ON THE PETITION TO ESTABLISH
BANK OF CAPE COD IN HYANNIS, MASSACHUSETTS
The Incorporators (or the "Petitioners") of the proposed Bank of Cape Cod (the "Bank") 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 Hyannis, Massachusetts. The Petitioners seek to establish the Bank as a trust company under the provisions of Massachusetts General Laws chapter 172. The Bank's deposits will be insured by the Federal Deposit Insurance Corporation ("FDIC").
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 the application pursuant to chapter 172 of the General Laws on Thursday, January 5, 2006 to receive comments from interested parties. The time for filing comments and supplementary materials after the hearing has passed. The Board reviewed the application and the testimony received at the public hearing. The application and testimony have been considered in accordance with the statutory criteria, set forth in section 6 of said chapter 172, of whether public convenience and advantage will be promoted by the establishment of the proposed banking institution. The requirements of said chapter 172 relative to the formation of the Bank, as described herein, have also been considered by the Board. The Petitioners' proposal for compliance with the Commonwealth's Community Reinvestment Act ("CRA") is also a factor 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 proposed capital structure and the convenience and needs of the community to be served. The Petitioners' oral testimony at the public hearing has addressed each of these matters in conjunction with the application to establish the Bank. It is noted that a significant number of the Bank's proposed directors and senior management attended the Board's public hearing. The Board also considered comment letters received during the public comment period.
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 FDIC. 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 Bank will be established as a trust company with its proposed main office in Hyannis, Massachusetts and a branch office to be located in Osterville, Massachusetts. According to the application, the Bank also anticipates opening a third branch at the beginning of the third year of operations. The Bank's primary service area will be Barnstable County, Massachusetts. The Petitioner asserts that the primary service area has undergone significant consolidation in the banking industry during the last decade. This trend has resulted in a considerable decline in the number of locally owned and operated banking institutions and the emergence in their place of branch offices of a smaller number of large institutions headquartered outside of the local community and outside the Commonwealth. The Petitioner asserts that eight of eleven banks in the service area are based or located outside of the Cape Cod area. At this time, there are three locally controlled banks based on Cape Cod. These three banks are state-chartered thrift institutions. The Petitioners cite to a need in this market for a commercial bank focused on meeting the lending and business needs of the business community, particularly small businesses located in the community. The Bank will focus on the small business market particularly companies with less than ten employees, as well as specialized areas including professionals, hi-tech and the growing Brazilian community on Cape Cod. Petitioners note the current Brazilian population on the Cape as approximately 17,000 with continued growth from that level.The Bank's founders and investors were selected based on their knowledge of and relationships in the Cape Cod community. Petitioner testified that twenty seven of the twenty nine founders have businesses or residences on Cape Cod. Additionally, six of the founders are current or former community bank directors.
For purposes of the Community Reinvestment Act ("CRA"), the Bank has designated its assessment area as the town of Barnstable in which the Bank's main office and branch will be located and the adjacent town of Yarmouth. Additionally, the Bank intends to maintain a loan to deposit ratio of at least 55 percent which will be reflective of both sound asset/liability management efforts and proactive community lending efforts. The Bank will offer traditional deposit products including business related products such as commercial checking, small business checking, and commercial money market accounts. Additionally, personal deposit products will include checking, statement savings, money market and certificates of deposit. The Bank seeks to attract consumer deposit accounts by providing convenient office locations and office hours, a high level of service and other convenience features such as ATMs, internet banking and debit cards. The Petitioners argue a need exists for a local full service commercial bank in this primary service area given there are no such locally based and controlled banks at the present time. The Petitioners also cite the importance of local loan officers with an understanding of the local market and culture. The Board's analysis of the adequacy of banking facilities in the area weighs in support of this application to establish a new bank.
The proposed Bank's President and Chief Executive Officer, Chief Financial Officer, and other senior officers have been identified to the Board. The senior officer positions identified will be held by individuals who have previously held senior positions at state-chartered financial institutions. The application offers that the character and experience of the incorporators will further assist the Bank in identifying and fulfilling the needs of the community to be served by the proposed Bank. Several of the Bank's incorporators have prior experience serving on bank boards of directors. As part of the process to establish a new bank, the Board reviews the general character of all the incorporators and the qualifications of the proposed management since proper management is vital to the organization and initial operation of a new bank. The information on the proposed management structure of the Bank submitted by the Petitioners 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. During the review process of the application, Petitioners submitted modified projections reflecting adjustments to capital estimates. The Petitioners state that they intend to raise initial capital of $12 million to $15 million to capitalize the Bank. The Bank will offer and sell its stock in a public offering primarily to the local community. The capital adequacy and projections will continue to be the subject of extensive review during the regulatory examination process by both the Commonwealth's Division of Banks (the "Division") and federal bank regulators if the Bank completes its organization. The Petitioners' growth projections indicate that the proposed Bank would meet all regulatory capital requirements from their initial capital contribution.
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 and stated in oral testimony, the proposed Bank intends to offer a wide range of products and services including a full range of commercial and small business and consumer deposit products such as checking and savings products, money market, certificate of deposit and IRA accounts. The Banks will also offer a full range of commercial loan and consumer loan products including commercial real estate loans, working capital lines of credit, asset-based loans, and letters of credit. Residential mortgage loans will be ancillary to the Bank's more concentrated focus on commercial and commercial real estate lending. It is the Bank's intention to partner with local mortgage lenders and brokers who will originate long term fixed rate residential mortgage loans. The Bank's products will be provided through a variety of channels. In addition to its main office and branch facilities, access to banking services will be provided through ATMs, debit cards, telephone, and internet banking and bill payment services. The Bank plans to participate in the SUM ATM network thus allowing its customers expanded access to more ATMs without the imposition of surcharges. 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 CRA. The application contains the information on the proposed lending activities of the Bank. The Petitioners cite to a need in this market for a commercial bank focused on meeting the lending needs of the business community, particularly small businesses located in the community. The Bank will focus on the small business market particularly companies with less than ten employees, as well as specialized areas including professionals, hi-tech and the growing Brazilian community on Cape Cod. In addition, the Bank intends to offer a full range of consumer loan products. The application 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 Bank of Cape Cod 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 preconditions 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, or a private placement, 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.
|Steven L. Antonakes |
Commissioner of Banks
|Alan L. LeBovidge |
Commissioner of Revenue
|Timothy P. Cahill |
Treasurer and Receiver General
|January 31, 2006 |