Decision relative to the Petition of Independent Bank Corp., Rockland, Massachusetts to acquire Falmouth Bancorp, Inc., Falmouth, Massachusetts
By the Division of Banks
Independent Bank Corp. (the "Petitioner" or "Independent"), Rockland, Massachusetts has petitioned the Board of Bank Incorporation (the "Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 for approval to acquire ownership of and control of the stock of Falmouth Co-operative Bank ("Falmouth Bank") Falmouth, Massachusetts through its indirect merger with Falmouth Bancorp, Inc. ("Falmouth Bancorp"), Falmouth, Massachusetts. The Petitioner is the bank holding company for Rockland Trust Company ("Rockland Trust"), Rockland, Massachusetts. Falmouth Bancorp is the bank holding company of Falmouth Bank. The application before the Board is part of a series of interrelated merger transactions wherein INDB Sub, Inc., a wholly-owned subsidiary of Independent, formed solely to effect the transaction, will merge with and into Falmouth Bancorp. The surviving corporation will then merge with and into Independent followed by the merger of Falmouth Bank with and into Rockland Trust. The merger of the subsidiary banks, Falmouth Bank and Rockland Trust, by statute, is subject to the approval of the Commissioner of Banks.
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 Independent on May 25, 2004. The stockholders of Falmouth Bancorp approved the transaction on June 7, 2004. The comment period on the proposed transaction ended June 8, 2004.
The Board has reviewed the application and 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 two involved subsidiary 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. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated April 15, 2004.
Independent is a Massachusetts corporation incorporated in 1985 and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended. Independent owns 100% of the outstanding capital stock of Rockland Trust, and its primary business is serving as the holding company of Rockland Trust. Rockland Trust has its main office in Rockland and operates 52 banking offices (including 49 full service branches), seven commercial lending centers, three investment management offices and three mortgage banking centers, all of which are located in Plymouth, Norfolk, Bristol and Barnstable Counties. As of December 31, 2003, Independent, Rockland Trust's holding company, had consolidated assets of $2.44 billion. Rockland Trust's deposits are insured by the Bank Insurance Fund administered through the Federal Deposit Insurance Corporation ("FDIC"). Rockland Trust is principally engaged in the business of gathering deposits from customers within its market areas and investing those funds in residential and commercial real estate loans, private banking services to both individuals and businesses, investment management services, commercial loans, construction loans, home equity loans and other consumer loans and investment securities.
Falmouth Bancorp is a Delaware corporation and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended. Falmouth Bancorp's principal asset is 100% of the outstanding capital stock of Falmouth Bank, and its primary business is serving as the holding company of Falmouth Bank. Falmouth Bank has its main office in Falmouth and operates three branch offices in East Falmouth, North Falmouth and Bourne. As of December 31, 2003, Falmouth Bancorp, the bank's holding company, had consolidated assets of $158.11 million. Falmouth Bank's deposits are insured through the Bank Insurance Fund administered by the FDIC. Additionally, as a Massachusetts-chartered co-operative bank, Falmouth Bank's deposits in excess of the FDIC coverage are insured through the Share Insurance Fund of the Co-operative Central Bank, established by Chapter 73 of the Acts of 1934. Falmouth Bank is principally engaged in the business of attracting deposits from the general public, borrowing funds and investing those deposits and funds.
The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. Much of that analysis is detailed according to various tests used by federal agencies. The analysis demonstrates that consummation of the transaction will not result in undue concentration of banking resources in the specified banking markets in Massachusetts. Traditionally, however, this Board has not limited its review to those previously cited federal standards in its consideration of whether competition will be unreasonably affected. Rather 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. In an additional related transaction, Rockland Trust seeks approval from the Division of Banks to close two of its branch offices. The Rockland Trust branches proposed to be closed are located at: 301 Barlows Landing Road, Pocasset, Massachusetts and 763 Main Street, Falmouth, Massachusetts. The deposits and loans from these two Rockland Trust branches will be consolidated into, and the existing Rockland Trust customers served from, the four current Falmouth Bank branches. Upon review, the Board does not believe the transaction will unreasonably affect competition for the reasons cited as well as the fact that a number of diverse financial institutions will continue to provide competitive deposit and credit services in the affected areas.
The Board has considered whether public convenience and advantage will be promoted by this proposed transaction. The enhanced financial strength of the combined banks will ensure that the resulting institution will be able to offer financial products and services at competitive rates. As a significantly larger financial institution, Rockland Trust offers a greater variety of products and services than does Falmouth Bank. Such products and services will include: investment management services; mutual funds and annuities; consumer and business credit cards; higher withdrawal limits on ATM and debit cards; telephone banking; more branches in a larger geographic area; and increased lending limits. The application and the testimony at the public hearing cited several benefits which will result from the transaction. Following the merger, the combined banks will continue to make available to its customers the many programs currently offered by each of them that are designed to meet the needs of low and moderate income persons, such as FHA Loans, FNMA 97% Program, First Time Home Buyer, MHFA General Lending Program, Municipal Loan Program, various Soft-Second Programs, Veteran's Administration loans and other lending programs. The Board's review of factors related to public 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 Division of Banks 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 Board has noted that the Petitioner's subsidiary bank, Rockland Trust, has an "Outstanding" rating in its most recent examination of performance under CRA by the Division of Banks in August 2003.
The Board has noted that Falmouth Bank has a "Satisfactory" rating at its most recent FDIC examination of CRA performance in September 2003. The Board's review of factors related to public convenience and advantage are consistent with approval.
The Board has considered the Petitioner's analysis of "net new benefits" related to the transaction. The term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors. The Petitioner has stated in the application that its current financial strength, together with the resources and operating efficiencies it anticipates achieving as a result of the transaction, will provide a platform for future growth of the combined institution's market area and customer base within Barnstable County and other parts of Massachusetts and will permit the continued institution to respond to market opportunities more rapidly. The Petitioner further states that such growth, and the enhanced ability to respond to changing market conditions, may contribute to the Massachusetts economy.Related to the job creation component of the "net new benefits" analysis, at the public hearing the Board presented several questions to the Petitioners with respect to the impact of the transaction on job consolidations. Petitioners responded that all existing personnel in the branches of Falmouth Bank will be retained. Petitioners further stated that certain positions in the accounting and lending areas will be eliminated due to overlap and duplication of duties of comparable personnel. The Petitioner emphasized that it anticipates future growth and stated that the Cape Cod area is a key part of its overall growth strategy. As discussed at the public hearing, the Petitioner's job creation plans are consistent with the requirements of the net new benefits test. Other prongs of that test have also been met. 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. Additionally, all other requirements of statute have been met.
The application, supporting documents, and the testimony received at the public hearing have established a comprehensive 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 subsidiary 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 Independent to acquire Falmouth Bancorp and Falmouth Bank 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
|Timothy P. Cahill|
Treasurer and Receiver General
|June 16, 2004|