Berkshire Hills Bancorp Inc. said yesterday that it plans to buy Worcester-based Commerce Bancshares Corp. in a $209 million, all-stock deal and relocate its corporate headquarters to Boston from Pittsfield.
The parent company of Berkshire Bank said it has signed a merger agreement to purchase Commerce and its Commerce Bank & Trust subsidiary, a deal that will expand its presence in Worcester and Boston and make it the largest state-chartered regional bank.
“We will be able to leverage the strengths of both banks and capitalize on growth opportunities in the attractive, high-growth central and eastern Massachusetts markets,” Berkshire CEO Michael Daly said. “We also raised $150 million in equity this morning, which strengthens our capital and provides support for future growth.”
Berkshire’s assets are expected to increase to $12 billion. It would have $8.2 billion in loans, $8.7 billion in deposits, 113 branches in New England, New York, New Jersey and Pennsylvania, and a market capitalization of about $1.5 billion. The acquisition gives it a presence in Worcester, where Commerce has 13 branches. Commerce has the No. 1 deposit market share in Worcester and No. 2 share in the Worcester metro area behind Bank of America.
Berkshire said it has no plans to grow Commerce’s $103 million taxi medallion portfolio that represents about 390 medallions in Boston and Cambridge. Approximately 70 percent of the portfolio has never been delinquent, but while the overall cash flow generated continues to be strong, it’s under pressure from ride-sharing companies including Uber and Lyft.
Berkshire’s Boston move would make it the first Hub-headquartered regional bank since BankBoston, which was acquired by Fleet Financial in 1999. In Boston, the merged company would have $1.5 billion in loans and more than $200 million in deposits. Berkshire opened its first branch in the Financial District in April. Commerce has three Hub branches.
“The market opportunity is significant,” Daly said. “By moving our deposit market share only 1 percent, we would garner over $3 billion in new deposits.”
Berkshire hopes to find a 4,000- to 10,000-square foot headquarters in the area encompassing TD Garden, the Financial District and Seaport District.
The business environment for banks is driving a fair amount of mergers, said Bruce Spitzer, spokesman for the Massachusetts Bankers Association.
“The cost of doing business goes up every year, and that includes the cost to invest in technology, and also the cost of compliance,” Spitzer said. “So banks more often combine forces in order to create some efficiencies and, of course, a bigger market presence.”
