Short Hills-based Investors Bancorp, Inc. announced the signing of a definitive purchase agreement under which Investors’ wholly-owned subsidiary, Investors Bank, will acquire the eight New Jersey and eastern Pennsylvania branches of Berkshire Bank, the wholly-owned subsidiary of Berkshire Hills Bancorp, Inc., with approximately $639 million of deposits and $308 million of consumer and commercial loans.
This acquisition adds approximately 8,000 new retail and commercial customers and nearly doubles Investors’ market share in the Trenton, New Jersey MSA. In addition, four of the branches are located within 2.5 miles of an Investors Bank branch.
“This is a good opportunity to strengthen our central New Jersey deposit franchise and reduce higher cost wholesale funding,” said Kevin Cummings, chairman and CEO. “We are also pleased to expand our branch footprint and add two branches in affluent Pennsylvania markets.”
Investors will pay a 3.0% deposit premium on deposits acquired at close. As part of the transaction, Investors plans to use the lower cost funding to immediately extinguish approximately $250 million of FHLB borrowings, which is expected to reduce Investors’ wholesale borrowing ratio, lower its loan to deposit ratio and enhance its overall net interest margin.
The acquisition is expected to be approximately 5% accretive to Investors’ earnings per share, with tangible book value dilution of approximately 1.6% inclusive of all FHLB prepayment fees, earned back in less than three years using the “crossover method.” Estimated after-tax transaction costs total $9.7 million, including $4.2 million of FHLB prepayment fees. Investors performed a thorough credit review on the seasoned New Jersey and Pennsylvania residential and commercial loans they are acquiring, and have applied a gross credit mark of 4.2%.
“This is a low risk, in-market transaction with a minimal impact on capital levels,” said Cummings, “and given the improved economic outlook and our strong tangible capital levels, we have decided to resume repurchasing our shares.”
The transaction is subject to regulatory approval and other conditions and is expected to close in the first half of 2021.
Lazard acted as Investors’ financial advisor and McCarter & English, LLP acted as its legal counsel.
To access more business news, visit NJB News Now.Related Articles: