Decision relative to the petition of Seacoast Financial Services Corp., New Bedford, Massachusetts to acquire Abington Bancorp Inc., Weymouth, Massachusetts
By the Division of Banks
Seacoast Financial Services Corporation ("Seacoast" or the "Petitioner"), New Bedford, Massachusetts has petitioned the Board of Bank Incorporation ("the Board") pursuant to Massachusetts General Laws chapter 167A, section 2 and 4 to acquire Abington Bancorp, Inc., ("Bancorp"), Weymouth, Massachusetts and its subsidiary bank, Abington Savings Bank ("Abington"), Abington, Massachusetts. Petitioner's application before the Board is part of a multi-step transaction. A subsequent merger of Abington with and into one of Petitioner's banking subsidiaries pursuant to an Agreement and Plan of Merger dated October 20, 2003, is before the Division of Banks.
As directed by the Board, notice of the application was published and posted and a public hearing was scheduled, thereby affording an opportunity for interested parties to attend or submit comments. Other standard procedures for informing the public of this matter before the Board were implemented. The public hearing was held on March 3, 2003, and representatives of the Petitioner offered testimony and responded to questions from the Board. One issue discussed at the hearing was the recently announced and now pending application by Sovereign Bancorp, Inc., Wyomissing, Pennsylvania, to acquire the Petitioner and its subsidiary banks, and the anticipated impact of the Sovereign acquisition on this transaction. Following the hearing, the public comment period remained open so that interested parties could submit any additional comments. The public comment period closed on March 11, 2003.
Based in New Bedford, Massachusetts, Seacoast is a bank holding company with $4.5 billion in total consolidated assets as of September 30, 2003. It is the holding company for two Massachusetts chartered banks, Compass Bank for Savings ("Compass Bank"), New Bedford, Massachusetts, and Nantucket Bank, Nantucket, Massachusetts. The deposits of these banks are insured through the Bank Insurance Fund administered by the Federal Deposit Insurance Corporation ("FDIC"). Additionally, as Massachusetts chartered savings banks, their deposits in excess of the FDIC coverage limits are insured through the Depositors Insurance Fund (the "DIF"), established by Chapter 43 of the Acts of 1934. Compass Bank maintains approximately forty branch offices located throughout eastern Massachusetts, while Nantucket Bank operates three branch offices on the island of Nantucket.
Bancorp is a bank holding company headquartered in Weymouth, Massachusetts. At September 30, 2003, Bancorp had total consolidated assets of $822.8 million. Bancorp's principal asset is all of the capital stock of Abington, a state-chartered stock savings bank. Abington itself owns and controls seven subsidiaries: Holt Park Place Development Corporation and Norroway Pond Development Corporation own properties being marketed for sale; Abington Securities Corporation, Mass Securities Corporation, and Mass SEC Corp. II, are investment companies; Old Colony Mortgage Corporation originates and sells residential mortgages; and 70 Quincy Ave. LLC, owns and operates a building in Quincy. Like Compass Bank and Nantucket Bank, the deposits of Abington are insured by the FDIC and the DIF. In addition to a main office in Abington, Massachusetts, Abington operates 16 full service banking offices, located along the South Shore and as far north as Dorchester.
The Petitioner proposes to accomplish this acquisition in a two-step merger. First, Seacoast would establish Coast Merger Sub Corporation, ("Merger Sub") as a wholly-owned subsidiary. The Merger Sub would merge with and into Bancorp. Thereafter, Bancorp would be merged with and into Seacoast. Following the merger of holding companies, and upon the approval of the Division of Banks, Abington will be merged with and into Compass Bank. If approved, these transactions will result in the branches and assets of Abington becoming the branches and assets of Seacoast, and Abington and the Merger Sub will cease to exist.
Prior to approving an application under chapter 167A, the Board must have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that the Petitioner has arranged to participate in the MHPF's various affordable housing loan programs. In a letter dated April 16, 2004, the MHPF notified the Board that satisfactory arrangements had been made for this transaction.
The Board's review of this transaction focuses on the applicable statutory and administrative criteria which include, among other things, whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In determining whether the public convenience and advantage are promoted by the transaction, the Board considers, among other things, whether there has been a showing of "net new benefits." Net new benefits are defined as initial capital investments, job creation plans, consumer and business services, commitment to maintain and open branch offices within a bank's delineated local community, and such other matters as the Board may deem necessary or advisable. The Board also considers the banks record of performance under the Community Reinvestment Act ("CRA") and any relevant testimony received at the public hearing or submitted during the open comment period.
