Decision relative to the application of Sovereign Bank, Wyomissing, Pennsylvania to merge with Compass Bank for Savings, New Bedford, Massachusetts and Nantucket Bank, Nantucket, Massachusetts
By the Division of Banks
Sovereign Bank (the "Petitioner" or "Sovereign Bank"), of Wyomissing, Pennsylvania, has applied to the Division of Banks (the "Division") pursuant to Massachusetts General Laws chapter 167, section 39B, for permission to merge with Compass Bank for Savings ("Compass Bank"), New Bedford, Massachusetts, and Nantucket Bank ("Nantucket Bank"), Nantucket, Massachusetts. The proposed merger is part of a multi-step transaction, involving a petition before the Board of Bank Incorporation (the "Board") by Petitioner's holding company, Sovereign Bancorp ("Bancorp"), Inc., Philadelphia, Pennsylvania, to acquire Seacoast Financial Services Corporation ("Seacoast") of New Bedford, Massachusetts. Seacoast is the holding company of Compass Bank and Nantucket Bank. Following the merger of Bancorp and Seacoast, Compass Bank and Nantucket Bank will be merged with and into Sovereign Bank. As a result of these transactions, Compass Bank and Nantucket Bank will cease to exist and the branches of Compass Bank and Nantucket Bank will become branches of Sovereign Bank as set forth herein.
Notice of Petitioner's application was published and posted, and the time period for interested parties to comment on the transaction has expired. Accordingly, all documents and materials related to this transaction have been received and reviewed. This record has been considered with regard to all applicable statutory standards, which require consideration of, among other things, whether competition among banking institutions will be unreasonably affected by the proposed transaction and whether the public convenience and advantage will be promoted. The Commissioner's consideration of this matter must also take into account the involved banks' record of performance under the Community Reinvestment Act ("CRA").
Petitioner is a federal savings bank headquartered in Wyomissing, Pennsylvania. As of December 31, 2003, it had approximately $43.5 billion in consolidated assets. It operates 581 branch offices in Pennsylvania, New Jersey, Connecticut, New Hampshire, New York, Rhode Island, and Massachusetts. Of the total branches, 173 are within Massachusetts.
Compass Bank is a Massachusetts chartered, stock savings bank. At December 31, 2003, it held approximately $3.9 billion in consolidated assets. Compass Bank maintains fifty-one full service banking offices located throughout Southeastern Massachusetts. Nantucket Bank is also a Massachusetts chartered stock savings bank. As of December 31, 2003, it had approximately $506 million in consolidated assets. Nantucket Bank operates a main office and two branch offices on the island of Nantucket.
As an interstate transaction and pursuant to the requirements of chapter 167, section 39B, the reciprocity laws of Petitioner's home state are subject to the review of the Commissioner of Banks. Specifically, the Commissioner must determine whether the transaction being proposed by the Petitioner is authorized under the laws of Pennsylvania for a Massachusetts-based company, under conditions no more restrictive than those imposed by Massachusetts. Accordingly, a review of these laws indicates that they are reciprocal and would authorize the proposed transaction under conditions no more restrictive than those imposed by the above-referenced statute. Based on this review, and consistent with previous rulings regarding Pennsylvania's reciprocity laws, the proposed transaction is permissible under the Commonwealth's Interstate Bank Act.
Materials have been submitted to address whether competition among banks will be unreasonably affected by the proposed transaction. These materials included the current market shares of Sovereign Bank, Compass Bank, and Nantucket Bank, and the various indices used by federal banking agencies to assess competitive conditions. Also relevant to the question of competitive conditions within the Community is the Petitioner's determination, as explained in a June 1, 2004 supplemental filing, to close twelve banking offices for the reason of consolidation with a nearby branch office. The twelve banking offices are located in twelve separate municipalities and range from New Bedford to Boston. The Division has reviewed these materials, and has determined that the affected communities 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 Division finds that the proposed transaction will not unreasonably interfere with competition.
The Commissioner must consider whether the proposed transaction promotes the public convenience and advantage, as well as whether there has been a showing of net new benefits in relation to the transaction. Net new benefits include, among other things, initial capital investments, job creation plans, consumer and business services, commitments to maintain and open branch offices within a bank's delineated local community, and such other matters as the Commissioner may deem necessary. In this regard, the Petitioner first notes that customers of the merged banks will have access to Sovereign Bank's significantly larger and multi-state branch and ATM network. The Petitioner further asserts that, as a larger financial institution, Sovereign Bank is able to offer a greater variety of products and services than either Compass Bank or Nantucket Bank, a number of which are not currently available to Compass Bank and Nantucket Bank customers. Among the products and services offered by Sovereign Bank, but not currently offered by either Compass Bank or Nantucket Bank, that would be available to customers of the combined institution are: 1) capital markets products (money market investments, interest rate swaps, foreign exchange services); 2) miscellaneous personal and commercial banking products offered through alliances with other companies (insurance, benefits management, merchant services, payroll services); 3) cash management services for corporate and institutional customers; and 4) international trade services.
Prior to approving this transaction, and as required by Massachusetts General Laws chapter 167, section 14, the Commissioner must consider the involved banks' record of performance under the CRA. Such review for a Massachusetts-chartered bank includes examination by the Division, as well as an analysis of any legitimate concerns raised by the community and the bank's response to those concerns. For other institutions, the Division reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency . In its most recent CRA examination, performed by the Office of Thrift Supervision ("OTS"), Sovereign Bank received an "Outstanding" rating. The most recent examinations of Compass Bank and Nantucket Bank, both performed by the FDIC, each resulted in "Satisfactory" ratings. These ratings, as well as other materials submitted on this issue, sufficiently demonstrate that the banks involved in this transaction are adequately meeting the credit needs of their respective communities.
As state-chartered savings banks, the deposits in Compass Bank and Nantucket Bank in excess of the deposit insurance coverage provided by the FDIC" are insured, in full, by the Depositors Insurance Fund ("DIF"), established by Chapter 43 of the Acts of 1934. Upon consummation of the mergers of these banks with and into Sovereign Bank, a federal savings bank, the excess deposit insurance coverage of DIF will end. The Division is aware that disclosure materials will be provided to Compass Bank and Nantucket Bank depositors, informing such depositors that the DIF deposit insurance coverage will end if the merger is approved and finalized, while the FDIC coverage will continue.
Based on the entire record of this matter and considered in light of all relevant statutory and administrative requirements, the Division concludes that all such requirements have been met and that consummation of the proposed merger would be in the public interest. On the basis of these conclusions, and subject to the conditions set forth below, approval is granted for Compass Bank and Nantucket Bank to merge with and into Sovereign Bank in conformity with the merger agreements and to consolidate and maintain the branches of both banks as set forth in the application materials, pursuant the provisions to Massachusetts General Laws chapter 167, section 39B.
The approval granted herein is subject to the following conditions:
- that the mergers of Compass Bank and Sovereign Bank, as well as Nantucket Bank and Sovereign Bank, shall not become effective until Certificates, signed by the Presidents and Clerks or other duly authorized officers of the banks involved in the mergers, indicating that each such institution has complied with the provisions of Massachusetts General Laws chapter 167, section 39B, or other applicable statute, have been returned;
- that such Certificates shall be filed with the Secretary of State of the Commonwealth of Massachusetts;
- that the proposed mergers shall be consummated within one year of the date of this decision.
| July 22, 2004 __________________________ Date | Steven L. Antonakes ___________________________________ Commissioner of Banks |