Beacon acquisition makes Berkshire Hills a player in Central New York

Editor’s Note: The Newsmaker Interview portion of Financial Quarterly features a conversation with a CEO of a major Central New York business every quarter. The story discusses key financial issues affecting the newsmaker’s company and industry.

By Kevin Tampone

Journal Staff

DeWITT — A new bank is moving into the region in a big way.

Berkshire Hills Bancorp, Inc. (NASDQ: BHLB), parent company of Berkshire Bank, unveiled in May its plans to acquire DeWitt–based Beacon Federal Bancorp, Inc. (NASDQ: BFED) in a $132 million deal. That follows Berkshire’s acquisition of Rome Savings Bank last year, its first entry into Central New York.

Berkshire has been targeting the region, says Sean Gray, Berkshire’s executive vice president for retail banking. Syracuse is an especially key market within that broader footprint, he adds.

The region mirrors some of the characteristics of other markets where Berkshire has had success, such as Albany, Gray says. The bank started opening branches in the Albany area about seven years ago, he adds.

Headquartered in Pittsfield, Mass., Berkshire Hills has $4.3 billion in assets and 68 branches in Massachusetts, New York, Connecticut, and Vermont.

Beacon Federal has total assets of $1 billion and branches in DeWitt, Marcy, and Rome; Smartt and Smyrna, Tenn.; and Chelmsford, Mass. A subsidiary, Beacon Comprehensive Services Corp., provides investments, insurance, tax preparation.

Future acquisitions and branch openings are possible for Berkshire in Central New York, Casey says. The bank could look to fill in its footprint between Rome and Syracuse and Albany in the future.

Much of Berkshire’s focus in the immediate future will be on its current operations in the region, Gray notes.

 “Right now, Syracuse is one of the largest markets we operate in [for] the whole bank,” he says. “That requires our effort and energy and concentration.”

Gray says he can envision Beacon Federal becoming a hub for Berkshire’s consumer business throughout its footprint. Beacon Federal is strong in auto lending and other consumer-oriented products, he says.

Berkshire’s commercial and business-related products should provide a boost for Beacon Federal, he adds.

Berkshire leaders haven’t made any decisions on job cuts, Gray says, but plan to look for duplication of positions as the acquisition nears completion. Beacon Federal employs more than 140 people and Berkshire has 760 employees.

Berkshire is planning to divest Beacon’s branches in Tennessee, which it says would involve $57 million in deposits and $98 million in loans. Berkshire is also expecting cost savings of 30 percent with the deal.

Gray says the long-term plan is to grow Berkshire in Beacon’s geographic footprint.

“They know the markets,” he says of Beacon’s employees. “There’s a lot of folks with incredible tenures.”

The acquisition is continuing despite a report from a federal regulator of unsafe banking practices at Beacon Federal. The bank and the federal Office of the Comptroller of the Currency (OCC) signed an agreement recently, outlining actions to address the issues the regulator found.

The regulator found “unsafe and unsound” banking practices at Beacon Federal, according to filings with the U.S. Securities and Exchange Commission, but the documents did not discuss the details.

Among other things, Beacon Federal agreed to implement a three-year business plan and review the qualifications of all its senior executive officers.

The bank must also establish new risk-management practices, diversify its assets, improve internal controls on its commercial-lending activities, and review and revise its loan policy. In addition, the regulator imposed specific capital requirements on the bank.

The agreement stems from an OCC examination that began last October. It was the first for the bank with the OCC, according to Beacon Federal.