Decision  Decision of March 28, 2011

Date:	03/28/2011
Organization:	Division of Banks

• Petitioner: Berkshire Hills Bancorp, Inc.
• Respondent: Board of Bank Incorporation

Decision relative to the petition of Berkshire Hills Bancorp, Inc., Pittsfield, Massachusetts to acquire Rome Bancorp, Inc., Rome, New York

Berkshire Hills Bancorp, Inc. (the "Petitioner"), Pittsfield, 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 Rome Bancorp, Inc., Rome, New York and its subsidiary bank, The Rome Savings Bank, Rome, New York. The Petitioner is the bank holding company for Berkshire Bank, Pittsfield, Massachusetts. The Petitioner's application before the Board is part of a multi-step transaction in which Rome Bancorp, Inc. will merge with and into the Petitioner. A subsequent merger of the subsidiary banks, The Rome Savings Bank with and into Berkshire Bank is, by statute, subject to approval by 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 of Berkshire Hills Bancorp, Inc. on February 16, 2011. The comment period on the proposed transaction ended on March 11, 2011. While no shareholder approval of the proposed transaction was necessary for the Petitioner, subsequent to the public hearing and within the public comment period Rome Bancorp, Inc. held its stockholders' vote on this proposed transaction and the stockholders voted in favor of the transaction. No stockholders or other person or entity submitted a comment to the Board after the public hearing or after the announced vote of the shareholders at Rome Bancorp, Inc. Shareholder issues discussed at the Board's hearing on the transaction were subsequently resolved and the Board was so informed.

The Board has reviewed the application, the oral testimony received at the public hearing, and information subsequently filed. 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 January 25, 2011.

Berkshire Hills Bancorp, Inc. is a Delaware corporation, registered as a savings and loan holding company, and subject to the Office of Thrift Supervision ("OTS"). The Dodd-Frank Wall Street Reform and Consumer Protection Act transfers the OTS's supervisory powers to the Office of the Comptroller of the Currency ("OCC") for federal savings associations and to the Federal Reserve for OTS holding companies such as Berkshire Hills Bancorp, Inc. Berkshire Hills Bancorp, Inc. was organized in January 2000 as a holding company for Berkshire Bank. The Petitioner operates in two segments: banking and insurance through its subsidiaries. As a bank holding company, one of its primary purposes is to serve as a source of strength for its subsidiaries and affiliates. In this case, one of Berkshire Hills Bancorp Inc.'s principal assets is 100% ownership of the capital stock of Berkshire Bank, a state-chartered stock savings bank. Berkshire Hills Bancorp, Inc. is also the holding company for Berkshire Insurance Group, Inc., an independent insurance agency in western Massachusetts. Berkshire Hills Bancorp Inc. operates a total of 45 financial centers, including branch offices, as well as insurance offices.

As of December 31, 2010 Berkshire Hills Bancorp, Inc. had total assets of approximately $2.8 billion. The Petitioner has its main office in Pittsfield, Massachusetts. Berkshire Hills Bancorp, Inc., through Berkshire Bank and its other subsidiaries offers a full range of financial products for consumers, businesses, investors, municipalities and non-profit organizations. Berkshire Hills Bancorp, Inc. wholly owns three active subsidiaries: Berkshire Bank, Berkshire Insurance Group, Inc. and Berkshire Hills Capital Trust I. The capital trust subsidiary was organized to facilitate the issuance of trust preferred securities. Berkshire Hills Bancorp, Inc., as a holding company, offers no financial products and services directly.

Berkshire Bank, a Massachusetts chartered savings bank, chartered in 1846, is one of Massachusetts' oldest and largest independent banks and is the largest banking institution based in Western Massachusetts. Berkshire Bank, headquartered in Pittsfield, Massachusetts, has forty-two full- service banking offices in communities throughout western Massachusetts, northeastern New York and Southern Vermont. Berkshire Bank has offices in the following communities of Berkshire, Hampden and Hampshire Counties in Massachusetts: Chicopee, Dalton, East Longmeadow, Feeding Hills, Great Barrington (2), Lee, Longmeadow, Ludlow, North Adams, Pittsfield (4), Sheffield, South Hadley, Southwick (2), Springfield, Stockbridge, West Stockbridge, and Westfield (2). Berkshire Bank has offices in the following communities of Albany, Oneida, Rensselaer, Saratoga, and Schenectady Counties in New York: Albany (2), Clifton Park, Colonie (2), Delmar, East Greenbush, Glenville, Guilderland (2), Halfmoon, and Oriskany Falls. Its remaining banking offices are in Vermont. Berkshire recently filed an application with the Division of Banks for approval to establish a branch office in Rotterdam, New York.

