Decision Relative To The Merger Of Woronoco Savings Bank, Westfield, Massachusetts With And Into Berkshire Bank, Pittsfield, Massachusetts

Berkshire Bank ("Berkshire Bank" or the "Petitioner"), Pittsfield, Massachusetts has applied to the Division of Banks (the "Division") for authority to merge with Woronoco Savings Bank ("Woronoco Bank"), Westfield, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 168, section 34D and under the terms of an agreement (the "Agreement"). The Agreement provides for the merger of Woronoco Bank with and into Berkshire Bank under the name, charter and by-laws of Berkshire Bank. The banking offices of Woronoco Bank will become branch offices of Berkshire. The proposed merger is part of a multi-step transaction involving a petition before the Board of Bank Incorporation (the "Board") by Petitioner's holding company, Berkshire Hills Bancorp, Inc. ("Berkshire Hills"), Pittsfield, Massachusetts, to acquire Woronoco Bancorp, Inc., Westfield, Massachusetts. Woronoco Bancorp, Inc. ("Woronoco Bancorp") is the holding company of Woronoco. The acquisition application of Berkshire Hills was approved by the Board on May 31, 2005.

Notice of the application was posted as directed by the Division thereby affording opportunity for interested parties to submit comments. The period for filing comments has expired. The Division reviewed the application and all related documents in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether net new benefits as well as public convenience and advantage 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 the Division's regulation, 209 CMR 46.00 et seq. also were factors considered by the Division.

Berkshire Bank, the sole banking subsidiary of Berkshire Hills, 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.

Woronoco Bank, the sole banking subsidiary of Woronoco Bancorp, was chartered as a mutual savings bank in 1871. Woronoco Bank converted to stock form in 1999 and formed Woronoco 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.

Materials have been submitted to address the issue of whether competition among banks will be unreasonably affected by the proposed transaction. Some of that analysis is detailed according to various tests relative to the size of each institution and its competitors within delineated markets used by federal agencies. According to the Petitioner, there is no overlap and the proposed merger will have a de minimis effect on competition. In fact, there are no cities or towns in which both banks have a banking office. The transaction would be Berkshire Bank's first entry into Hampden and Hampshire Counties in Massachusetts. Moreover, no branch closings are contemplated in connection with the transaction. Upon review, the Division's analysis of the competitive impact of this transaction does not preclude its approval.

The Division has also considered whether public convenience and advantage, as well as whether net new benefits, will be promoted by this transaction. As described in the filed documents, Berkshire Bank 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. The Petitioner has 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, the Petitioner has stated that 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 has been addressed and the Petitioner has filed supplemental information. The Division notes that both Berkshire Bank and Woronoco Bank have insurance subsidiaries. Petitioner has stated 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 Division 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.

Related to the issue of net new benefits and public convenience and advantage is the record of performance under CRA by the banks which are parties to this transaction. For financial institutions not directly under the jurisdiction of the Commonwealth, the Division initially looks to the publicly available descriptive rating and evaluation by a federal or another state's banking regulatory agency. Such review for state-chartered banks such as Berkshire Bank and Woronoco Bank includes examination by personnel of the Division as well as analysis of concerns received from a bank's community and a bank's response to those concerns fairly raised. The Division notes that Berkshire Bank has received an "Outstanding" rating in its most recent examination of performance under CRA conducted by the Division on March 21, 2005. The most recent examination of Woronoco Bank, performed by the Division on February 23, 2004, resulted in a "High Satisfactory" rating. Accordingly, the Division's view of this factor is consistent with approval.

The application states that upon consummation of the transaction the Chief Executive Officer of Woronoco Bank will serve on the Board of Directors of Berkshire Bank. As indicated in the application, Woronoco Bancorp has the right to appoint two additional directors to the Board of Berkshire Bank. Economies and service capabilities which would result from the transaction are set out in the submitted documents. Following consummation of this transaction, all regulatory capital standards will continue to be met. Upon review, financial and managerial considerations support the petition.

Based on the record on this matter considered in light of all relevant statutory and administrative requirements, the Division finds that competition among banking institutions will not be unreasonably affected, that public convenience and advantage will be promoted by consummation of the proposed transaction and that records of performance under CRA by the banks involved in this transaction are consistent with its approval. Therefore, in accordance with these findings, consideration of comments received and pursuant to the statutory authority cited herein, the Division hereby approves the application and authorizes Woronoco Bank to merge with and into Berkshire Bank. Approval is also granted for Berkshire Bank to maintain the banking offices of Woronoco Bank as branch offices under General Laws chapter 167C, section 3.

The approvals granted herein are subject to the following conditions:

(1) That no merger shall 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 or other applicable statute has been returned with my endorsement thereon;

(2) that the proposed merger shall not become effective until 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.