By the Division of Banks


DECISION
RELATIVE TO THE MERGER OF
FIRST CHOICE BANK, LAWRENCEVILLE, NEW JERSEY
WITH AND INTO
BERKSHIRE BANK, PITTSFIELD, MASSACHUSETTS


Berkshire Bank, Pittsfield, Massachusetts has applied to the Division of Banks (Division) to merge with First Choice Bank (First Choice), Lawrenceville, New Jersey pursuant to the provisions of Massachusetts General Laws chapter 167I, section 3.  Under the terms of the Agreement and Plan of Merger dated as of June 24, 2016, First Choice will merge with and into Berkshire Bank under the charter, by-laws, and name of Berkshire Bank (Continuing Institution).  The main office of Berkshire Bank will remain the main office of the Continuing Institution after consummation of the proposed merger, and all of the banking offices of First Choice will be retained by the Continuing Institution as branch offices pursuant to Massachusetts General Laws chapter 167C, section 6. 

Legal and Procedural Requirements

Notice of Berkshire Bank’s application was posted and published as directed by the Division thereby affording opportunity for interested parties to submit comments.  The period for filing comments has expired, and no comments were received.  The Division reviewed the application and supplementary materials submitted by Berkshire Bank 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” will be promoted by approval of the proposed transaction.  Both banks’ records of Community Reinvestment Act (CRA) performance and financial and managerial factors were considered by the Division as well.  The Division reviewed all documents and materials related to this transaction according to applicable law.

The Parties

Berkshire Bank was chartered as a Massachusetts savings bank in 1846 and became a trust company in 2014.  Berkshire Bank is the sole banking subsidiary of Berkshire Hills Bancorp, Inc.  In addition to its main office in Pittsfield, Massachusetts, Berkshire Bank operates 90 full-service branch offices that serve communities in Massachusetts, eastern and central New York, southern Vermont, and central Connecticut.  As of September 30, 2016, Berkshire Bank had total assets of approximately $7.9 billion and total deposits of approximately $5.8 billion.  Berkshire Bank offers an extensive range of personal and business banking services, including insurance, investment, and wealth management services throughout its market area.  Berkshire Bank’s deposits are insured up to allowable limits by the Federal Deposit Insurance Corporation (FDIC). 

First Choice was chartered as a New Jersey commercial bank in 2007 and does not have a holding company.  In addition to its main office in Lawrenceville, New Jersey, First Choice operates five full-service branch offices in New Jersey and two full-service branch offices in Pennsylvania.  First Choice has four wholly-owned subsidiaries that are expected to be acquired by Berkshire Bank in connection with this transaction.  Among those subsidiaries are First Choice Loan Services, Inc. (FCLS) and Old Spot Properties, LLC.  FCLS is a mortgage originator that serves customers in targeted markets nationwide and accounted for approximately $2.5 billion in total mortgage production in 2015, according to materials provided.  Old Spot Properties, LLC is an “other real estate owned” (OREO) subsidiary that currently holds no property.  After consummation of the proposed transaction, Old Spot Properties, LLC will be merged with and into Berkshire Bank’s current OREO subsidiary, CSB Services Corp.  As of September 30, 2016, First Choice had total assets of approximately $1.1 billion and total deposits of approximately $885.2 million.  First Choice offers personal and business banking services, including consumer and business savings and checking accounts; money market accounts; certificates of deposit; individual retirement accounts; business, consumer, home equity, and mortgage loans; and credit cards.  Like Berkshire Bank, First Choice’s deposits are insured up to allowable limits by the FDIC.

Competition

Materials have been submitted to address the issue 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 upon, the guidelines used by federal authorities to review bank mergers.  Essentially, these guidelines define relevant markets and measure concentration, which is considered an important indicator of competitiveness.  The starting point in the federal analysis is the Herfindahl-Hirschman Index (HHI), an arithmetic measure of market concentration that synthesizes the distribution of market shares and the number of banks in the affected market into a single value.  In this case, the HHI analysis demonstrates that consummation of the transaction will not result in an undue concentration of banking resources.  The Division also considers the competitive impact of the proposed transaction on a community-by-community basis, as well as on the overall banking structure of the Commonwealth.  Berkshire Bank and First Choice do not have any banking offices located in the same city or town, and First Choice does not operate any banking offices in the Commonwealth.  Accordingly, the review of the transaction’s impact on competition supports its approval.   

