Berkshire Bank’s Capital Region retail branch expansion slows

Three years after Berkshire Bank launched an aggressive retail branch expansion in the Capital Regio
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The surge is over, at least for now.

Three years after Berkshire Bank launched an aggressive retail branch expansion in the Capital Region, the Pittsfield, Mass., bank is falling short of its initial projections.

In 2005, Berkshire opened its first area retail branch in downtown Albany. A second was fast to follow in Clifton Park. The bank’s tenth area office opened last April in Glenville. But since then, Berkshire’s Capital Region branch expansion has slowed to a crawl.

The expansion has been bogged down largely by competitive pricing pressures for loans and deposits and an adverse interest rate environment.

Those factors have extended the amount of time it takes new offices to become profitable, said Berkshire Chief Finance Officer David Gonci.

The bank’s first Albany area office achieved profitability last year and half of its area branches should reach that level by the end of 2008.

At an investors’ conference in December 2005, bank parent Berkshire Hills Bancorp said it planned to have 21 branches in New York by the end of 2008. At the start of 2008 it has only half that many.

Berkshire President and Chief Executive Officer Michael Daly said in a Friday conference call that Berkshire has no commitments for new offices in 2008, though it is looking to fill in gaps in its footprint.

“There are things that do change with the passage of time,” said Gonci.

At a time when the nation is teetering on the verge of a recession, a growing number of banks are curtailing their branch growth plans, most notably Citigroup.

Despite Berkshire’s slowdown in Albany area branch openings, the bank managed to report a 20 percent net increase in income to a record $13.5 million in 2007. Daly said the bank should also see record earnings in 2008.

“We certainly expect more branches there, and that includes 2009 and beyond,” Gonci said of the Capital Region.

Berkshire’s branch surge made it one of the most aggressive new banking players in the Capital Region, which has been awash with new banks. And the parade of newcomers is not stopping.

At the same time, Berkshire is tempering its growth.

The bank last year curtailed some lending activities.

It is “throttling back from the double-digit annual organic growth we’ve been booking in recent years” to help shore up its asset quality and establish sustainable margins, Daly said.

Another change in Berkshire’s expansion plans came last year when it acquired the parent of Factory Point National Bank of Manchester Center and its seven southern Vermont offices.

Berkshire ended 2007 with 38 branches in three states.

In 2005, the bank said it expected to have 50 branches by the end of 2008.

Daly last week said Berkshire is considering offering some banking services at its insurance offices.

“We do expect to move the ball forward in 2008 in a difficult year, and we want to be back to double-digit [earnings-per-share] growth after 2008, but realistically this will depend a lot on what happens in the economy,” said Daly.

Other banks that are mounting Capital Region branch expansion campaigns include Wilber National Bank in Oneonta and Legacy Banks in Pittsfield.

TrustCo Bank is not backing away from its target announced in May to open 21 offices by the end of 2008, giving it a total branch network of 120.

The Glenville-based TrustCo currently has 107 offices in five states. Like TrustCo, the Cherry Hill, N.J.-based Commerce Bank has been expanding heavily in Florida and its growth plans there are on track for 2008, said bank spokesman David Flaherty.

Commerce, which is merging with the Portland, Maine-based TD Banknorth, expects this year to open up to 35 offices within its eight-state footprint, which includes New York. It last year opened 42 branches.

“We’re still moving to expand our branch operations. We haven’t changed our plans,” said TrustCo Vice President and Treasurer Kevin Timmons.

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