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Brookline Bancorp, Inc. (the "Petitioner"), Brookline, 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 First Ipswich Bancorp ("First Ipswich"), Ipswich, Massachusetts and its subsidiary bank, First National Bank of Ipswich ("Ipswich Bank"), Ipswich, Massachusetts. The Petitioner is the bank holding company for Brookline Bank, Brookline, Massachusetts. If approved, the Petitioner will maintain and operate Ipswich Bank as a separate subsidiary bank.
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. At the direction of the Board, the Petitioner submitted a supplemental filing on January 6, 2011. The Board held a public hearing on the petition of Brookline Bancorp, Inc. on January 6, 2011. The comment period on the proposed transaction ended on January 11, 2011. Prior to the public hearing, First Ipswich held its stockholders' vote on this proposed transaction, and the stockholders voted in favor of the transaction. No stockholder or other person or entity submitted a comment to the Board at the public hearing. One comment was received after the hearing and within the comment period relative to reverse mortgage lending of Brookline Bank.
The Board has reviewed the application, the supplemental filing, the oral testimony received at the public hearing, and other testimony 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 December 16, 2011.
Brookline Bancorp, Inc. is a Delaware corporation and is registered as a savings and loan company under the Home Owners Loan Act, and subject to the supervision of the Office of Thrift Supervision ("OTS"). The Dodd-Frank Wall Street Reform and Consumer Protection Act, transfers the OTS's supervisory powers to the Office of the Comptroller of the Currency ("OCC") for federal savings associations such as Brookline Bank and to the Federal Reserve for OTS holding companies such as Brookline Bancorp, Inc. effective July 21, 2011. As discussed at the public hearing, the Petitioner has applied to the Federal Reserve to become a holding company under its jurisdiction in conjunction with this proposal to acquire a national bank. As a bank holding company, one of Brookline Bancorp, Inc.'s primary purposes is to serve as a source of strength for its subsidiaries and affiliates.
Brookline Bancorp Inc.'s principal asset is 100% ownership of Brookline Bank, a federally chartered savings bank subject to regulation by the OTS. Brookline Bank was originally chartered in 1871 as Brookline Savings Bank. On July 16, 2001, the OTS approved conversion of Brookline Savings Bank from a Massachusetts chartered stock savings bank to a federally chartered savings association. In 2003, Brookline Savings Bank changed its name to Brookline Bank. Brookline Bank has twenty full-service banking offices in the following communities of Middlesex, Norfolk and Suffolk Counties in Massachusetts: Arlington, Bedford, Brookline(4), Burlington(2), Chestnut Hill, Lexington, Malden, Medford(3), Needham Heights, Newton Center, Newton Highlands, Newtonville, Wellesley Hills and West Roxbury. The deposits of Brookline Bank are insured by the FDIC. Brookline Bank offers investment and insurance products and services to its customers through Brookline Investment Services, which is a division of Brookline Bank. As of September 30, 2010, Brookline Bank had consolidated assets of approximately $2.6 billion. As of the same date its Tier 1 risk-based capital ratio was 18.09%, total risk-based capital ratio was 19.34% and Tier 1 leverage capital ratio was 15.70%, each under guidelines established by the OTS. Accordingly, Brookline Bank is a "well-capitalized" institution pursuant to applicable regulatory guidelines. Brookline Bank accepts deposits and provides a broad range of retail and commercial banking services to its customers. Brookline Bank participates in the SUM network which provides surcharge-free use of more than 3,400 automated teller machines by customers of participating institutions. Brookline Bank's deposits are received from the general public primarily in the communities in which its banking offices are located. Brookline Bank's lending activities are concentrated primarily in the greater Boston metropolitan area and eastern Massachusetts. Multi-family and commercial real estate mortgage lending and the origination of one-to-four family residential mortgage loans comprise a significant portion of Brookline Bank's lending activities. Brookline Bank has three wholly-owned direct subsidiaries, two of which are securities corporations.
First Ipswich is a Massachusetts corporation, registered as a bank holding company under the Bank Holding Company Act of 1956, and subject to regulation by the Federal Reserve. As of September 30, 2010, First Ipswich had total assets of $266.9 million. First Ipswich has its main office in Ipswich, Massachusetts. First Ipswich, through Ipswich Bank, offers a full range of financial products for consumers, businesses, government agencies and non-profit organizations.
Ipswich Bank, First Ipswich's sole banking subsidiary, is a national banking association subject to regulation by the OCC. Ipswich Bank was chartered in 1892. Ipswich Bank has six full service banking offices in the following communities of Essex and Suffolk counties in Massachusetts: Boston, Essex, Gloucester, Ipswich, Newburyport and Rowley. The deposits of Ipswich Bank are insured by the FDIC. Ipswich Bank offers investment and retirement products and services to its customers through First National Bank of Ipswich Investment Services, which is a division of Ipswich Bank. As of September 30, 2010, Ipswich Bank had consolidated assets of $265.4 million.
