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  • Division of Banks

Decision  Decision of April 9, 2009

Date: 04/09/2009
Organization: Division of Banks
  • Petitioner: Independent Bank Corp.
  • Respondent: Board of Bank Incorporation

Table of Contents

Decision relative to the petition of Independent Bank Corp., Rockland, Massachusetts to acquire Benjamin Franklin Bancorp, Inc., Franklin, Massachusetts

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 and control of Benjamin Franklin Bancorp, Inc. ("Benjamin Franklin"), Franklin, Massachusetts and its subsidiary bank, Benjamin Franklin Bank, Franklin, Massachusetts. The Petitioner is the bank holding company for Rockland Trust Company ("Rockland Trust"), Rockland, Massachusetts. The merger, as now structured, of the subsidiary banks, Benjamin Franklin Bank with and into Rockland Trust is, by statute, subject to the approval by the Division 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 February 10, 2009. The Petitioner submitted a supplemental filing to the application at the request of the Board on February 9, 2009. The comment period on the proposed transaction ended on February 20, 2009. Only one comment was received directly by the Board during the open comment period. That comment received in advance of the public hearing was by a stockholder of Independent. Although the proposed transaction was the subject of media coverage, only representatives of the involved institutions testified at the public hearing which was sparsely attended by other interested parties.

The Board has reviewed the application, oral testimony received at the public hearing, the supplemental filing of the Petitioner and other information received. That review focused on the statutory and administrative criteria applicable to such transactions which include, 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 subsidiary banks of the holding companies. As in any transaction, consideration is also given to the financial and management components of a proposed acquisition. 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.

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 February 25, 2009.

The Parties

Independent is a Massachusetts corporation and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended. As a bank holding company, its primary purpose is to serve as a source of strength for its subsidiaries and affiliates. In this case, Independent's principal asset is 100% ownership of the capital stock of Rockland Trust, a state-chartered trust company established in 1907. Rockland Trust offers a full range of community banking services throughout Southeastern Massachusetts and on Cape Cod. It has its main office in Rockland and operates 60 full service branches, ten commercial lending centers, four investment management offices and five mortgage banking centers, all of which are located in Plymouth, Norfolk, Bristol and Barnstable Counties. According to the application, Rockland Trust plans to open two additional branches, one in Norfolk County and one in Bristol County. As of December 31, 2008, Independent, Rockland Trust's holding company, had consolidated assets of $3.6 billion. Rockland Trust's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC").

Benjamin Franklin is a Massachusetts corporation and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended. Benjamin Franklin was organized in 1996 as a mutual holding company in connection with Benjamin Franklin Savings Bank's reorganization into the mutual holding company form of organization. Benjamin Franklin Bank's mutual holding company converted to a stock holding company on April 4, 2005 under the name Benjamin Franklin Bancorp. Benjamin Franklin's primary activity is acting as a holding company for Benjamin Franklin Bank, a Massachusetts-chartered savings bank. The deposits of Benjamin Franklin Bank are insured by the FDIC with deposits in excess of FDIC limits insured in full by the Depositors Insurance Fund. Benjamin Franklin Bank is a full service community bank with offices in Franklin (2), Bellingham, Foxborough, Medfield, Milford, Newtonville, Waltham (2), Watertown, and Wellesley Hills. As of December 31, 2008, Benjamin Franklin, the bank's holding company, had consolidated assets of $998 million.

Subsequent to the public hearing and within the public comment period both Independent and Benjamin Franklin held their stockholders vote on this proposed transaction. There were approximately six million shares which executed proxies received by Benjamin Franklin for voting on the transaction, of which approximately 18,000 abstained. Of the total proxies received, 95% voted in favor of being acquired by Independent. Similarly, 98.9% of the stockholders of Independent voted in favor of the transaction. As noted above, no stockholders or other person or entity submitted a comment to the Board after the public hearing or after the announced votes of the shareholders at each institution.


