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Decision

Decision Decision of September 30, 2011

Date: 09/30/2011
Organization: Division of Banks
  • Petitioner: Brookline Bancorp, Inc.
  • Respondent: Board of Bank Incorporation

Decision relative to the petition of Brookline Bancorp, Inc., Brookline, Massachusetts to acquire Bancorp Rhode Island, Inc., Providence, Rhode Island

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 Bancorp Rhode Island, Inc., Providence, Rhode Island, and its subsidiary bank, Bank Rhode Island, Providence, Rhode Island.  The Petitioner is the bank holding company for Brookline Bank, Brookline, Massachusetts, and First National Bank of Ipswich, Ipswich, Massachusetts. 

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 of Brookline Bancorp, Inc. on September 13, 2011.   The comment period on the proposed transaction ended on September 20, 2011.  Prior to the public hearing, Bancorp Rhode Island, Inc. 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 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 June 29, 2011.

Brookline Bancorp, Inc. is a Delaware corporation and is a bank holding company under the Bank Holding Company Act of 1956, as amended and subject to regulation by the Board of Governors of the Federal Reserve System, and formerly subject to the Office of Thrift Supervision (“OTS”).  As of June 30, 2011, Brookline Bancorp, Inc. had total consolidated assets of approximately $3 billion.

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.  In this case, Brookline Bancorp Inc.’s principal assets are 100% ownership of Brookline Bank, a federally chartered savings bank formerly subject to regulation by the OTS, and First National Bank of Ipswich, a national banking association, subject to regulation by the Office of the Comptroller of the Currency (OCC).  On January 18, 2011 the Board approved Brookline Bancorp, Inc’s petition to acquire ownership and control of First Ipswich Bancorp, Ipswich, Massachusetts and its subsidiary bank, the immediately aforementioned First National Bank of Ipswich.

Brookline Bank was originally chartered in 1871 as Brookline Savings Bank.  On July 16, 2001, the OTS approved the 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 cities and towns in Middlesex, Norfolk and Suffolk Counties in Massachusetts.  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 June 30, 2011, Brookline Bank had consolidated assets of approximately $2.8 billion.  As of June 30, 2011 its Tier 1 risk-based capital ratio was 15.40%, total risk-based capital ratio was 16.65% and Tier 1 Capital Ratio was 13.65%.  Accordingly, Brookline Bank is a “well-capitalized” institution pursuant to regulatory guidelines. Brookline Bank received a “Satisfactory” CRA rating on its most recent CRA performance evaluation conducted by the OTS as of November 3, 2008.  Brookline Bank has three wholly-owned direct subsidiaries, two of which are securities corporations. 

First National Bank of Ipswich was originally chartered in 1892.  The bank has six full-service banking offices in Essex and Suffolk Counties in Massachusetts.  The deposits of First National Bank of Ipswich are insured by the FDIC.  First National Bank of Ipswich offers investment and retirement products and services to its customers through First National Bank of Ipswich Investment Services, which is a division of the bank.  As of June 30, 2011, First National Bank of Ipswich had consolidated assets of approximately $272 million.  As of June 30, 2011 its Tier 1 leverage ratio was 9.41%, Tier 1 risk-based capital ratio was 12.64%, and total risk-based capital ratio was 12.74%, each exceeding regulatory guidelines.  First National Bank of Ipswich received a “Satisfactory” CRA rating on its most recent CRA performance evaluation conducted by the OCC as of January 3, 2011. 

Bancorp Rhode Island, Inc. is a Rhode Island corporation, registered as a bank holding company under the BHC Act, and subject to regulation by the Federal Reserve.  As of June 30, 2011, Bancorp Rhode Island, Inc. had consolidated total assets of $1.6 billion.    

Bancorp Rhode Island, Inc. through Bank Rhode Island offers a full range of financial products for consumers, businesses, investors, government agencies and non-profit organizations.  Bancorp Rhode Island, Inc, as a holding company, offers no financial products and services directly and has no non-bank subsidiary that offers financial services to the public.