As of the same date Ipswich Bank's Tier 1 risk-based capital ratio was 11.86%, total risk-based capital ratio was 13.11% and Tier 1 leverage capital ratio was 8.93%, each under guidelines established by the OCC. Due to an agreement with the OCC, Ipswich Bank is an "adequately-capitalized" institution pursuant to applicable law. Ipswich Bank accepts deposits and provides a broad range of retail and commercial banking services to its customers. According to the application and described therein, Ipswich Bank has five wholly-owned direct subsidiaries: First Ipswich Insurance Agency, Inc.; First Ipswich Realty Company, LLC; First Ipswich Securities II Corporation; FNBI Realty Company, LLC; Ipswich Capital Investment Corp; and one indirect subsidiary, FNBI OldCo, Inc.
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. This is a cash transaction whereby Brookline Bancorp, Inc. will purchase all stock and options of First Ipswich Bancorp for approximately $19.7 million. Furthermore, within a few months of the consummation of this transaction, subject to the approval of the Board of Governors of the Federal Reserve System, Brookline Bancorp, Inc. intends to redeem all of the trust preferred securities issued by First Ipswich Statutory Trust II and First Ipswich Statutory Trust III. The total cost to Brookline Bancorp, Inc. of redeeming all of the trust preferred securities will be approximately $13 million. Upon consummation of the transaction, if approved, Brookline Bancorp, Inc. will remain a well capitalized holding company under applicable bank regulatory guidelines.
The Petitioner has submitted materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. 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. The Board has considered that there is minimal geographic overlap between the subsidiary banks and that Brookline Bancorp, Inc. intends to hold and operate Ipswich Bank as a separate bank subsidiary. Both of the subsidiary banks have branch offices in Boston although in different parts of the City. Brookline Bank's branch office is in the West Roxbury neighborhood while Ipswich Bank's branch office is in downtown Boston. The separate and distinct markets served by the subsidiary banks were discussed at the public hearing. 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 served by the continuing institution.
The Board has considered whether public convenience and advantage will be promoted by the proposed transaction. The Petitioner states that the enhanced financial strength of the combined holding companies will ensure that the subsidiaries of the banks will be able to offer financial products and services at competitive rates. The transaction will permit Brookline Bank and Ipswich Bank to pool their financial resources, to reduce costs, to diversify risk, thus, to better serve their communities. Ipswich Bank would continue to offer its products and services since it is to continue operations as a separate subsidiary of the Petitioner. As set out in the application and testimony, additional benefits will result for the customers of Ipswich Bank from the financial and organizational strength of the Petitioner.
In connection with the transaction the Petitioner has no current plans to close any branch office of Ipswich Bank. 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. The Board has considered the Petitioner's analysis of "net new benefits" related to the transaction with respect to the 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 application and testimony addressed the capital investment component of the statutory requirement. Testimony by the Petitioner and in response to questions by the Board indicated that while there would be some immediate reduction of staff levels, it was anticipated that there would be future growth resulting from the proposed transaction if approved. As part of the oral testimony received, Petitioner indicated that the holding company is growing and that twenty new jobs or positions were added in the past two years, including six new lending officers, a chief credit officer, a director of operations, a director of compliance, a director of marketing, three financial investment advisors and personnel to staff the two new branches opened in 2010. Testimony at the Board's public hearing stated that future job growth would occur at both subsidiary banks. With respect to 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. The Board has considered the application and testimony submitted by the Petitioner and finds that consideration of public convenience and advantage including net new benefits weighs in favor of approving the proposed transaction.
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, Brookline Bank, has a "Satisfactory" rating in its most recent examination of performance under CRA by the OTS on November 3, 2008. Ipswich Bank has a "Satisfactory" rating at its most recent examination conducted by the Office of the Comptroller of the Currency on June 2, 2008.
The financial and managerial aspects of any transaction are also a significant consideration of the Board. The acquisition is being accomplished by the merger of the two holding companies in a transaction financed by an exchange of cash. The cash consideration payable to eligible stockholders is being paid by the Petitioner from cash on hand. The cost of the transaction and the financial analysis of the Petitioner is addressed previously in the Decision. Except as noted in the application, Ipswich Bank will continue under its current officers and directors as a subsidiary of the Petitioner whose Board will not change in conjunction with this transaction.
The application, supporting documents, 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. Having considered the record established on this application, the Board has found that the applicable statutory and administrative criteria have been met. Accordingly, the Board has concluded that the petition should be approved.
In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Brookline Bancorp, Inc. to acquire First Ipswich Bancorp and its subsidiary bank provided that the transaction is completed within one year of the date of this Decision.
David J. Cotney
Acting Commissioner of Banks
Navjeet K. Bal
Commissioner of Revenue
Timothy P. Cahill
Treasurer and Receiver-General
January 18, 2011