On the issue of whether banking competition will be unreasonably affected by the proposed transaction, the Board considers, but does not rely exclusively on, the guidelines used by federal authorities to review bank mergers. Essentially, these guidelines define relevant markets and measure concentration, which is considered an important indicator of competitiveness. The starting point in the federal analysis is the Herfindahl-Hirschman Index ("HHI"), an arithmetic measure of market concentration that synthesizes the distribution of market shares and the number of banks in an affected market into a single value. (The HHI is the sum of the squared market shares of all banks in the market.) In addition to that analysis, the Board considers the competitive impact of the proposed transaction on a community-by-community basis, as well as on the overall banking structure of the Commonwealth. In the Boston banking market, the only market in which both Compass Bank and Abington operate, they maintain a market share of .46% and .52%, respectively. Pursuant to the federal guidelines, the proposed transaction would have a relatively minor impact on competition in the Boston banking market. The Board has noted that the only municipality in which Abington and Compass Bank have branch offices is Boston, and those branches are located in different neighborhoods of the city. The Board is also satisfied that customers of Abington will continue to have access to competitive products and services offered by a diverse number of commercial banks, savings banks, cooperative banks, credit unions and non-bank providers. Accordingly, the Board finds that banking competition will not be unreasonably affected by the proposed transaction.
The Petitioner submitted a variety of materials relating to the public convenience and advantage it asserts would result from the proposed transaction. In addition to maintaining all of Abington's branch offices, the Petitioner has indicated that it will make several improvements to infrastructure and operations that will benefit Abington customers. These improvements include replacing and upgrading numerous ATMs, remodeling two branch offices, and enhancing Abington's telephone and internet banking platforms. Although consolidation of operations will result from the transaction, the Petitioner has indicated that it will be able to offer jobs to nearly all of Abington's employees who have day-to-day customer contact and absorb a number of administrative positions into the resulting organization.
As a result of the transaction, the Petitioner points out that Abington customers will have access to a Compass Bank's expanded branch network. Moreover, and unlike Abington, Compass Bank does not charge a monthly fee for its ATM and debit cards. In addition to these conveniences, the Petitioner maintains that the proposed transaction will provide Abington customers with access to a greater variety of banking products and services. These products and services include private banking, enhanced checking, free online bill payment, and telephone bill payment. Abington's business banking customers, the Petitioner asserts, will have access to several new products, and will be further advantaged by Compass Bank's increased lending limits.
The Petitioner contends that, like Abington, it has a strong commitment to the communities that it serves. In this regard, it advises that the Abington Savings Charitable Foundation will continue to operate after the acquisition, and will continue to provide funding to various non-profit organizations in the Abington community. More generally, Petitioner asserts that these communities will benefit from its greater resources, noting particularly its many programs designed to meet the needs of low and moderate income persons.
Based on all of the material submitted by the Petitioner and testimony at the hearing, the record demonstrates that, if the proposed transaction is approved, Abington customers will have expanded access to banking venues and services. The Board further finds that Petitioner's existing customers will be benefited by its expansion in the Boston Banking Market. Finally, the Board finds that Petitioner's various programs designed to address community needs will benefit the Abington community. Based on all of these factors, the Board's review weighs in favor of the finding that the public convenience and advantage will be promoted. The Board further concludes that the criteria for net new benefits has been established.
The Board's review of this transaction includes an assessment of the subsidiary banks' performance under the CRA. Such assessment for a state-chartered bank involves examination by Division of Banks personnel, as well as an analysis of the legitimate concerns raised by the community and the bank's response to those concerns. For other institutions, the Board reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency. Here, the Board obtained and reviewed the relevant evaluations for Compass Bank, Nantucket Bank, and Abington. In the most recent CRA examinations of Compass Bank and Nantucket Bank, both performed by the FDIC, each bank received a "Satisfactory" rating. The most recent examination of Abington, also conducted by the FDIC, resulted in a "Satisfactory" rating. Based on its review of these evaluations, the Board concludes that the banks involved in this transaction are adequately meeting the credit needs of their respective communities.
As part of its inquiry, the Board reviews the financial structure, tax consequences, and the operational aspects of the transaction. The Board has reviewed the consolidated financial statements of the parties and the details of the proposed transaction, and is satisfied with the Petitioner's capital ratios and projections. Information regarding the tax consequences of the proposed transaction was provided by Petitioner and considered by the Board. Finally, the Board is satisfied that Petitioner has the operational and managerial resources required to ensure a smooth transition.
Conclusion
Based on the record of this matter and considered in light of all relevant statutory and administrative requirements, the Board concludes that the proposed transaction will not have a significant impact on competition among banking institutions in the Commonwealth and will promote the public convenience and advantage. The Board finds that the banks involved in this transaction have a satisfactory record of performance under the CRA. In accordance with these findings and pursuant to the statutory authority cited herein, the Board approves the application and authorizes Seacoast Financial Services Corporation to acquire up to 100% of the stock of Abington Bancorp, Inc., and Abington Savings Bank.
The approval granted herein is subject to the condition that all related transactions are completed within one year of the date of this Decision.
| Steven L. Antonakes ___________________________ Commissioner of Banks | |
| Alan L. LeBovidge ___________________________ Commissioner of Revenue | Board |
| Timothy P. Cahill ___________________________ Treasurer and Receiver General | |
| April 22, 2004 _____________________ Date |