Berkshire Hills Bancorp will acquire a Needham-based commercial specialty finance outfit for approximately $53 million in a deal slated to close in the third quarter this year.
Firestone Financial Corp. focuses on secured installment loan equipment for small and medium-sized businesses, like indoor and outdoor amusement, vending, coin-op laundry, gaming and fitness industries. The firm had approximately $190 million in commercial loans as of March 31.
“Firestone is a terrific fit for Berkshire Bank,” CEO Michael Daly said in a statement. “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.”
Firestone lends nationwide and no state comprises more than 11 percent of its outstanding balances. The company’s largest borrower represents just 1.2 percent of outstanding loans. The weighted average yield on the portfolio at the quarter’s end was 9.8 percent and its weighted average remaining maturity was 36 months. The portfolio’s net charge-off rate has not exceeded 0.23 percent 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, who both joined the company in the mid 80s. Firestone’s senior management team has extensive experience in the markets they serve and will continue to run the business following the closing.
“We are excited to be joining the Berkshire team,” CEO Cohen said. “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.”
The acquisition is priced at 130 percent of Firestone’s adjusted tangible book value. Berkshire will pay 75 percent of the price with its common stock and the balance 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 percent. The transaction is expected to be 8 cents dilutive to Berkshire’s tangible book value per share, with a related payback period of approximately 2.5 years.