The previous stated and cited statutory criteria of the Massachusetts General Laws clearly establish the road this Board must travel in reviewing the many components of a transaction that comes within its jurisdiction. In meeting these significant statutory responsibilities, however, the Board is and must be well aware of national and real world issues and concerns existing at the time of any application. Such awareness is necessary, not only for any impact such matters may have on the applicable statutory tests which are not frozen in time to the context existing at passage, but also to make the Board's decision relevant in a changing financial services industry.

The necessity for such an understanding and awareness of current events was never more evident than by certain facts related to this proposed acquisition. But for the atmosphere that exists within the financial world, this application would be for another market transaction similar to all so many previously before and approved by the Board.

During the pendency of this application and particularly at the time of the public hearing the receipt and use of federal funds by financial institutions and enhanced compensation to top financial executives in light of employee job losses were and remain in the spotlight on the financial industry. Although the holding companies and the subsidiary banks involved in this transaction are well capitalized and well run under all public and bank regulatory guidelines for analyzing financial institutions, each party to the transaction triggers one of these issues being critically scrutinized. In barest terms the Petitioner received $78 million in government assistance while the President and CEO of Benjamin Franklin receives what some view as an excessive buyout while some employees will lose their jobs.

Financial Aspects

Through the Petitioner's various filings and testimony, as well as through various media outlets the Board has always been aware that Independent voluntarily participated in the U. S. Department of the Treasury's Capital Purchase Program ("CPP"). Under the CPP, Independent raised approximately $78 million through the issuance of its preferred stock and warrants to the Treasury which would also receive mandatory interest payments. The stated purpose of the CPP is to provide capital to financial institutions which in turn are to use the funds to expand their lending to consumers and businesses. The CPP is within the Treasury's Troubled Asset Relief Program ("TARP") to strengthen the financial sector.

Of interest to the Board was whether the Treasury funds were necessary or to be used by the Petitioner in any way for this acquisition. For that reason the Board compared the timeline for the transactions compared to Independent's application and approval to participate in the CPP. The Board conducted this due diligence while knowing that the financial consideration for Independent's proposed acquisition of Benjamin Franklin is a non-cash exchange of stock transaction as further described herein. This was also pursued at the public hearing.

That timeline details that Congress passed the federal act that created the CPP in October of 2008. The parties to this transaction signed the Agreement and Plan of Merger on November 8 th, followed by a joint press release. On November 13, 2008, Independent applied to the Treasury for funds under the CPP but was not approved until January 9, 2009. The Board received this proposed acquisition application and related documents on December 14, 2008.

Independent's testimony and response to questions from the Board emphasized that negotiations for the acquisition of Benjamin Franklin began well before the CPP or TARP were known and moreover, that the acquisition is funded by common stock, not cash. Media coverage as early as March 12, 2009 reported that Independent was looking "pretty closely" at returning the $78 million. The Board understands that participants in the CPP are subject to federal oversight and guidance by various agencies including the Treasury, the Inspector General for TARP as well as the Federal Deposit Insurance Corporation. Upon review, the Board has concluded that Independent's participation in the CPP is unrelated to this proposed transaction and that its approval of this transaction would not violate the law or the purpose of the Capital Purchase Program. Additionally, the Board is aware that on February 25, 2009, the Federal Reserve Bank of Boston, under delegated authority, issued a letter of non-objection to Independent's acquisition of Benjamin Franklin and that any subsequent federal waiting period has expired.

The financial aspects of any transaction are a significant consideration of the Board as they may affect the continuing holding company's ability to serve the banking public and to actively compete with other financial institutions as well as to maintain its capital ratio standards for a safe and sound institution. In this transaction the common stock of Independent is the sole consideration for the acquisition of Benjamin Franklin. No cash will be paid by the Petitioner to the stockholders of Benjamin Franklin. The exchange ratio agreed to and subsequently approved by stockholders is that one share of common stock of Benjamin Franklin will be converted to 0.59 shares of common stock of Independent. Upon consummation of the transaction, if approved, Independent will remain a well capitalized holding company under applicable bank regulatory guidelines. That status remains even without the inclusion of the capital received from the Treasury. Similarly, Independent has the necessary available liquid funds to pay the expenses related to such a merger transaction.

