Berkshire Hills Bancorp plans to sell 10 upstate New York branches, part of a larger series of moves that also involve a yet-to-be-disclosed securities sale. The net result would be revenue-neutral,
Mhatre, who has made
"The proposed sales will concentrate our overall geographic footprint and lower our expense run rate, while strengthening focus in our core New York markets," Mhartre said in the press release.
Despite the loss of nearly $500 million in deposits that will depart Berkshire Hills along with the physical branch locations, the sales would not result in a material increase in borrowing, Mhatre said.
The bank did not provide additional details on the securities sale.
By selling branches, Boston-based Berkshire Hills, parent to Berkshire Bank, avoids severance and real estate costs associated with branch closures, Chief Financial Officer David Rosato said in the press release. "We continue to execute on opportunities to create efficiencies in our franchise," Rosato said, adding the sales would "contribute to long-term profitability."
Branch closure costs are not insignificant. In the 2023 10-K report it filed with the Securities and Exchange Commission on Feb. 28, Berkshire Hills noted it closed four branches in 2023, the costs of which equaled most of the $6.3 million it reported in restructuring expenses. Berkshire Hills closed six branches in 2022.
Berkshire Hills reported noninterest expenses totaling $79 million and an efficiency ratio of 67.8% for the quarter ending Dec. 31, up from 58.3% a year earlier. A bank's efficiency ratio is a profitability measure derived from dividing noninterest expenses by net revenue. In a research note Tuesday, David Bishop, an analyst who covers Berkshire Hills for Hovde, estimated the branch sales could shave about $3 million off the company's annual operating costs. In an investor presentation made public Monday, the same day the branch sales were announced, Berkshire Hills projected full-year 2024 operating expenses would range from $293 million to $297 million, in line with the 2023 total of $295 million.
Berkshire Hills' shareholders appeared to approve the deal. The stock was trading up nearly 3% midday Tuesday at $21.65 per share. The bank tussled with
Berkshire Hills plans to sell eight branches, in Albany, Saratoga, Schenectady and Columbia counties, to the $7.1 billion-asset Hudson Valley Credit Union in Poughkeepsie, New York. Glens Falls National Bank and Trust Company, a subsidiary of the $4.2 billion-asset Arrow Financial Corp. in Glens Falls, New York, will purchase Berkshire Hills' branch in Whitehall. The $1.5 billion-asset Pathfinder Bancorp in Oswego, New York, will acquire the branch in East Syracuse.
For Hudson Valley, the branch buys add to a regional growth trend that began in January when it announced plans
In all, the sales include approximately $485.5 million in deposits, $60.5 million of related residential mortgage and consumer loans. Commercial loans were excluded. A Berkshire spokeswoman on Tuesday declined to provide more detailed information about the branch sales or the planned securities sale.
Pathfinder Bancorp would gain a significant share — approximately $198 million — of the deposits being sold, CEO James Dowd said Monday in a press release. The deal offers "meaningful access into a market with attractive growth opportunities," Dowd added. The Whiitehall branch has about $39 million in deposits, Arrow CEO David DeMarco said Monday in a press release.
All three prospective buyers have agreed to retain the Berkshire Hills branch staff.
Berkshire Hills, which would still operate 16 branches in upstate New York following the sales, expects to close the transaction by the end of the third quarter. In a research note Monday, Mark Fitzgibbon, an analyst at Piper Sandler, wrote that it "makes sense for Berkshire Hills to shrink its footprint," though he added the planned sale of 10 branches would not "budge the needle enough to warrant a higher rating."
Fitzgibbon currently rates Berkshire Hills as "neutral." Hovde's Bishop rates Berkshire Hills as "outperform."
