Decision  Decision of June 26, 2007

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

• Petitioner: Fall River Five Cents Savings Bank d/b/a/ BankFive
• Respondent: Division of Banks

Decision relative to the application of Luzo Community Bank, New Bedford, Massachusetts to merge with Fall River Five Cents Avings Bank D/B/A BankFive, Fall River, Massachusetts

Fall River Five Cents Savings Bank d/b/a/ BankFive ("Petitioner" or "BankFive"), Fall River, Massachusetts, has applied to the Division of Banks (the "Division") for permission to merge with Luzo Community Bank ("Luzo"), Fall River, Massachusetts. The proposed merger is pursuant to an Agreement and Plan of Merger (the "Agreement") and is authorized under the provisions of Massachusetts General Laws chapter 168, section 34D and Massachusetts General Laws chapter 172, section 36. The Agreement provides for the merger of Luzo with and into BankFive. Preceding this merger will be the merger of an interim bank, which has been formed for the specific purpose of effecting the overall transaction, with and into Luzo. An Application seeking authority for this interim merger was made to the Division pursuant to Massachusetts General Laws chapter 172, section 36.

The proposed merger of Luzo into BankFive is part of a multi-step transaction that also involves petitions before the Board of Bank Incorporation for various approvals in connection with the parent holding companies of BankFive acquiring directly and indirectly New Bedford Community Bancorp, ("Bancorp"), New Bedford, Massachusetts, the parent holding company of Luzo.

Notice of Petitioner's application was published and posted, and the time period for interested parties to comment on the transaction has expired. Accordingly, all documents, materials and public comments related to this transaction have been received and reviewed. This record has been considered with regard to all applicable statutory standards, which require consideration of, among other things, whether competition among banking institutions will be unreasonably affected by the proposed transaction and whether the public convenience and advantage will be promoted. The Division's review of this matter must also take into consideration the involved banks' record of performance under the Community Reinvestment Act ("CRA") pursuant to General Laws chapter 167, section 14 and its implementing regulation, 209 CMR 46.00 et seq.

BankFive 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.

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.

By statute, the Division's review of this transaction must take into consideration whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In determining whether the public convenience and advantage are promoted by the transaction, the Division considers, among other things, whether there has been a showing of "net new benefits." Net new benefits are defined as initial capital investments, job creation plans, consumer and business services, commitment to maintain and open branch offices within a bank's delineated local community, and such other matter as the Division may deem necessary or advisable. At the direction of the Division, these factors, additional statutory requirements, and other relevant administrative criteria must be addressed in the application documents. The Division also considers any relevant testimony received at the public hearing of the Board of Bank Incorporation or submitted during the open comment period.

On the issue of whether competition will be unreasonably affected by the proposed transaction, the Division considers, but does not rely exclusively on, the various indices used by federal agencies in measuring competition in a given market. In this case, the federal standards indicate that the proposed transaction will not result in undue concentration of banking resources in the relevant banking markets. However, the Division further considers the competitive effect of the proposed transaction in light of its impact on the citizens, communities, and banking structure of the Commonwealth on a community by community basis. The only municipality in which both BankFive and Luzo have banking operation is in New Bedford. Upon careful review of all of these factors, and given the relatively small market share of the involved entities, the Division concludes that the transaction will not unreasonably impact 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 diverse bank and financial institutions.

Petitioner submitted materials relating to the public convenience and advantage that will result from the proposed transaction. It is anticipated that a wider variety of services, products and banking locations will be available to the customers of Luzo as a result of the merger with BankFive. The Division takes special note that customers from the fishing industry will generally be able to have loans made from the combined bank instead of loan participations through Luzo.

On the issue of net new benefits to be derived from the proposed transaction, the Division notes Petitioner's statement that it anticipates that no services or products currently offered by Luzo and by BankFive will be discontinued as a result of the merger. No banking offices of either Luzo or the BankFive will be closed or relocated as a result of the merger, and there are no plans to eliminate any jobs at Luzo. Interest rates on loans and deposits offered by Luzo are not anticipated to change significantly from current levels and will continue to be competitive in its market area.

As the record demonstrates, the customers of Luzo will have access to an increased lending capacity, access to a considerably larger branch network, and will enjoy the additional products and services that a larger combined institution can offer. The Division's review weighs in favor of the finding that the public convenience and advantage will be promoted. The Division further concludes that the criteria for net new benefits has been established.

The Division's review of this transaction includes an assessment of the banks' performance under CRA. Such assessment for a state-chartered bank includes examination by the Division's personnel, as well as an analysis of the legitimate comments raised by the community and the bank's response to those concerns. For other institutions, the Division reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency. Here, the relevant evaluations were submitted as part of Petitioner's application materials. In its most recent CRA examination, performed by the Federal Deposit Insurance Corporation, BankFive received an "Outstanding" rating. The Division performed the most recent examination of Luzo, which received a "Satisfactory" rating. Based on its review of these ratings, the Division concludes that the banks involved in this transaction are adequately meeting the credit needs of their respective communities.

As part of its inquiry, the Division reviews the financial structure, tax consequences, and the operational aspects of the transaction. The Division has reviewed the consolidated financial statements of the entities and the details of the proposed transaction, and is satisfied with the Petitioner's capital ratios and projections. Based on the information provided in the filing, the Division concludes that these issues have been adequately addressed.

Based on the entire record of this matter and considered in light of all relevant statutory and administrative requirements, the Division concludes that all such requirements have been met and that consummation of the proposed merger of Luzo and BankFive would be in the public interest. On the basis of these conclusions, and subject to the conditions set forth below, approval is granted for Luzo to merge with and into BankFive in conformity with the Agreement and pursuant to Massachusetts General Laws chapter 168, section 34D and chapter 172, section 36. In accordance with General Laws chapter 167C, section 3, approval is also granted for the continuing bank to maintain the existing banking offices of Luzo as branch offices. All necessary approvals are also granted for an interim bank merger with Luzo as the surviving entity as part of this multi-step transaction.

The approval granted herein is subject to the following conditions:

1. that the merger of Luzo and BankFive shall not become effective until a Certificate, signed by the Presidents and Clerks or other duly authorized officers of the banks involved in the merger, indicating that the institution has complied with the provisions of Massachusetts General Laws chapter 168, section 34D and chapter 172 section 36 has been returned with my endorsement thereon. A Certificate of the interim merger shall also be filed;
2. that Articles of Merger for the transactions shall be filed with the Secretary of State of the Commonwealth of Massachusetts;
3. that the proposed merger shall be consummated within one year of the date of this Decision.

June 26, 2007
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Date


Steven L. Antonakes
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Commissioner of Banks