By the Division of Banks


DECISION
RELATIVE TO THE APPLICATION OF
BERKSHIRE BANK, PITTSFIELD, MASSACHUSETTS
TO MERGE WITH
HAMPDEN BANK, SPRINGFIELD, MASSACHUSETTS


Berkshire Bank (“Berkshire Bank” or “Petitioner”), Pittsfield, Massachusetts has applied to the Division of Banks (“Division”) for authority to merge with Hampden Bank (“Hampden Bank”), Springfield, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 168, section 34D and Massachusetts General Laws chapter 172, section 36[1], under the terms of an Agreement and Plan of Merger (“Agreement”) dated November 3, 2014.  The Agreement provides for the merger of Hampden Bank with and into Berkshire Bank under the charter, by-laws, and name of Berkshire Bank.  The main office of Berkshire Bank would remain the main office of the continuing institution.  The banking offices of Hampden Bank will become branch offices of Berkshire Bank, with the exception of its branch offices located at 475 Longmeadow Street, Route 5, Longmeadow; 977 Boston Road, Route 20, Springfield; and 1500 Main Street, Springfield, which will be closed.  The proposed merger is part of a multi-step transaction which included a petition before the Board of Bank Incorporation (the “Board”) by the Petitioner’s holding company, Berkshire Hills Bancorp, Inc. (“Berkshire Bancorp”), Pittsfield, Massachusetts, to acquire Hampden Bancorp, Inc. (“Hampden Bancorp”), Springfield, Massachusetts, and its sole subsidiary bank, Hampden Bank.  The Board approved the holding company transaction in its decision of this same date.

Notice of the application was published and posted as directed, thereby affording opportunity for interested parties to submit comments.  The time period for interested persons to submit comments ended on March 16, 2015.  The Division reviewed the application and all documents and materials related to this multi-step transaction in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage, as well as net new benefits, would be promoted by approval of the proposed transaction.  The record of performance under the Commonwealth’s Community Reinvestment Act (“CRA”), Massachusetts General Laws chapter 167, section 14 and its implementing regulation, 209 CMR 46.00 et seq. were also factors considered by the Division.

 Established in 1846, Berkshire Bank is a Massachusetts trust company with its main office in Pittsfield, Massachusetts.  Berkshire Bank operates 91 full-service banking offices, as well as commercial and residential loan offices, throughout Massachusetts, eastern and central New York, southern Vermont, and central Connecticut.  Berkshire Bank’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the maximum amount permitted by law.  As of September 30, 2014, Berkshire Bank had consolidated assets of approximately $6.3 billion. 

Established in 1852, Hampden Bank is a Massachusetts stock savings bank with its main office in Springfield, Massachusetts.  In addition to its main office, it operates ten branch offices in Hampden County, Massachusetts.  Hampden Bank’s deposits are insured up to allowable limits by the FDIC and by the Depositors Insurance Fund (“DIF”) for amounts in excess of the FDIC’s insurance limits.  As of September 30, 2014, Hampden Bank had consolidated assets of approximately $703.5 million.

The Petitioner has submitted materials in support of its position that competition among banks will not be unreasonably affected by the proposed transaction.  In analyzing the impact of a proposed transaction on banking competition, the Division considers, but does not rely exclusively on, the guidelines used by federal authorities to review bank mergers.  These guidelines essentially define relevant markets and measure concentration, which is considered an important indicator of competitiveness.  The application contained an analysis under the Herfindahl-Hirschmann Index (“HHI”), a key test utilized by federal agencies in assessing the competitive effects of a proposed bank merger.  In this case, the HHI analysis demonstrates that consummation of the transaction will not result in undue concentration of banking resources in the specified banking markets in Massachusetts.  In addition to the HHI analysis, the Division considers the competitive impact of the proposed transaction on a community-by-community basis, as well as its impact on the overall banking structure of the Commonwealth.  The service areas of Berkshire Bank and Hampden Bank overlap in two communities, Longmeadow and Springfield.  Berkshire Bank maintains one branch in Springfield, and Hampden Bank operates four branches in Springfield.  Berkshire Bank and Hampden Bank each operate a branch in Longmeadow.  As part of this multi-step transaction, Hampden Bank has petitioned the Division to close its branch office in Longmeadow and two branch offices in Springfield.  These three Hampden Bank branches are all within the two overlapping communities served by Berkshire Bank and Hampden Bank – Springfield and Longmeadow – and are each to be consolidated with Berkshire Bank branches that are geographically close, the furthest of which is 2.11 miles from its Hampden Bank counterpart.  Furthermore, the application sets forth the numerous banking options available to consumers in the affected area, providing further support for the conclusion that competition will not be unreasonably affected by the merger.  In light of the foregoing, the Division’s analysis of the competitive impact of the acquisition weighs in favor of the proposed transaction. 

The Division also considers the financial and managerial aspects of any merger as they may affect the continuing institution’s ability to serve the banking public, to actively compete with other financial institutions, and to maintain its capital ratio standards for a safe and sound institution.  The application states that, in connection with the merger, the continuing institution’s Board of Directors will consist of the current directors of Berkshire Bank with the addition of two directors of Hampden Bank, who will be selected by Berkshire Bank and its holding company in consultation with Hampden Bank’s holding company.  In addition, after consolidation the bank will meet all required capital standards.  The Division’s consideration of the financial and managerial aspects of the transaction also supports its approval.

