Berkshire Hills to merge with Brookline in $1.1 billion deal

NEW YORK - Berkshire Hills (NYSE:BHLB) Bancorp, Inc. (NYSE: BHLB) and Brookline Bancorp , Inc. (NASDAQ: NASDAQ:BRKL), both holding companies for regional banks, have announced an all-stock merger agreement valued at around $1.1 billion. The transaction, expected to close in the third quarter of 2025, will result in a combined entity with proforma assets of $24 billion. Berkshire Hills, currently valued at $1.23 billion and trading near InvestingPro's Fair Value estimate, has demonstrated strong momentum with a 43.76% price return over the past six months.

The deal, announced on Monday, will see Brookline merge into Berkshire Hills, with the latter's shareholders receiving $12.68 per share of Brookline common stock, based on Berkshire Hills' closing price of $30.20. In support of the merger, Berkshire Hills has also agreed to a $100 million common stock issue at $29.00 per share, set to close on Thursday.

The combined company's leadership will feature an equal split of the current directors from both banks, with Berkshire Hills' current chairperson retaining their role. Key executives from both companies, including Brookline's CEO, CFO, and CCO, as well as Berkshire Hills' COO, will maintain their positions post-merger.

The merger is projected to yield annual cost savings of approximately $65 million to $70 million, equating to 13% of the combined noninterest expenses. Despite an expected initial drop in the proforma CET1 ratio to around 9.8%, the company aims to rebuild capital ratios to a mid-10% CET1 ratio by the end of 2026. According to InvestingPro data, Berkshire Hills maintains a "FAIR" financial health score and has consistently paid dividends for 25 consecutive years, though it currently trades at a relatively high P/E ratio of 31.15x. Discover more insights and 6 additional ProTips with an InvestingPro subscription.

The combined bank will operate over 140 retail branches across New England and parts of New York, becoming the third-largest mid-sized bank in New England by deposit market share. However, the merger will result in a higher-cost deposit base and an above-average reliance on wholesale funding.

Additionally, the loan portfolio will have a significant concentration in investor commercial real estate (CRE), which is expected to be reduced over time through strategies such as loan sales or securitizations. The merger includes a gross credit mark of $143 million, with a day 2 CECL reserve of $95 million. For comprehensive analysis of this merger's implications, access the detailed Pro Research Report available on InvestingPro, offering expert insights on 1,400+ US stocks.

This merger is based on a press release statement and aims to create a more diversified geographic footprint for both institutions, which have faced funding pressures in the current higher interest rate environment. The transaction is subject to regulatory approvals and customary closing conditions.

In other recent news, Berkshire Hills Bancorp has been the focus of significant developments. The company's earnings per share (EPS) estimates for 2024, 2025, and 2026 have been revised from $2.21 to $2.19, $2.50 to $2.30, and $2.90 to $2.65, respectively, following the announcement of a merger with Brookline Bancorp. The merger, valued at approximately $1.1 billion, is expected to significantly expand the bank's scale throughout the Northeast.

RBC Capital Markets adjusted its price target for Berkshire Hills Bancorp from $32.00 to $31.00, while Seaport Global Securities upgraded the company's stock from Neutral to Buy. These changes reflect the anticipation of increased efficiency and profitability due to the synergies expected between Berkshire and Brookline.

The merger is expected to close in the second half of 2025, resulting in a combined entity with $24 billion in assets and $18 billion in deposits. In connection with the merger, Berkshire Hills Bancorp has raised $100 million in common equity, which will adjust the post-merger ownership structure.

Berkshire Hills Bancorp reported strong financial results in the third quarter of 2024, with operating earnings of $24.8 million. The bank projects the net interest margin (NIM) to be between 3.10% and 3.20% in Q4 2024. These are the latest developments for Berkshire Hills Bancorp.

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