Brookline enters New York-area markets with PCSB Financial acquisition

Brookline Bancorp Inc.'s acquisition of PCSB Financial Corp. will expand the company's footprint into the metro New York City market while allowing PCSB to remain a separate bank subsidiary as Brookline's third bank charter, executives said.

The $320.1 million deal is the second-largest U.S. bank deal announced in 2022, according to S&P Global Market Intelligence data, and will push Brookline over $10 billion in assets. Brookline shares fell more than 6% after its announcement.

PCSB shareholders will receive 1.3284 shares of Brookline stock, or $22 in cash considerations per share, subject to a 60% stock and 40% cash proration.

"This is a meaningful acquisition for Brookline, but one with very manageable risks," Brookline CEO Paul Perrault said on a call to discuss the deal.

PCSB has 14 branches and serves communities to the north of New York City, including Fishkill, White Plains and Eastchester. PCSB has about $2 billion in assets, with $1.3 billion in loans and $1.6 billion in deposits, executives said.

PCSB Chairman, President and CEO Joe Roberto will stay on for a short time as a consultant and board member of PCSB, and Michael Goldrick, PCSB's chief lending officer since 2012, will become chairman, president and CEO of the bank once the deal closes. Perrault will join the PCSB board of directors, and Brookline will choose one PCSB director to serve on its board, Perrault said.

"We wanted to make sure that we had the expertise and the depth that could support multiple charters, and we have accomplished that," Perrault said.

Brookline can bring PCSB capabilities that come with size and complexity, including foreign exchange, 1031 services and wealth management, Perrault said, adding, "We think we bring a lot to the table and we think, by operating from the multicharter environment, we'll let them prosper quickly."

Brookline has no plan to expand PSCB's footprint directly into New York City at this time and is unlikely to fill in its footprint between its charters and instead remain focused on its existing markets, Perrault said.

"We've got a small market share in a very dense and deep market," Perrault said. "So we will have our hands full, and we can prosper without going into New York City. Of course, as time goes on I will take the counsel of the management there and see what they have in mind."

Raymond James analyst William Wallace called the deal a positive for Brookline.

"With PCSB Bank operating as a separate subsidiary of the bank, we see the acquisition as a continuation of Brookline's acquisition strategy of acquiring high-quality community banks in attractive metro markets with similar business models," Wallace wrote in a note. "From a financial perspective, the price tag/premium paid appears fair, and though we see the assumed tangible book value dilution period of 3.6 years is reasonable, it is slightly higher than recent [tangible book value] earnback periods we have seen from recent deals."