Berkshire Hills Bancorp Inc. in Pittsfield, Mass., is shelling out for an acquisition in a neighboring market even as it prepares to repay government capital.
The $2.7 billion-asset company announced late Wednesday that it had agreed to buy CNB Financial Corp. in Worcester, Mass., where Berkshire has no branches, for $19.5 million of stock. Berkshire also said it had applied to repay the $40 million it got in December from the Treasury Department's Troubled Asset Relief Program.
In an interview, Michael P. Daly, the company's president and chief executive, called buying CNB "a natural extension for us." Berkshire raised $36 million for these sorts of opportunities last year. "We will continue to look at those possibilities," he said.
He would not discuss the application to repay Tarp funds. In a press release, he said: "We were among the strong banks who were initially invited to partner with the Treasury in order … to expand credit and support the economy. Since that time, the government program has gone through many changes and may continue to evolve in ways that create difficulties for us."
The company will focus on bolstering capital through earnings, Daly said in the release.
Berkshire is to pay 99% of tangible book value for CNB, whose expenses it said it could cut by one-quarter. Berkshire said it expects the deal to close next quarter and add 10 cents per share to its earnings by next year. It would pick up $300 million of assets and six branches in areas adjacent to its 48-branch network in western Massachusetts.
The company's last acquisition was in September 2007 when it bought Factory Point Bancorp in Manchester Center, Vt., for $82 million. Berkshire also has branches in northeastern New York.
The company also reported Wednesday that it had earned $3.8 million last quarter, 36% less than a year earlier. Interest and noninterest income both fell, and the provision for loan losses tripled, to $2.5 million. But nonperforming assets were roughly flat, at $12.8 million, or 0.47% of total assets.
Laurie Hunsicker, an analyst at Stifel, Nicolaus & Co., called Berkshire's application to repay its Tarp money unsurprising, given the restrictions in matters like compensation that have emerged since the program was created.
"You have a group of best-of-breed community banks that took the Tarp to begin with as a means of being patriotic," she said. Now, "solid, better-capitalized banks have this added burden, and they are opting out. Berkshire fits into that category."