Public Convenience and Advantage

The Division has also considered the record of this application to determine whether public convenience and advantage will be promoted.  Berkshire Bank indicates that the banking public will benefit in several ways as a result of the merger.  As an interstate merger, customers of both banks will gain access to a larger multi-state branch network.  Furthermore, the Continuing Institution will have a larger lending limit, and First Choice customers will gain access to products and services not currently offered by First Choice, including equipment leasing, asset-based lending, and a variety of trust department and wealth management services. 

In determining whether 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.  That term as set out in section 3 of said chapter 167I includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors that the Commissioner may deem necessary.  Berkshire Bank has addressed this requirement of the statute.  The application indicates that Berkshire Bank plans to make initial capital investments in new signage and branch improvements following the consummation of the proposed transaction.  With regard to employment, Berkshire Bank expects an immediate reduction of redundant back-office positions at First Choice, but they do not expect any reduction of branch office staff.  Berkshire Bank anticipates that continued growth resulting from the merger will, over time, create new jobs and provide career advancement opportunities for employees of the Continuing Institution.  As mentioned above, the Continuing Institution will offer improved consumer and business services through a higher lending limit and by providing a broader variety of products and services to First Choice customers.  Furthermore, Berkshire Bank plans to maintain all banking offices of First Choice as branch offices of the Continuing Institution.  Customers of both banks will find additional convenience conducting their banking business from this larger branch network.  Accordingly, the Division has reviewed the factors related to public convenience and advantage, including net new benefits, and has determined that they are consistent with approval of Berkshire Bank’s application.

Also related to the issue of public convenience and advantage is the record of CRA performance by the banks that are parties to this transaction.  Such review for Massachusetts-chartered banks includes examination by personnel of the Division.  For other institutions, the Division looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency.  Berkshire Bank received a “Satisfactory” rating in its most recent CRA performance evaluation conducted jointly by the Division and the FDIC as of January 20, 2015.  First Choice received a “Satisfactory” rating in its most recent evaluation conducted by the FDIC as of June 1, 2015.  The Division’s consideration of the CRA performance of Berkshire Bank and First Choice also support the approval of the proposed merger.

Financial and Managerial Considerations

The Division has reviewed and considered the financial and managerial aspects of this transaction.  Materials provided indicate that Berkshire Bank will continue to meet all regulatory capital requirements after the consummation of the proposed merger.  The primary consideration for this transaction is the payment of 0.5773 shares of Berkshire Hills Bancorp, Inc. common stock in exchange for each share of First Choice common and preferred stock issued and outstanding. 

The application indicates that Berkshire Bank’s board of directors and executive management will remain the same after the proposed merger.  Berkshire Bank’s management is experienced in assimilating banks following an acquisition.  Accordingly, upon review, the financial and managerial considerations support approval of the application.

Conclusion

Upon review of the complete record of the application with reference to the relevant statutory and regulatory requirements, the Division has concluded that all such requirements have been met and that consummation of the proposed transaction is in the public interest.  On the basis of these considerations, and subject to the conditions set forth below, approval is granted for First Choice to merge with and into Berkshire Bank under the charter, by-laws, and name of Berkshire Bank pursuant to section 3 of chapter 167I of the General Laws.  In accordance with General Laws chapter 167C, section 6, approval is also granted for Berkshire Bank to maintain the eight banking offices of First Choice as branch offices. 

The approvals granted herein are subject to the following conditions:

  1. That the proposed merger shall not become effective until a Certificate signed by the Presidents and Clerks, or other duly authorized officers of each bank, indicating that each institution has complied with the provisions of Massachusetts General Laws chapter 167I, section 3 has been returned with my endorsement thereon;
  2. That the proposed merger shall not become effective unless the Articles of Merger with my endorsement thereon are filed with the Secretary of State; and
  3. That the proposed merger shall be consummated within one year of the date of this Decision.
November 29, 2016
_____________
Date


Terence A. McGinnis
____________________
Commissioner of Banks