of application, only tentative commitments had been received from individuals who would fill the positions of chief financial officer, chief operations officer and marketing manager. Accordingly, the Board would emphasize that the Incorporators cannot rely solely on one individual and must have in place a competent and complete management team prior to the issuance of a certificate to transact business. The Board notes that supplemental information was filed relative to the inclusion of several Incorporators on the proposed Board of Directors as well as some additional information on the Incorporators. The information on the management structure of Navis 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. The Incorporators of Navis intend to raise between $8 and $14 million in capital. The business plan submitted was based on the assumption that $10 million in capital would be raised. As set out in submitted documents, the Bank will rely primarily on management and the initial Incorporators to spearhead a local campaign to raise the necessary capital. Should a secondary phase of capital acquisition become necessary, management may use an investment banking firm. 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 payment of dividends will be governed by G.L. c. 172, section 28. The actual amount raised, the manner by which all such funds were obtained, as well as the shareholders of Navis 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 application, the Bank will offer a wide range of traditional products and services, attention to customer service, the opportunistic use of technology to more efficiently deliver products and services, and commitment to and direct involvement and participation in community institutions and events. It is the intention of Navis to focus significantly on providing banking services to small to medium sized businesses thus serving those individuals looking for a commercial bank with a community focus. The Bank contends that it will meet the banking needs of individuals, professionals, and small to medium sized businesses, by providing local management, knowledge, investment, control, and competitive services and products in both traditional and non-traditional ways. The consumer loan products to be offered include fixed and variable rate residential mortgages, including construction, 1-4 family owner occupied, non-owner occupied, and condominium loans. Home equity lines of credit will also be a significant component of the Bank's residential lending efforts. Commercial lending products will include commercial real estate loans, working capital lines of credit, asset-based loans, and letters of credit. A wide array of depository services are also planned and summarized in the submitted documents. According to the application, the Bank intends to offer a full suite of consumer and commercial deposit products. Consumers will choose from a menu that will include checking, savings, money market, certificate of deposit, and IRA accounts. Rates and fees will be determined relative to market conditions, representing a strategic mix of marketing and asset/liability management objectives. The Bank intends to be open six days a 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. The proposed areas to be served are determined to be reasonable.
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 Navis 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 requirements 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.
The approval granted herein is subject to the following additional conditions:
- During the organization period the proposed Bank shall be referred to in all public materials as "in organization".
- All organization documents, including Articles of Organization and all proposed Bank policies, must be submitted to the Board for review.
- All materials related to any stock offering, including the prospectus and marketing materials, must be submitted to the Board for review.
- No material change in the business plan submitted to the Board may occur within the organization period and for a period of three years commencing on the date the Bank opens to transact business without the prior written approval of the Division of Banks.
| Thomas J. Curry Commissioner of Banks | |
| Bernard F. Crowley, Jr. Acting Commissioner of Revenue | Board |
| Shannon P. O'Brien Treasurer and Receiver-General | |
| November 13, 2001 Date |
CERTIFICATE OF PUBLIC CONVENIENCE AND ADVANTAGE
The Board of Bank Incorporation constituted under the provisions of Massachusetts General Laws chapter 26, section 5, and acting under the powers conferred upon it by chapter 172, section 6 of said General Laws, hereby certifies that public convenience and advantage will be promoted by the establishment of a trust company in the City of Gloucester, in the Commonwealth to be known as
NAVIS BANK
The Certificate shall be deemed to be revoked if the applicants therefore do not become incorporated and begin business, in accordance with the provisions of section 6 of said chapter 172, within one year after the date of the issuance of this Certificate.
IN TESTIMONY WHEREOF the members of the Board hereby affix their names at Boston this Thirteenth day November, Two Thousand and One.
| Thomas J. Curry Commissioner of Banks | |
| Bernard F. Crowley, Jr. Acting Commissioner of Revenue | Board |
| Shannon P. O'Brien Treasurer and Receiver-General |