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Decision

Decision Decision of November 4, 2013

Date: 11/04/2013
Organization: Division of Banks
  • Petitioner: Independent Bank Corp.
  • Respondent: Board of Bank Incorporation

Decision relative to the petition of Independent Bank Corp., Hanover, Massachusetts to acquire Mayflower Bancorp, Inc., Middleborough, Massachusetts

Independent Bank Corp. (“Independent” or the “Petitioner”), Hanover, 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 Mayflower Bancorp, Inc. (“Mayflower”), Middleborough, Massachusetts and its subsidiary bank, Mayflower Co-operative Bank (“Mayflower Bank”), Middleborough, Massachusetts. The Petitioner is the bank holding company for Rockland Trust Company (“Rockland Trust”), Rockland, Massachusetts.  The Petitioner’s application before the Board is part of a multi-step transaction in which Mayflower will merge with and into the Petitioner.  An application has also been filed with the Division of Banks (“Division”) for the subsequent merger of the subsidiary bank, Mayflower Bank with and into Rockland Trust.  The application to merge the subsidiary banks is, by statute, subject to approval of the Commissioner of Banks.

Notice of the application was published and posted as directed by the Board, thereby affording opportunity for interested parties to submit comments.  Additional standard procedures informing the public of this matter before the Board were also implemented.  The Board held a public hearing on the petition on September 4, 2013.  The comment period on the proposed transaction ended on September 27, 2013.  The Mayflower stockholders voted to approve this proposed transaction on September 20, 2013.

The Board has reviewed the application, the oral testimony received at the public hearing, and the supplemental filings of the Petitioner.  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 respective subsidiary banks of the holding companies.  The financial and management components of the proposed transaction were also considered.  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 (“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 satisfactory arrangements had been made for this transaction in a letter dated August 6, 2013.

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.  Independent's principal asset is 100% of the capital stock of Rockland Trust, a Massachusetts chartered trust company established in 1907 with its main office in Rockland, Massachusetts.  Rockland Trust has 78 banking offices, including 75 full service branch offices, as well as commercial lending centers and investment management offices, all of which are located in Plymouth, Norfolk, Bristol, Barnstable, Middlesex, and Worcester counties and Providence, Rhode Island.  As of March 31, 2013, Independent had total assets of approximately $6 billion.  Rockland Trust’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the maximum extent permitted by law.  As of June 30, 2013, Rockland Trust’s total risk-based capital ratio was 12.23%; its Tier 1 risk-based capital ratio was 10.37%; and its Tier 1 leverage capital ratio was 8.35%.  Accordingly, Rockland Trust is a “well-capitalized” institution pursuant to applicable regulatory guidelines, and upon consummation of the transaction, Rockland Trust will remain well capitalized under applicable bank regulatory guidelines.

Mayflower 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. Mayflower’s primary activity is acting as a holding company for Mayflower Bank.  Mayflower Bank operates eight full service bank branches in Plymouth County in Bridgewater, Lakeville, Middleborough, Plymouth (2), Rochester, Wareham, and West Wareham.  As of June 30, 2013, Mayflower had consolidated assets of approximately $249 million.  Mayflower Bank’s deposits are insured by the FDIC to the maximum extent permitted by law, and are also insured by the Share Insurance Fund for all deposits in excess of FDIC coverage.  As of the same date Mayflower Bank's Tier 1 risk-based capital ratio was 17.38%; total risk-based capital ratio was 18.43%; and Tier 1 leverage ratio was 8.59%.  Accordingly, Mayflower Bank is a “well capitalized bank” under applicable 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.  There are four communities, including Middleborough, Bridgewater, Plymouth, and Wareham, in which both Rockland Trust and Mayflower Bank operate offices.  The Board is aware that as part of this multi-step transaction, Rockland Trust has petitioned the Division to close the branch offices of Mayflower Bank in Bridgewater, Plymouth, and Wareham, where Rockland Trust also maintains banking offices.  Rockland Trust has also petitioned the Division to close its own branch office in Middleborough, stating that the Middleborough branch office of Mayflower Bank will continue to be operated after the acquisition.  Rockland Trust has also petitioned the Division to close the branch office of Mayflower Bank in Lakeville.  Upon review, the Board has concluded that consumers and commercial customers will continue to be able to choose from a number of diverse financial institutions offering a variety of competitive products and services throughout Mayflower Bank’s service area.  Accordingly, the Board’s analysis of the competitive impact of the acquisition weighs in favor of the proposed transaction.

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 banks will ensure that the continuing institution will be able to offer financial products and services at competitive rates.  The transaction will permit Rockland Trust and Mayflower Bank to pool their financial resources, reduce costs, diversify risk, and better serve their communities by offering a broader array of products and services with a more robust range of features and a greater level of customer service.  Current customers of Mayflower Bank will experience substantial improvement in access to banking services.  As a larger institution, Rockland Trust offers a greater variety of products and services than Mayflower Bank, including cash management services and commercial lending programs.  Rockland Trust has a commercial lending capability far larger than Mayflower Bank’s lending limit, which will enable the resulting institution to offer significantly larger commercial loans which will enhance market competition. 

Related to the issue of public convenience and advantage is the record of CRA performance 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 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, received an “Outstanding” rating in its most recent examination of performance under CRA by the Division and the FDIC as of December 27, 2010.  Mayflower Bank also received an “Outstanding” rating at its most recent examination conducted by the Division and the FDIC on March 9, 2009. The Board’s review of factors related to public convenience and advantage are supportive of approval.

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.  Independent also addressed the effect of the transaction on Mayflower Bank employees in its testimony, in responses to inquiries from the Board, and in its supplemental filing to the Board.  Independent stated that while there would be some immediate reduction of staff levels, it was anticipated that there would be future growth in such levels resulting from the proposed transaction if approved.  Independent reported that a portion of Mayflower Bank employees will be employed by Rockland Trust following the merger of the subsidiary banks.  However, the Board also notes that a significant number of Mayflower Bank employees have elected to resign, retire, or have been notified that they will not be retained by Rockland Trust as a result of the proposed acquisition.  Severance payments will be made to any “at will” Mayflower Bank employee who is terminated by Rockland Trust within one year of the merger in an amount calculated upon their years of service.  Transitional assistance, in a variety of forms, will also be provided to those employees impacted by the merger.  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 as well as through its subsidiary bank’s lending programs which ultimately fund jobs.  Accordingly, the Board’s consideration of the transaction’s impact on employment does not preclude its approval.  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.

The financial and managerial aspects of any transaction are also 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. The acquisition will be accomplished by the merger of the two holding companies in a cash and stock transaction whereby 70% of outstanding Mayflower common stock will be exchanged for Independent common stock at a fixed exchange ratio and 30% of Mayflower common stock will be purchased for $17.50 per share in cash.  Upon consummation of the transaction, the Petitioner will remain a well capitalized holding company under applicable bank regulatory guidelines.  The Board’s consideration of the financial and managerial aspects of the transaction also supports its approval.

The application, supporting documents, the testimony received at the public hearing as well as additional information submitted 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.  In accordance with the findings expressed herein and pursuant to statute, the Board hereby approves the petition and authorizes Independent Bank Corp. to acquire Mayflower Bancorp Inc. and its subsidiary bank, Mayflower Bank, provided that the transaction is completed within one year of the date of this Decision.

Board of Bank
Incorporation

David J. Cotney
______________________
Commissioner of Banks


Steven Grossman
______________________
Treasurer and Receiver-General


Amy Pitter
______________________
Commissioner of Revenue
 

November 4, 2013
_____________
Date

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