Decisions on Bank Applications
Marlborough Co-Operative Bank
Board of Directors
Marlborough Co-Operative Bank
175 Main Street
PO Box K
Marlborough, Massachusetts 01752
Members of the Board:
The Board of Directors of the Federal Deposit Insurance Corporation (the Board) has today approved the request filed on behalf of Marlborough Co-Operative Bank (the Bank) for a limited waiver of the depositor voting requirements imposed by 12 C.F.R. Section 333.4(c)(2) with regard to the Bank's conversion from mutual to stock form of ownership. This waiver is granted pursuant to 12 C.F.R. Section 303.162(a)(2).
The FDIC's regulations at 12 C.F.R. Section 333.4(c)(2) require that the following depositor voting procedures be implemented:
The proposed conversion shall be approved by a vote of at least a majority of the bank's depositors and, as reasonably determined by the bank's directors or trustees, other stakeholders of the bank who are entitled to vote on the conversion, unless the applicable state law requires a higher percentage, in which case the higher percentage shall be used. Voting may be in person or by proxy.
Massachusetts law requires approval of mutual-to-stock conversion plans by more than two-thirds of the depositors present at a special meeting called to vote on a plan. Massachusetts law prohibits voting by proxy for co-operative banks.
The attendance and results of the vote held at the September 18, 1998 special meeting of depositors was considered in reaching this decision. The special meeting was attended by 94 eligible depositors out of 2,998 eligible depositors, or 3.1% of eligible depositors. Of the 94 eligible depositors present, 91 voted on the plan of conversion, with 79 or 86.8 percent of those depositors voting in favor of the plan of conversion.
The 79 depositors who voted in favor of the conversion clearly do not represent a majority of the Bank's depositors, as required by the FDIC's Rules and Regulations, but the Board understands that it was difficult for the Bank to obtain votes from a majority of depositors without the use of proxies, which are prohibited under Massachusetts law. In the face of this challenge, the Bank made extraordinary efforts to attract depositors to the special meeting to vote in person, including:
- The Bank's Notice and Information Statement sent to its depositors on September 1, 1998, informing them of the special meeting and the matters to be considered ended with the following in bold capital letters, "YOUR ATTENDANCE AT THIS MEETING IS VERY IMPORTANT."
- Printed notices of the special meeting were handed to customers at teller windows and customer service desks at all offices of the Bank.
- Reminder notices of the meeting were displayed at the teller windows and the entrances of all offices of the Bank.
- Each of the Directors and proposed Corporators invited family and friends to the meeting.
- As soon as the Notice and Information Statement was sent, Bank staff personally approached 10 to 15 customers each day to remind them of the meeting.
- Staff members, Directors, and proposed Corporators attending local community functions encouraged depositors to attend the meeting.
- During the week before the meeting, staff members made telephone calls to depositors reminding them of the meeting.
- Notice of the meeting was forwarded to the local media and shown on cable television.
Despite these extraordinary efforts, the Bank attracted only a small proportion of its depositors to the special meeting. The Board recognizes that the 94 depositors who attended the special meeting represent a great improvement over the number who attended previous depositor meetings of the Bank. Over the preceding five years, annual meetings typically had been attended by fewer than 15 depositors, all of whom were insiders of the Bank. The Board also recognizes that any further efforts are not likely to attract significantly higher numbers of depositors to another special meeting.
The Board has provided this explanation of the approval of the Bank's waiver request to emphasize the special circumstances of this case. Despite great effort, the Bank was unable to meet the FDIC's requirement of majority approval by depositors of its plan of conversion because Massachusetts law prohibits the use of proxies. Because of this, the FDIC accepts that it is a practical impossibility for the Bank to obtain majority approval through in-person voting only. The Board acknowledges the Bank's extraordinary efforts to inform depositors about the special meeting and about the purpose of the special meeting, and appreciates the Bank's dilemma in trying to satisfy the laws and rules of both the Commonwealth of Massachusetts and the FDIC. For these reasons, the Board has approved the Bank's waiver request.
Provided that there has been no significant alteration to the terms of the conversion transaction (by action of other regulators or otherwise), the FDIC is prepared to issue a letter of nonobjection to the proposed transaction.
Mark S. Schmidt