Compensation and Employment

The vast number of transactions which come before the Board involve corporate entities that are in stock form. The compensation packages for executives of such stock entities include, but are not limited to, evergreen contracts, performance bonuses, stock options, awards and grants, as well as other personal perquisites, all of which are enhancements that can be triggered by various contractual events, such as a change in control. Such is the case here.

A review was made of the compensation package to be paid to the highest executive officers of Benjamin Franklin. At the Board's request, it received the day before the public hearing, a detailed breakdown of all compensation to be received by the President and Chief Executive Officer of Benjamin Franklin. It contained the usual components for such a position including an employment agreement, a supplemental executive retirement agreement, often referenced as a "SERP" as well as stock options and restricted stock awards. These latter forms of compensation are not available to mutual banks and must be approved at some point by the stockholders of a bank in stock form or its parent company. The Board's review determined that the various components of the compensation package were for the most part disclosed in the Prospectus and subsequently approved by stockholders in connection with Benjamin Franklin's conversion to a stock holding company in 2005 as part of an acquisition of another bank.

This matter was raised by the Board and discussed at the public hearing. The Board also questioned the need for the President and Chief Executive Officer of Benjamin Franklin to also receive a non-compete agreement while serving as a director of Independent. The Petitioner stated in detail the purpose for making that payment. As it had done in writing, Independent emphasized that the non-competition agreements were the only amounts payable by it or Rockland Trust to executives of Benjamin Franklin. All other payments were pre-existing obligations of Benjamin Franklin Bank over which Independent had no influence.

The Board has considered all factors relative to the focus on the compensation to be received by executive officers of Benjamin Franklin. It understands the disclosures, timing, as well as the responsibilities of and approvals by the governing bodies that established the employment agreements and stock programs. The Board also understands that money is a fungible commodity and something on one side of the balance sheet is offset on the other side. As reviewed by the Board, the payments of the compensation would ultimately be reflected, one way or the other, in the consolidated financials of the merged holding companies and banks. Upon review the Board concludes that neither Independent nor Rockland Trust's status as well capitalized institutions will be affected by these compensation agreements and on its own, this issue does not warrant denial of the application.

The employment ramifications of this approximately billion dollar acquisition were closely scrutinized by the Board as evidenced at the public hearing. The Petitioner's testimony and questions by the Board reflected the sensitivity of the proposed merger's effect on employees during these difficult economic times. The Board's initial concerns, based on information in the filed application, were addressed by updated, somewhat more positive, facts presented at the hearing which also included additional information on the transitional assistance being provided to employees of Benjamin Franklin Bank. Included in the testimony were the facts that ten additional employees would be retained above the jobs identified in the application and that discussions were ongoing with another dozen employees. It was also clarified that the severance pay will be two weeks for every year of employment at Benjamin Franklin Bank up to a maximum of fifty-two weeks.

The Board's analysis of the impact on employment of the transaction prior to the hearing compared it, in part, to Independent's acquisition of Slade's Ferry Bancorp one year ago. The job retention ratios available to the Board at the time it approved that acquisition are comparable to those before it today. Job retention by and growth of Independent from that prior transaction were raised by the Board. The Petitioner's testimony stated that eleven more employees were retained in the Slade's Ferry transaction than had been presented to the Board during the pendency of that application. Other information relative to employees and human resource services was provided in testimony or in response to questions from the Board.

The Board is aware that as a holding company Independent employs over 900 people, primarily at Rockland Trust. Its growth in recent years has resulted both organically and through acquisitions. On the statutory test of job creation plans within net new benefits the Board has past precedent to guide it. In prior Decisions, the Board has concluded that the statutory test can be met by prospective direct and indirect employment gains resulting from continued growth of a larger and stronger institution as well as through its subsidiary bank's lending programs which ultimately fund jobs. Those precedents involve some of the largest transactions, including in-market acquisitions, to have come before the Board. Accordingly, the Board's consideration of the transaction's impact on employment does not preclude its approval.

