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Berkshire Hills to Acquire Firestone Financial

May 22, 2015, 07:49 AM
Filed Under: Mergers & Acquisitions

Berkshire Hills Bancorp today the signing of a definitive agreement for the acquisition of privately held Firestone Financial Corp. as an operating subsidiary of Berkshire Bank.  Based in Needham, Massachusetts, Firestone is a longstanding commercial specialty finance company providing secured installment loan equipment financing for small and medium-sized businesses.

"Firestone is a terrific fit for Berkshire Bank," stated Berkshire CEO Michael Daly.  "The strength of the management team and their conservative approach to credit has made them a solid performing finance company.  Our strategic decision to complement our strong asset based lending platform with this commercial lending business enables us to further diversify our assets while expanding our client offerings. We look forward to adding Firestone's expertise to our organization, and taking advantage of the synergies available through this acquisition."

George Bacigalupo, Berkshire's EVP Commercial Banking, added, "We are pleased to expand our commercial platform with this attractive acquisition.  The addition of Firestone enhances both the geographic and categorical diversification of our loan portfolio while providing a valuable additional growth channel for us.  The business will continue to be run by Firestone's talented management team and their experience and conservative relationship-based approach makes this a great fit for our organization."

"We are excited to be joining the Berkshire team," said Firestone CEO David Cohen.  "With Berkshire's resources behind us, we believe we can be a significant contributor to the continued growth and profitability of this organization.  We remain committed to our markets and customers, and through this partnership we will be able to offer additional services to help facilitate their continued growth."

At March 31, 2015, Firestone had approximately $190 million in loans outstanding spread across multiple industries and market areas. Borrowers are widely dispersed with no state comprising more than 11% of the outstanding balance and the largest borrower representing just 1.2% of outstandings.  The weighted average yield on the portfolio at quarter end was 9.8% and its weighted average remaining maturity was 36 months.  The portfolio's net charge-off rate has not exceeded 0.23% in any of the last three years.

Firestone has been in business for 50 years and is led by industry veterans David S. Cohen and Scott A. Cooper, both of whom joined the company in the mid-1980's.  Firestone's senior management team has extensive experience in the markets they serve and will continue to run the business following the closing.  

The acquisition is priced at 130% of Firestone's adjusted tangible book value. The deal value is estimated to be approximately $53 million, with 75% of the consideration to be paid in BHLB common stock and 25% to be paid in cash.  The acquisition is expected to be accretive to Berkshire's 2016 earnings per share and to generate a return on equity in excess of 15%.  The transaction is expected to be $0.08 dilutive to Berkshire's tangible book value per share, with a related payback period of approximately 2.5 years. The transaction is subject to the receipt of regulatory approvals and other customary closing conditions and is expected to be completed during the third quarter of 2015.

For this transaction, Luse Gorman, P.C. served as outside counsel to Berkshire. For Firestone, Houlihan Lokey served as exclusive financial advisor and Locke Lord LLP ­­­served as outside counsel.  

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