Analysts See Favorable Aspects To Berkshire Hills' New Acquisition

KBW analysts are positive on Berkshire Hills Bancorp, Inc. (NYSE: BHLB)'s move to acquire First Choice Bank, a private $1.1 billion bank based in Lawrenceville, New Jersey, for $111.7 million in an all-stock transaction.

"This acquisition comes as a surprise to us as we were unaware of BHLB's interest in moving meaningfully into the NJ market. We also view this market as highly competitive, with weaker pricing dynamics than perhaps what BHLB would see in its core markets of MA and upstate, NY," analyst Collyn Gilbert wrote in a note.

Gilbert said the financial components of this acquisition are favorable as First Choice will bring six branches near Princeton, New Jersey, and two branches in the greater Philadelphia market.

With First Choice's $1.1 billion in assets, $436 million in net loans and $906 million in deposits, Berkshire Hills' assets will move to just below $9.0 billion, making the $10 billion threshold a more near-term hurdle.

The analyst noted that First Choice is located within 10 miles of Berkshire Hills' small business lending division in 44 Capital.

"At the same time, we think First Choice's strong mortgage banking platform was an attractive feature for BHLB, as that division funded $2.5 billion in mortgage loans in 2015, and generated $68 million in mortgage revenues during 2015 as well," Gilbert added.

Gilbert has an Outperform rating and target price of $33 on Berkshire Hills stock, which is currently up 0.63 percent to $25.42 at time of writing.