Decision Relative To The Petition Of Berkshire Hills Bancorp, Inc., Pittsfield, Massachusetts To Acquire Woronoco Bancorp, Inc., Westfield, Massachusetts
Berkshire Hills Bancorp., Inc. (the "Petitioner" or "Corporation"), Pittsfield, Massachusetts, has petitioned the Board of Bank Incorporation ("the Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 to acquire Woronoco Bancorp, Inc., ("Bancorp"), Westfield, Massachusetts, and its subsidiary, Woronoco Savings Bank ("Woronoco Bank"), Westfield, Massachusetts. Petitioner is the holding company for Berkshire Bank, Pittsfield, Massachusetts. If approved this multi-step transaction will result in the merger Bancorp with and into the Petitioner and Woronoco Bank with and into Berkshire Bank. The application to merge the subsidiary banks is a matter before the Division of Banks.
As directed by the Board, notice of the application was published and posted and a public hearing was held, thereby affording an opportunity for interested parties to attend or submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The public hearing was held on May 3, 2005. Representatives of the Corporation and Bancorp offered testimony and responded to questions from the members of the Board. While this matter was pending, the filing was supplemented in response to questions asked by the Board at the hearing as well as to a prior written request. Following the hearing, the public comment period remained open so that interested parties could submit any additional comments. No further public comments were received. The public comment period closed on May 10, 2005.
Petitioner is a holding company headquartered in Pittsfield, Massachusetts. Berkshire Bank, Petitioner's sole banking subsidiary, was chartered as a mutual savings bank in 1846. It reorganized into the mutual holding company form of organization in 1996. The mutual holding company converted to a stock holding company in June of 2000. As of December 31, 2004, Berkshire Bank had total consolidated assets of approximately $ 1.3 billion. Berkshire Bank operates 11 branch offices serving communities throughout Berkshire County, and a representative office and branch offices in New York. Through its banking offices, Berkshire Bank offers a range of financial products and services for consumers and business. Additionally, it provides trust and investment management services as well as financial planning services. Berkshire Bank has a number of subsidiaries including subsidiaries which are engaged in insurance, financial planning and securities. Berkshire Bank's deposits are insured to allowable limits by the FDIC and deposits in excess of those are insured by the DIF. In addition to its historic service area, Berkshire Bank has recently expanded into New York and this proposed transaction would permit it to expand by entering into Hampden and Hampshire Counties of Massachusetts.
Bancorp is a holding company headquartered in Westfield, Massachusetts. Bancorp's sole banking subsidiary is Woronoco Bank, which was chartered as a mutual savings bank in 1871. Woronoco Bank converted to stock form in 1999 and formed Bancorp at the same time. As of December 31, 2004, Woronoco Bank had total consolidated assets of approximately $919 million. Woronoco Bank operates 9 branch offices located in Hampden and Hampshire Counties in western Massachusetts. Through its banking offices, Woronoco Bank accepts deposits and provides a full range of loan products and financial services to consumer and commercial customers. Woronoco Bank has a number of subsidiaries including a subsidiary engaged in the sale of insurance products. Woronoco Bank's deposits are insured to allowable limits by the FDIC and deposits in excess of those limits are insured by the DIF.
Prior to approving an application under chapter 167A, the Board must have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and MHPF's various affordable housing loan programs. On May 19, 2005 the Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction.
The Board's review of this transaction focuses on the applicable statutory and administrative criteria which include, among other things, whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In determining whether the public convenience and advantage are promoted by the proposed transaction, the Board considers, among other things, whether there has been a showing of "net new benefits." Net new benefits are defined, in section 4 of said chapter 167A, as initial capital investments, job creation plans, consumer and business services, commitment to maintain and open branch offices within a bank's delineated local community, and such other matters as the Board may deem necessary or advisable. The Board also considers the record of performance of the banks involved in this transaction under the Community Reinvestment Act ("CRA") and any relevant public testimony or commentary submitted into the record.
