Who’s News | By Laura Alix
Berkshire Bank is writing the latest chapter in the story of its ever-expanding geographical footprint with its recent acquisition of 20 Bank of America branches in upstate New York.
Executives at Berkshire Bank announced the deal late in July, just a day ahead of their second-quarter earnings release, which president, chairman and CEO Michael Daly characterized in a conference call as “extremely disappointing.”
According to terms the bank made public, Berkshire Bank will assume approximately $640 million in deposits and $5 million in loans. Berkshire paid a deposit premium of 2.25 percent, or roughly $14.4 million, for the acquisition. And the deal will increase Berkshire Bank’s market share in the Central New York region from 5 to 8 percent. The acquisition, which is still subject to the requisite regulatory approvals, is expected to close in the first quarter of next year.
Those branches were packaged together and sold as Bank of America’s Central New York Region, said Tami Gunsch, Berkshire Bank’s senior vice president of retail banking. In other words, Berkshire Bank couldn’t have chosen just a few of those branches and Gunsch said furthermore that that wouldn’t have made much sense.
She added, “In 2011, we acquired Rome Savings Bank, which gave us five branches in the Rome area. These additional branches will really help us fill in our footprint along I-90 connecting Western Massachusetts and New York.”
At the end of 2006, Berkshire Bank’s assets totaled around $2.2 billion. Today, the bank has increased its asset size to $5.2 billion. Along the way, it’s picked up the Connecticut Bank & Trust, the Needham-based Greenpark Mortgage Company, East Syracuse, N.Y.-headquartered Beacon Federal Bank, and the eponymous Rome Bancorp and its subsidiary the Rome Savings Bank, also in New York.
Berkshire Bank now has a 74-branch network across Massachusetts, Connecticut, Southern Vermont and New York, and this acquisition will bring its branch count up to 94. Around the time it released its second quarter earnings, the bank also announced a restructuring initiative that would include a comprehensive review of its branch network.
As for the other side of the table, Bank of America is fully exiting those counties where the 20 branches in question are located. In fact, the banking behemoth announced its intentions earlier this year to close 750 branches nationwide in the coming years as part of an overall plan to streamline its operations and cut costs.
Besides those branches changing hands to Berkshire Bank, Bank of America last month sold 51 branches across four western states to the Seattle-based Washington Federal Bank, closed four branches earlier this year in Massachusetts, and Community Bank, based in DeWitt, will close a deal later this year to buy four Pennsylvania branches from the banking behemoth.
Whatever that will wind up meaning for the giant bank remains to be seen, but it’s certainly proved a boon for regional banks – like Berkshire, Community Bank and Washington Federal – who are looking to expand their footprints.
A Different Deal
This particular deal is a bit different from Berkshire’s previous acquisitions, however. Berkshire Bank isn’t acquiring Bank of America – it’s just taking a number of branches off the megabank’s hands. But that in itself could be a benefit for the Pittsfield-headquartered bank in a number of ways and potentially easier than acquiring a whole bank with a smaller network, Mark V. Nuccio, a partner at Ropes & Gray, said.
“When you acquire a whole bank, sometimes it’s harder because you’ll have senior executives and you may not need them. That’s kind of sad,” he remarked. “But when you acquire branches, you really need all the people who already work there.”
Corporate culture, redundancies and various other human resources errata are less likely to be an issue in an acquisition like this one, too.
And furthermore, Berkshire could ultimately improve its funding cost and net interest margin after the deal is completed, swapping out higher cost borrowing with lower cost deposits.
Gunsch commented on that point, “We plan to use some of that money to pay off some short-term debt borrowings, we’ll put some into securities, and use some to fund planned loan growth.”
In an era where electronic banking almost obviates the need for physical branches, Nuccio said, “smaller banks can get bigger, and larger banks that have accumulated thousands of branches can afford to get smaller. There can be a nice happy match.”■