The deposits of Berkshire Bank are insured by the Deposit Insurance Fund (the "DIF") administered by the FDIC and all deposits in excess of FDIC deposit insurance coverage are insured by the Depositors Insurance Fund.

As of December 31, 2010, Berkshire Bank's Tier 1 risk-based capital ratio was 9.33 %, total risk-based capital ratio was 10.58 % and Tier 1 leverage capital ratio was 8.02 %, each under guidelines established by the FDIC. Accordingly, Berkshire Bank is a "well-capitalized" institution pursuant to applicable law.

Berkshire Bank owns three subsidiaries: North Street Securities Corporation, Woodland Securities, Inc. and Gold Leaf Securities Corporation. Berkshire Bank also owns Berkshire Bank Municipal Bank, a New York chartered limited-purpose commercial bank. Additionally, Berkshire Bank owns the inactive subsidiary, Berkshire Financial Planning, Inc.

Rome Bancorp, Inc., a savings and loan holding company and Delaware corporation, was organized in 1999 as the stock holding company for The Rome Savings Bank. Its primary business is operating its wholly-owned subsidiary, The Rome Savings Bank. The Rome Savings Bank, established in 1851, is a federally-chartered stock savings bank headquartered in Rome, New York. The Rome Savings Bank is subject to the supervision of the OTS. The Rome Savings Bank operates five full service community banking offices in Rome and New Hartford, New York. The Rome Savings Bank's primary lines of business include residential real estate lending, small business loan and deposit services, as well as a variety of consumer loan and deposit services. Rome Bancorp, Inc. had approximately $332 million in total assets.

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. The acquisition of the bank holding company will be accomplished by the merger of the two holding companies in a transaction whereby 70% of the outstanding shares of Rome Bancorp, Inc.'s common stock will be converted into Berkshire shares at an exchange ratio of 0.5658 Berkshire shares for each share of Rome Bancorp, Inc.'s. common stock. The remaining 30% of Rome Bancorp, Inc.'s common stock will be exchanged for cash in the amount of $11.25 per share. Upon consummation of the transaction, if approved, Berkshire Bancorp, Inc. will remain a well capitalized holding company under applicable bank regulatory guidelines. The Board of Directors and senior executive officers after the merger will consist of current directors and management of Berkshire Hills Bancorp, Inc.

The Board has considered that Rome Bancorp, Inc. and its subsidiary, The Rome Savings Bank do not have any branch offices in the Commonwealth of Massachusetts, and the consequent fact that their CRA assessment areas do not overlap in any community. Accordingly, 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 resulting institution will be able to offer financial products and services at competitive rates. The Board believes that The Rome Savings Bank's merger with and into Berkshire Bank enables the respective institutions to pool their financial resources, to reduce costs, to diversify risk, and better to serve their communities by offering a broader array of products and services to consumers and businesses. Customers of The Rome Savings Bank will have access to more products and services including, among others: personal, commercial, employee benefits and life insurance through Berkshire bank's wholly-owned subsidiary, Berkshire Insurance Group, Inc.; the Express Credit program for commercial loans, and commercial cash management services, including sweep accounts; remote deposit services; lockbox services; electronic funds transfer services; cash management services; free Express checking; corporate checking; municipal checking; merchant services; and asset based loans. At the hearing, the Petitioner indicated that components of certain products of The Rome Savings Bank were being considered for addition to Berkshire Bank's products.

In connection with the transaction, Berkshire Bank has no current plans to close any branch office of its own or of The Rome Savings 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. 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 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 in such levels resulting from the proposed transaction, if approved. 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, Berkshire Bank, has a "High Satisfactory" rating in its most recent examination of performance under CRA by the Division of Banks. The Board has noted that The Rome Savings Bank has a "Satisfactory" rating at its most recent examination conducted by the OTS.

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 Berkshire Hills Bancorp, Inc. to acquire Rome Bancorp, Inc. and its subsidiary bank, The Rome Savings Bank provided that the transaction is completed within one year of the date of this Decision..

 

Dated this 28th day of March, 2011

 

Board of Bank Incorporation

 

By: David J. Cotney Commissioner of Banks

Navjeet K. Bal Commissioner of Revenue

Steven Grossman Treasurer and Receiver-General