On the issue of whether banking competition will be unreasonably affected by the proposed transaction, the Board considers, but does not rely exclusively on, 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 competitive conditions. The starting point in the federal analyses 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 an affected market into a single value. Accordingly, and consistent with the relatively small market share of both banks, the HHI calculations indicate that the proposed transaction will have a minimal impact on banking concentration. However, the Board's analysis of a transaction is not confined to the consideration of overall concentration ratios to evaluate competitive conditions, it also considers the competitive impact of a proposed transaction on a community by community basis, as well as on the overall banking structure of the Commonwealth. In this case, the Board notes that there is no community in which each bank maintains a branch office. In fact, as previously noted, the transaction would be Berkshire Bank's first entry into Hampden and Hampshire Counties in Massachusetts.. Moreover, the Petitioner is committed to maintaining Woronoco Bank's existing branch offices following the merger. Based on these factors, the Board finds that banking competition will not be unreasonably affected by the proposed transaction.
The Board has also considered whether public convenience and advantage will be promoted by this transaction. As described in the filed documents and at the public hearing, the Petitioner believes the statutory test is met in a number of ways. Woronoco Bank customers will benefit from the larger lending limit available through the combined institution. Customers of both banks will benefit through a larger network of branches and ATMs. As discussed at the public hearing, the Petitioner indicated that the continuing bank will remain a member of the SUM network. Noteworthy is the fact that no branches of either bank are anticipated to be closed as a result of the merger and testimony at the hearing focused on the continuing bank adding branch offices in the areas served by Woronoco Bank. Additionally, as specifically stated at the hearing it is anticipated that the merger will result in the combined company being able to offer the product strength of each to customers of the other. The issue of jobs was addressed at the hearing which resulted in the Petitioner filing supplemental information. Additional reasons were cited at the public hearing. The Board notes that both Berkshire Bank and Woronoco Bank have insurance subsidiaries. Comments at the hearing indicated that Woronoco Bank's insurance group would provide the platform to serve Berkshire Bank's customers. Based on the foregoing, and on the entire record of this matter, the Board finds that the public convenience and advantage will be promoted by the proposed transaction, and that the criteria for net new benefits has been established.
The Board's review of this transaction includes an assessment of the subsidiary banks' performance under the CRA. Such assessment for a state-chartered bank includes examination by Division of Bank personnel, as well as an analysis of the legitimate concerns raised by the community and the bank's response to those concerns. For other institutions, the Board reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency. In the most recent CRA examination of Berkshire Bank, performed by the Division of Banks on March 21, 2005, it received an "Outstanding" rating. The most recent examination of Woronoco Bank, performed by the Division on February 23, 2004, resulted in an "High Satisfactory" rating. Based on its review of these ratings, the Board concludes that the banks involved in this transaction are adequately meeting the credit needs of their communities.
Finally, the Board reviews the financial structure, tax consequences, and operational aspects of the transaction. It has reviewed the consolidated financial statements of the parties and the details of the proposed transaction, and is satisfied with the Petitioner's capital ratios and projections. Information regarding the tax consequences of the proposed transaction was also provided by the Petitioner, and was considered by the Board. Policies and procedures for compliance with the Bank Secrecy Act were also addressed at the public hearing. Finally, operational issues were considered, and the Board is satisfied that the Petitioner has the operational and managerial resources to ensure that the transaction will be accomplished with a minimum of inconvenience to the affected customers.
Based on the record of this matter and considered in light of all relevant statutory and administrative requirements, the Board concludes that competition among banking institutions in the Commonwealth will not be unreasonably affected and that the transaction will promote the public convenience and advantage. The Board also finds that the banks involved in this transaction have a satisfactory record of performance under the CRA. In accordance with these findings and pursuant to the statutory authority cited herein, the Board approves the petition of Berkshire Hills Bancorp, Inc. to acquire Woronoco Bancorp, Inc.
The approval granted herein is subject to the condition that the transaction is completed within one year of the date of this Decision.
|Steven L. Antonakes |
Commissioner of Banks
|Alan L. LeBovidge |
Commissioner of Revenue
|Timothy P. Cahill |
Treasurer and Receiver General
|May 31, 2005 |