Decision relative to the petition of Boston Private Financial Holdings, Inc. Boston, Massachusetts to acquire First State Bancorp, Granada Hills, California
By the Division of Banks
Boston Private Financial Holdings, Inc. ("Boston Private Financial" or the "Petitioner"), Boston, Massachusetts has petitioned the Board of Bank Incorporation (the "Board") to acquire First State Bancorp and its banking subsidiary, First State Bank of California ("First State"), Granada Hills, California. Boston Private Financial is currently the holding company for Boston Private Bank & Trust Company ("Boston Private Bank"), Boston, Massachusetts. Accordingly, the Petitioner has submitted the applicant pursuant to the provisions of sections 2 and 4 of said chapter 167A.
Notice of the application was published and posted as directed by the Board, thereby affording opportunity for interested parties to submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The Board held a public hearing on the petition of Boston Private Financial on December 11, 2003. The comment period on the proposed transaction ended December 17, 2003.
The Board has reviewed the application as well as the oral testimony received at the public hearing. That review focused on the statutory and administrative criteria which includes, among other things, whether competition among banking institutions will be unreasonably affected; whether public convenience and advantage would be promoted; and the record of performance under the Community Reinvestment Act ("CRA") by the involved banks. The additional statutory requirements set out in sections 2 and 4 of said chapter 167A were also significant factors in the Board's deliberations on the matter before it. All such requirements are specifically addressed in the application documents.
One such statutory provision requires the Board to have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and the MHPF's various affordable housing loan programs. In the application documents, the Petitioner informed the Board of its contact with the MHPF in order to meet this requirement. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated December 4, 2003.
Boston Private Financial is the parent company for Boston Private Bank. Boston Private Financial conducts business through two bank subsidiaries and four nonbank subsidiaries. As of June 30, 2003, it had approximately $2 billion in consolidated assets. Boston Private Financial has a banking subsidiary, Borel Private Bank & Trust Company in San Mateo, California and a nonbank subsidiary, Sand Hill Advisors, Inc., in Menlo Park, California. It is described as serving the investment needs of high net worth individuals and institutions primarily in California. Other subsidiaries are set out in the application.
Boston Private Bank is a state-chartered trust company. At June 30, 2003, it had total assets of $1.5 billion, total deposits of $1.1 billion, and is well capitalized. Boston Private Bank operates from its main office in Boston and has branch offices in Boston, Cambridge and Wellesley. It also has opened loan production offices in the Jamaica Plain neighborhood of Boston and in San Francisco, California. Boston Private Bank is described as pursuing a "private banking" business strategy and is principally engaged in providing banking investments and fiduciary products to high net worth individuals, their families and businesses in Boston, New England and to a lesser extent Europe and Latin America.
First State is a California chartered bank in Granada Hills, California with its deposits insured by the Federal Deposit Insurance Corporation ("FDIC"). It does not have any branch offices. First State provides financial services to primarily small to medium sized business owners and professionals and specializes in commercial loans secured by real estate. At June 30, 2003, First State had total assets of $173.9 million. As structured, Boston Private Financial will maintain First State as a separate bank subsidiary.
The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. That analysis states that consummation of the transaction will not result in undue concentration of banking resources in banking markets in Massachusetts. It is the position of this Board to consider a transaction in 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. The Board's review recognizes that Boston Private Bank and First Bank operate on different coasts and there is no overlap in branch office network or service area. For that reason and other factors, the Board finds that competition among banking institutions will not be unreasonably affected.
The Board has considered whether public convenience and advantage will be promoted by the proposed transaction. As discussed above, First State will continue to operate as a separate bank. At the public hearing, the Petitioner indicated that having bank subsidiaries on each coast may allow for certain business customers which operate in each area as well as their employees to conduct their banking business more easily. According to the application the acquisition of First State will enhance the Petitioner's performance which would benefit both of its subsidiary banks, their customers and the communities they serve. Boston Private Financial's local focus, it is stated, promotes advantage for the public seeking its banking, investment management and other products and services. The Board's review of these and other factors set out in the application related to pubic convenience and advantage support approval of the application.
Related to the issue of public convenience and advantage is the record of performance under the CRA by the subsidiary banks which are the parties to this transaction. Such a review for a state-chartered bank includes examination by personnel of the Board as well as analysis of concerns received by the bank's community and its response to those concerns fairly raised. For other institutions, the Board looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency. The matter was specifically addressed at the public hearing. The Board has noted that the Petitioner's subsidiary bank, Boston Private Bank, has a "Outstanding" rating in its most recent examination of performance under CRA by the FDIC. First State has a "Satisfactory" CRA rating from its last examination by the FDIC.
The statutory requirement for net new benefits from the proposed transaction was also considered by the Board. The Petitioner has addressed this requirement in the submitted application and at the public hearing. Among other things the Petitioner states it anticipates additional management positions will be created at the holding company as well as an additional revenue stream which could also support additional job growth. Moreover, all banking offices will be maintained and consumer and business services will be enhanced.
The financial aspects and any tax consequences from the structure of the transaction were also considered by the Board. Management factors reviewed were also found supportive of approval. At the public hearing, issues were raised and discussed relative to certain regulatory compliance matters. The Board has been informed that these matters have been sufficiently addressed to allow this matter to proceed.
The application, supporting documents, and the comments received at the public hearing have established an extensive record on this petition, which has been reviewed consistent with statutory provisions and the policies of the Board. Based on the record of this matter considered in light of all relevant statutory and administrative requirements, the Board finds that public convenience and advantage will be promoted and that competition among banking institutions will not be unreasonably affected and that the record of performance under CRA by the banks involved in this transaction are consistent with its approval. Having considered the record established on this application, the Board has found that the applicable statutory and administrative criteria have been met.
In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Boston Private Financial to acquire First State Bancorp and its subsidiary bank, First State Bank of California provided that the transaction is 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 | |
| January 28, 2004 _____________________ Date |