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Independent Bank Corp. ("Independent" or the "Petitioner"), 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 Central Bancorp, Inc. ("Central"), Somerville, Massachusetts and its subsidiary bank, Central Co-operative Bank ("Central Bank"), Somerville, 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 Central will merge with and into the Petitioner. An application has also been filed for the subsequent merger of the subsidiary bank, Central Bank with and into Rockland Trust. That part of the proposed transaction is, by statute, subject to approval of 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 on September 10, 2012. On September 12, 2012, the Petitioner submitted supplemental information in response to questions asked at the hearing. The comment period on the proposed transaction ended on September 19, 2012. Subsequent to the public hearing, but prior to the close of the comment period, Central held its stockholders' vote on this proposed transaction, and the stockholders voted in favor of the transaction.
The Board has reviewed the application, the oral testimony received at the public hearing, and the supplemental 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. Those requirements were addressed in the application documents and at the hearing.
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 July 25, 2012.
The Petitioner is a Massachusetts corporation, headquartered in Rockland, Massachusetts and formed in 1985 and is registered with the Federal Reserve System (the "Federal Reserve") as a bank holding company under the Bank Holding Company Act of 1956, as amended. As of June 30, 2012, the Petitioner had total assets of approximately $5 billion. Independent's principal asset is 100% ownership of Rockland Trust, a Massachusetts chartered trust company established in 1907 and situated in Rockland, Massachusetts. Rockland Trust’s deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by law. Rockland Trust has 68 full service banking offices located in eastern Massachusetts as well as commercial lending centers and investment management offices located in eastern Massachusetts and Providence, Rhode Island. As of June 30, 2012, Rockland Trust had consolidated assets of approximately $5 billion. As of the same date, its total risk-based capital ratio was 11.93%; its Tier 1 risk-based capital ratio was 9.94%; and its Tier 1 leverage capital ratio was 8.11%. 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.
Central, a Massachusetts corporation, was organized in 1998. Central is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. At June 30, 2012, Central had consolidated assets of approximately $565 million. Central conducts business principally through its wholly-owned bank subsidiary, Central Bank, a Massachusetts-chartered co-operative bank established in 1915 and headquartered in Somerville, Massachusetts. Central 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. Central Bank operates nine full service bank branches in Somerville, Arlington, Burlington, Chestnut Hill, Malden, Medford, Melrose, and two branches in Woburn as well as a limited service branch at Woburn High School. Central Bank had total assets of approximately $565 million as of June 30, 2012. As of the same date Central Bank's Tier 1 risk-based capital ratio was 12.81%; total risk-based capital ratio was 14.05%; and Tier 1 leverage ratio was 8.39%.
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 no municipality in which both Central Bank and Rockland Trust maintain banking offices. 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 banks will ensure that the continuing institution will be able to offer financial products and services at competitive rates. The transaction will permit the pooling of their financial resources, to reduce costs and to diversify risk and to 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 through a more extensive network of affiliated banking offices. In connection with the transaction, the Petitioner has no current plans to close any branch office of Central 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 footprint. In addition to a full range of deposit and commercial products and services, the transaction will result in a number of new products and services being offered at all of the acquired Central Bank branch offices. These products include a broader range of business and cash management services to its commercial customers, asset-based lending, New Markets Tax Credit Loans at below market rates to qualified, low-income community borrowers, investment management services, mobile banking and extended hours for telephone banking as well as other loan products and other services indentified in the application.
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 by the Division and the FDIC as of December 27, 2010. Central Co-operative Bank received a "High Satisfactory" rating at its most recent examination conducted by the Division on June 14, 2010. The Board’s review of factors related to public convenience and advantage are consistent with 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. 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. The Board specifically considered the future employment of Central Bank staff and questioned the applicant in detail concerning the transaction’s implications with respect to jobs.
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 is being accomplished by the merger of the two holding companies in a transaction financed by an exchange of stock and cash. Independent represents that it has the liquidity needed to pay the cash portion of the merger consideration. Upon consummation of the transaction, the Petitioner will remain a well capitalized holding company under applicable bank regulatory guidelines. As part of the transaction, one director of Central will become a director of both Independent and Rockland Trust. 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. 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 Independent Bank Corp. to acquire Central Bancorp Inc. and its subsidiary bank, Central Bank, provided that the transaction is completed within one year of the date of this Decision.
David J. Cotney
Commissioner of Banks
Commissioner of Revenue
Treasurer and Receiver-General
October 12, 2012