For the second installment of a series that will explore how different banks plan to use the capital that they will obtain from Treasury's TARP program, I spoke with Michael Daly, the president and CEO of Berkshire Bank, a $2.5 billion-asset bank in Pittsfield, Mass. In mid October, Berkshire completed a stock offering that raised $36 million in new capital. Shortly thereafter, it agreed to obtain even more through the TARP program.
How much capital will you obtain from Treasury?
"We will likely draw down somewhere between the minimum and $40 million.
How did you come to participate in this? Did the regulators contact you?
"I did get a call from the regulators and I think that they are making some calls to some of the stronger banks. I think they wanted to make sure we understood the program, and they also gave us some support that the program they thought would be helpful."
Why did you decide to participate in the program?
"We did that for opportunistic reasons. We did it to lighten the load...The TARP is reasonably priced, it was a fairly cheap form of capital."
How will you deploy this capital? Will you be putting it into loans?
"I think the government may have at one point or another encouraged people to increase their lending. We have always been a strong lending company, but we've always been disciplined. That's not going to change regardless of how much capital we have. We're on pace to do 8 percent annualized loan growth—I think that's probably a good, solid number. So I don't think [the new capital] is going to increase our aggressiveness. I do think though that one of the things we are seeing is opportunities and better looks at better credits than we might have before. We compete with a lot of the major banks and there was a time when some of the larger credits and the better credits were really the property of some of these larger banks. I think the opportunity to look at some of those may in fact give us opportunities to lend in some of the new regions we're in more robustly than we have in the past.
One of the things I want to be clear about is that with additional capital I think people have to be as judicious with that capital as they would have been prior to getting it. It's just that there may be more opportunities."
Will you use some of this money to make acquisitions?
"I think there will be some acquisition opportunities. I talked to one reporter recently who said, 'Gee, the northeast and New England doesn't seem to be a region where there is as many banks that could go under or that could be available for sale.' My response to that was, 'that's probably true, but the pressure in the environment may cause a bank that is not necessarily on life support to consider doing partnerships with other companies.' And we want to be ready to accept that as well."
So you won ' t be dramatically altering your business model on account of this new capital?
"I don't think anybody should increase their capital levels to reach, they should only increase their capital levels because there may be more opportunities, and good opportunities."