Boston-based Brookline Bancorp Inc. entered into an agreement to acquire Yorktown Heights, N.Y.-based PCSB Financial Corp. and its subsidiary PCSB Bank for $313 million in a cash-and-stock deal.
Under the merger agreement, the stockholders of PCSB Financial will receive either $22 in cash consideration or 1.3284 shares of Brookline Bancorp's common stock for each share of PCSB Financial common stock, subject to allocation procedures to ensure 60% of the outstanding shares of PCSB common stock will be converted to Brookline common stock.
PCSB Bank will operate as a separate bank subsidiary of Brookline Bancorp upon completion of the deal, which is expected to occur in the second half of the year, according to a press release.
With the acquisition, Brookline Bancorp will enter Westchester County, N.Y., with nine branches to be ranked No. 18 with a 0.4% share of approximately $173.25 billion in total market deposits; Putnam County, N.Y., with three branches to be ranked second with a 22.83% share of approximately $2.65 billion in total market deposits; Dutchess County, N.Y., with two branches to be ranked No. 13 with a 1.81% share of approximately $9.6 billion in total market deposits; and Rockland County, N.Y., with one branch to be ranked No. 14 with a 0.23% share of approximately $23.67 billion in total market deposits, based on S&P Global Market Intelligence data.
The $313 million deal value equates to roughly $20.72 per PCSB Financial share, based on Brookline Bancorp's common stock price of $14.96 at close May 23.
At announcement, S&P Global Market Intelligence calculates the deal value to be 114.98% of common equity, 117.62% of tangible common equity, 19.70% of deposits, 16.13% of assets and 20.32x of earnings. The tangible book premium to deposits ratio is 3.07%.
S&P Global Market Intelligence valuations for bank and thrift targets in the Mid Atlantic region between May 24, 2021, and May 24, 2022, averaged 127.42% of book and 137.04% of tangible book and had a median of 18.05x last-12-months earnings, on an aggregate basis, and averaged 125.32% of book and 138.66% of tangible book and had a median of 16.44x last-12-months earnings, on a per-share basis.
Accretion of approximately 13% to Brookline Bancorp's EPS on a fully phased-in basis is expected, excluding the impact of expected revenue enhancement opportunities, according to the press release. The expected internal rate of return of the deal is approximately 15%, which exceeds Brookline Bancorp's cost of capital. Pro forma capital ratios of 8.6% TCE/TA and a 13.0% total risk-based capital ratio are estimated at the close of the deal. As of March 31, the combined company's total assets are $10.6 billion, with loans of $8.5 billion and deposits of $8.7 billion.
Upon the completion of the deal, PCSB Bank Chief Lending Officer Michael Goldrick will become the bank's president and CEO, according to the press release. PCSB Bank will retain its New York bank charter and board, and its headquarters will remain in Yorktown Heights, N.Y. Additionally, Brookline Bancorp will select one PCSB Financial director to join its board.
The boards of both the companies have unanimously approved the deal.
Performance Trust Capital Partners LLC was Brookline's financial adviser on the deal, while Goodwin Procter LLP was its legal counsel. Piper Sandler & Co. was PCSB's financial adviser, and Luse Gorman PC was its legal counsel in the deal.