Statutory Criteria Analysis

The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. There is no overlap in any community of the banking offices of Rockland Trust and Benjamin Franklin Bank. The application contained an analysis utilizing the 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. 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 throughout the affected areas and banking markets.

The Board has considered whether public convenience and advantage will be promoted by this proposed transaction. The Petitioner states that 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. The transaction will permit Rockland Trust and Benjamin Franklin Bank to pool their financial resources, reduce costs, diversity risk, and better serve their communities by offering a broader array of products and services to consumers and businesses. As a larger institution, Rockland Trust offers a greater variety of products and services than Benjamin Franklin Bank. The products and services offered by Rockland Trust, which are not currently offered by Benjamin Franklin Bank, include investment management services, section 1031 like-kind exchange services, business services, and new extended hours for telephone banking. Rockland Trust, with a larger lending limit, will have the ability to offer larger commercial loans, which will enhance market competition.

Independent has no current plans to merge, consolidate or close any branch offices of either bank in connection with the transaction. The existing bank branch locations of Rockland Trust and Benjamin Franklin Bank do not overlap and are complementary. Therefore, customers of both banks will be able to conduct their banking business at a greater number of locations over a much larger geographic area.

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. The Board has noted that Benjamin Franklin Bank has a "High Satisfactory" rating at its most recent examination conducted by the Division.

The Board has considered the Petitioner's analysis of "net new benefits" related to the transaction on this statutory criteria. 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 described in its application and testimony the anticipated initial capital investments following the consummation of the transaction such as voice and data equipment as well as computers and also anticipates future capital expenditures relative to bank office facilities all of which will be retained as part of this transaction. With respect to job creation, the Petitioner states it anticipates continuing its organic expansion into the communities it serves along with the concurrent hiring of additional employees as previously discussed above. As described herein, the Petitioner states that the transaction will allow Rockland Trust to provide substantial new benefits to customers of the combined institution, particularly current Benjamin Franklin Bank customers, and to the communities that the combined institution will serve. The banks will pool their financial resources, reduce costs, diversify risk, and better serve their communities by offering a broader array of products and services to consumers and businesses. The Board has considered the application and testimony submitted by the Petitioners and finds that consideration of public convenience and advantage including net new benefits weighs in favor of approving the proposed transaction.

Managerial consideration were also reviewed by the Board, Independent's Board of Directors will be increased by adding three directors from Benjamin Franklin's current Board. One of the three will be the President and Chief Executive Officer of Benjamin Franklin while the other two will be chosen at the discretion of Independent. The officers of Independent will remain the same while some non-executive officers from Benjamin Franklin may join management at a similar administrative level.


The application, supporting documents, and supplemental filing as well as 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. Financial and managerial considerations are also supportive of 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 Benjamin Franklin Bancorp, Inc. and Benjamin Franklin Bank provided that the transaction is completed within one year of the date of this Decision.

The Board, as stated herein, is acutely aware of its statutory responsibilities as well as how those responsibilities may be affected by ongoing events within the world of finance. It is aware that in that world the most pressing matter is for the economy to rebound with all the significant positive results that flow from a stronger financial environment. In a small way, the Board can help by allowing market transactions to occur despite the spotlight on all financial entities and their various regulatory bodies. To do otherwise would, similarly, contribute to the impression if not the case, that all financial related matters are on hold or should be delayed. The Board has considered the legitimate issues of the day to the facts before it and the clear statutory requirements on which this transaction and the numerous prior holding company transactions under which the Board is charged to judge. It is for the totality of these reasons that the Board concluded that the merger of these holding companies should be approved.

Board of Bank

Steven L. Antonakes
Commissioner of Banks

Navjeet K. Bal
Commissioner of Revenue

Timothy P. Cahill
Treasurer and Receiver-General


April 9, 2009

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