Decision  Decision of June 26, 2007

Date:	06/26/2007
Organization:	Division of Banks

• Petitioner: BankFive MHC
• Respondent: Board of Bank Incorporation

Decision relative to the application of BankFive, MHC and its mid-tier subsidiary, BankFive Corporation, Fall River, Massachusetts to become a bank holding company through the acquisition of New Bedford Community Bancorp and its subsidiary bank, Luzo Com

BankFive MHC, and its subsidiary, BankFive Corporation. (the "Petitioners"), Fall River, Massachusetts have petitioned the Board of Bank Incorporation (the "Board") to each become a bank holding company through a multi-step transaction in which New Bedford Community Bancorp, ("Bancorp"), New Bedford, Massachusetts and its subsidiary banking institution, Luzo Community Bank, New Bedford, Massachusetts will be acquired under the provisions of General Laws chapter 167A, sections 2 and 4. As part of the transaction, Petitioners have also made application to the Board to establish a bank that will exist for a limited time period which will be used to help effect the transaction. Further, additional related applications have been made to the Division of Banks including seeking authority to merge Luzo Community Bank with and into Fall River Five Cents Savings Bank d/b/a BankFive, ("BankFive"), Petitioners' banking subsidiary.

As directed by the Board, notice of the application was published and posted and a public hearing was scheduled, thereby affording opportunity for interested parties to submit comments. A public hearing relative to this application was held by the Board on May 16, 2007 and the period for filing comments expired on May 18, 2007. The Board reviewed the application, comments received at the public hearing, and all related documents in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage would be promoted by approval of the proposed transaction. The record of performance under the Commonwealth's Community Reinvestment Act ("CRA") by the banks involved in the transaction was also a factor considered by the Board.

One provision of law requires the Board to have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory MHPF arrangements for the proposed transaction have been made by Petitioners pursuant to section 4 of chapter 167A of the General Laws and guidelines adopted by the MHPF. The Board has received notice from the MHPF, in a letter dated May 23, 2007 that arrangements satisfactory to it have been made for the transaction.

BankFive, Petitioners' sole banking subsidiary, was chartered as a mutual savings bank in 1855. It reorganized into a mutual holding company form of organization in 2005. At December 31, 2006, BankFive had total consolidated assets of approximately $607 million. BankFive operates from ten banking offices located in the cities and towns of Fall River, Dartmouth, New Bedford, Somerset and Swansea. BankFive's deposits are insured to allowable limits by the FDIC and deposits in excess of those limits are insured by the Depositors Insurance Fund.

Bancorp's sole banking subsidiary, Luzo Community Bank ("Luzo"), is a trust company which was chartered in 1918. Bancorp acquired a majority stake in it in 1985. Bancorp owns 97% of the issued and outstanding shares of the capital stock of Luzo, and several individual shareholders who are not affiliated with Bancorp own the remaining 3%. As of December 31, 2006, Luzo had total consolidated assets of approximately $66 million. Luzo has two banking offices, both located in New Bedford. Luzo's deposits are insured to allowable limits by the FDIC.

The Petitioners have addressed the issue of whether competition among banks will be unreasonably affected by the proposed transaction. Part of that analysis is detailed according to various tests used by federal agencies. That analysis demonstrates that consummation of the transaction will not result in undue concentration of banking resources in the Commonwealth. The Board's review, however, is not limited to such federal standards. It is the position of the 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. Additionally, Petitioner presented information indicating that the proposed transaction will not have a significant adverse effect on competition among banking institutions in any relevant market. In fact, the City of New Bedford is the only municipality in which both BankFive and Luzo have banking operations. Petitioner states that the proposed transaction will also put the banks in a position to compete more effectively against the larger, national and regional financial institutions that now dominate the region. Upon review and given the relatively small market share of the involved entities, the Board concludes that the transaction will not unreasonably interfere with competition. Rather the area served by Luzo will continue to have access to a variety of competitive deposit and credit services, offered by a number of banks and financial institutions.

The Board has also considered whether public convenience and advantage will be promoted by this transaction. The Petitioners have pointed out both in testimony and in the application that the small size of Luzo has adversely affected its ability to compete. For example, in testimony it was noted that Luzo has often found that, due to its legal lending limit, it must arrange loan participations to serve customers from the fishing industry or lose them to larger institutions. The small size of Luzo has also been adversely impacted by cost inefficiencies. The transaction will provide benefits to each of the banks involved in the transaction. Luzo's customers will benefit by having a wider variety of products and services available to them. Customers of each bank will have more branch offices available to them. The combined bank will have an increased lending capacity allowing for loans such as the aforementioned loans to the fishing industry without the need of participation. Cost efficiencies of the larger entity will result from the transaction. The Board has also noted that no branches of either bank are to be closed and that there are no plans to eliminate any jobs at Luzo. The Board's analysis of the public convenience and advantage as well as net new benefits, in addition to other factors considered by the Board, weigh in favor of the transaction.

The record of performance under CRA by the subsidiary banks in a bank holding company transaction is also a consideration by the Board. For financial institutions not directly under the jurisdiction of the Commonwealth, the Board initially looks to the publicly available descriptive rating and evaluation by a federal or another state's banking regulatory agency. Such review for state-chartered banks such as BankFive and Luzo includes examination by personnel of the Division as well as analysis of comments received from a bank's community and a bank's response to those concerns fairly raised. The Board has noted that BankFive has an "Outstanding" rating in its most recent examination of performance, conducted by the FDIC under CRA. Luzo has a "Satisfactory" rating from the Division of Banks in its most recent examination of performance under CRA. Based on the information presented and available to the Board, the Board's view of this factor is consistent with approval. All additional requirements for the formation of the interim trust company have also been met.

As part of its inquiry, the Board reviews the financial structure, tax consequences, and the operational aspects of the transaction. The Board has reviewed the consolidated financial statements of the entities and the details of the proposed transaction, and is satisfied with the capital ratios and projections. Information regarding the tax consequences of the proposed transaction was provided and considered by the Board. Based on the information provided in the filing, the Board concludes that these issues have been adequately addressed. All additional requirements for formation of the interim trust company have also been met.

CONCLUSION

Based on the record on this matter including the testimony received at the public hearing and subsequent filing on changes in the structure of the transaction considered in light of all relevant statutory and administrative requirements, the Board finds that competition among banking institutions will not be unreasonably affected, that public convenience and advantage will be promoted by consummation of the proposed transaction and that records of performance under CRA by the banks involved in this transaction are consistent with its approval. Therefore, in accordance with these findings and pursuant to the statutory authority cited herein, the Board hereby approves the application and authorizes BankFive, MHC and BankFive Corporation to each become a bank holding company and to acquire up to 100% of the stock New Bedford Community Bancorp. In addition, The Board also grants approval for the formation of a new bank in the form of a trust company for the purpose of effecting this transaction.

The approvals herein are subject to the condition that all related transactions are completed within one year of the date of this Decision.

June 26, 2007
______________________
Date

Board of Bank
Incorporation

Steven L. Antonakes
______________________
Commissioner of Banks


Alan L. LeBovidge
______________________
Commissioner of Revenue


Timothy P. Cahill
______________________
Treasurer and Receiver-General