The Division has considered whether public convenience and advantage will be promoted by the proposed transaction.  The Petitioner states that the merger will benefit the public by creating a larger institution that is better positioned to compete against other regional, super-regional, and national financial institutions.   The merger will allow Hampden Bank customers access to additional products and services previously unavailable to them, including access to Berkshire Bank’s multistate network of ATMs, ACH positive pay, private banking and wealth management services, financial planning and investment advisory services, as well as services offered by Berkshire Bank’s insurance subsidiary.  Additionally, the merger will give Hampden Bank customers access to Berkshire Bank’s higher commercial lending limits.  Lastly, the vast service footprint of Berkshire, covering eastern Massachusetts to Syracuse, New York, and from northern Connecticut to Rutland, Vermont, provides a significant increase in physical presence for customers of Hampden Bank, who previously were served only by branches in Hampden County, Massachusetts. Most notably, Hampden Bank customers, who prior to the transaction had access to only 10 branches, will now have access to a total of 16 branches within Hampden County alone.  Accordingly, this transaction, if approved, will broaden the continuing institution’s physical presence in that county, as well as add branches in numerous other counties and communities in not only Massachusetts, but also in Connecticut, Vermont, and New York.  

In determining whether or not to approve a petition under the statutory criteria, the Commissioner is also required to consider a showing of “net new benefits” related to the transaction.  The term, as set out in Massachusetts General Laws chapter 172, section 36, includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors.  The Petitioner has addressed this statutory requirement in its filings.  The application indicates that Berkshire Bank’s initial capital investments are expected to be allocated to new signage and branch improvements. Through its submissions, Petitioner indicated that while there would be some immediate reduction in staff levels, it was anticipated that there would be future growth and expansion that would create additional jobs.  Petitioner anticipates that it will be opening additional de novo branches in central Connecticut, eastern New York, and possibly central and eastern Massachusetts in the next two-to-three years.  Because of this, Petitioner anticipates that the merger will ultimately result in job creation, both in these locations, as well as in Berkshire County, where additional bank office and support staff would be needed.  In addition, those Hampden Bank employees not being retained will receive severance benefits and employment counseling to assist them in securing new employment.  Moreover, Berkshire Bank is maintaining the majority of Hampden Bank’s branch offices, and the customers of Hampden will undoubtedly find additional convenience in conducting their banking business from a much larger branch and ATM network.  Likewise, as previously noted, customers of Hampden will benefit from the additional banking products and services offered by Berkshire Bank and not currently available through Hampden Bank.  The Division has considered the application 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 CRA performance by the 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 Division looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency.  The Division has noted that Berkshire Bank received a “Satisfactory” rating in its most recent examination of performance under CRA by the Division and the FDIC as of September 24, 2012.  Hampden Bank received a “High Satisfactory” rating at its most recent examination conducted by the Division on September 29, 2014.  The Division’s review of factors related to public convenience and advantage are supportive of approval.  

Upon consummation of the merger of Hampden Bank with and into Berkshire Bank, a Massachusetts trust company, the excess deposit insurance coverage for Hampden Bank’s deposits by the DIF will end.  FDIC insurance coverage will continue for depositors of Hampden Bank upon the merger.  The Division is aware that disclosure materials will be provided to Hampden Bank’s depositors informing those depositors of such changes, if the proposed merger is approved.

After review of the record of this application and supporting documents with reference to the relevant statutory and regulatory criteria, the Division concludes that all requirements have been satisfied and that consummation of the proposed merger would be in the public interest.  On the basis of these considerations, and subject to the conditions set forth below, approval is granted for Hampden Bank to merge with and into Berkshire Bank under the charter, by-laws and name of Berkshire Bank in conformity with the Agreement and pursuant to Massachusetts General Laws chapter 168, section 34D and Massachusetts General Laws chapter 172, section 36.  In accordance with General Laws chapter 167C, section 3, approval is also granted for Berkshire Bank to close branches located at 475 Longmeadow Street, Route 5, Longmeadow, Massachusetts; 977 Boston Road, Route 20, Springfield, Massachusetts; and 1500 Main Street, Springfield, Massachusetts and for Berkshire Bank to maintain the remaining existing branch offices of Hampden Bank as branch offices of the continuing institution.

The approval granted herein is subject to the following conditions:

  1. That the merger of Hampden Bank and Berkshire Bank shall not become effective until a Certificate signed by the Presidents and Clerks, or other duly authorized officers of the banks involved in the merger, indicating that each such institution has complied with the provisions of Massachusetts General Laws chapter 168, section 34D and Massachusetts General Laws chapter 172, section 36 has been returned for my endorsement thereon;
  2. That the proposed transaction shall not become effective until the Articles of Merger are submitted to the Secretary of the Commonwealth of Massachusetts with my endorsement thereon; and
  3. That the proposed merger shall be consummated within one year of the date of this Decision.


[1] Statutes cited in this Decision are the relevant statutes prior to the April 7, 2015 effective date of Chapter 482 of the Acts of 2014, An Act Modernizing the Banking Laws and Enhancing the Competitiveness of State-Chartered Banks.

April 13, 2015
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Date


David J. Cotney
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