Bank Rhode Island, Bancorp Rhode Island, Inc.’s sole banking subsidiary is subject to regulation by the Rhode Island Department of Business Regulation, Division of Banking and the FDIC.  Bank Rhode Island accepts deposits and provides a broad range of retail and commercial banking services to its customers.  The deposits of Bank Rhode Island are insured by the FDIC to the maximum extent permitted by law.  Bank Rhode Island is headquartered in Providence, Rhode Island and was chartered in 1996 in connection with the purchase and assumption of certain assets and liabilities divested as a condition to receipt of regulatory approval of the merger of Fleet Financial Company, Inc. and Shawmut National Corporation.  Bank Rhode Island has seventeen full service branch offices all located in Rhode Island, with 13 in Providence County, three in Kent County, and one in Washington County. 

As of June 30, 2011, Bank Rhode Island had consolidated assets of $1.6 billion. As of the same date, its Tier 1 risk-based capital ratio was 11.44%, total risk-based capital ratio was 12.69% and Tier 1 leverage ratio was 8.12%, each exceeding regulatory guidelines. Bank Rhode Island is a “well capitalized” institution pursuant to those guidelines.  Bank Rhode Island received a “Satisfactory” CRA rating on its most recent CRA performance evaluation conducted by the FDIC as of January 1, 2011.

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 and stock transaction whereby the Petitioner will purchase all of the stock of Bancorp Rhode Island, Inc. for approximately $207 million.  The total cash consideration will be approximately $120.3 million and the total stock consideration will consist of approximately 11 million shares of the Petitioner’s common stock.  The Board is aware that Brookline Bank has received approval from the OCC to pay a dividend of $125 million to the Petitioner as part of the proposed transaction.  Upon consummation of the transaction, if approved, Brookline Bancorp, Inc. will remain a well capitalized holding company under applicable bank regulatory guidelines.  It was discussed at the public hearing the different charters of the banks that would be held by the Petitioner if the transaction was approved.  The Petitioner indicated its ability to operate in such a multi charter structure.

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 Brookline Bancorp, Inc. intends to hold and operate Bank Rhode Island as a separate bank subsidiary.  It has further considered the fact that the three banks, Brookline Bank, First National Bank of Ipswich and Bank Rhode Island do not have branch offices in the same communities or CRA assessment areas.  There will be no geographical overlap in banking operations.   Upon review, the Board does not believe that 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 institutions.   

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, the opportunity to broaden their geographic scope and geographically to diversify their asset mix and risk profile throughout the Greater Boston metropolitan area and the North Shore of Massachusetts as well as Rhode Island, will further enhance its ability to better serve customers along eastern coastal areas of the Commonwealth as well as in Rhode Island.  In connection with the proposed transaction, Brookline Bancorp, Inc. has no current plans to close any branch office of Bank Rhode Island or its other two existing bank subsidiaries.   The Petitioner also informed the Board of its branch expansion plans for 2012 at the public hearing.

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.  Testimony by the Petitioner and in response to several 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.  Testimony was provided on the jobs to be impacted as well as the ongoing growth of Brookline Bancorp, Inc. Additional information was submitted to supplement a response to a question on impacted jobs. 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 Petitioner detailed the capital investments to be made as part of the integration of the back office function of its subsidiary banks and upgrades to existing systems.  Additionally it commented on the significant investment being made on the purchase and establishment of its new headquarters in Boston.  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 as of November 3, 2008.   The Board has noted that Bank Rhode Island received a “Satisfactory” CRA rating on its most recent CRA performance evaluation conducted by the FDIC as of January 1, 2011, and that First National Bank of Ipswich received a “Satisfactory” CRA rating on its most recent examination of performance under CRA by the OCC on June 2, 2008.  The fact that all three banking subdivisions of the Petitioner, if the transaction were to be approved, would have “Satisfactory” CRA ratings was discussed at the public hearing.  The Petitioner identified areas that could be worked on to improve each of its existing subsidiaries rating.

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 Bancorp Rhode Island, Inc. and its subsidiary bank, Bank Rhode Island, provided that the transaction is completed within one year of the date of this Decision.

 

David J. Cotney
Commissioner of Banks
Board of
Navjeet K. Bal
Commissioner of Revenue
Bank
Steven Grossman
Treasurer and Receiver-General
Incorporation


 

September 30, 2011                                       

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