Brookline Bancorp and PCSB Financial entered into a definitive merger agreement whereby Brookline will acquire PCSB and its wholly-owned subsidiary, PCSB Bank, for approximately $313 million in cash and stock. Following the transaction, PCSB Bank will operate as a separate bank subsidiary of Brookline.

“I am pleased to announce the combination of PCSB and Brookline. This transaction represents a unique opportunity for Brookline to expand its banking operations into one of the country’s largest deposit markets through the acquisition of a complementary commercial banking organization,” Paul Perrault, chairman and CEO of Brookline, said. “PCSB has a high-quality loan portfolio, deposit base and talented employees, making it an excellent addition to our organization.”

“We are truly excited to be merging with Brookline. Paul and his team have built an impressive regional financial services company with a bedrock culture of performance, service and support of their customers, employees and shareholders,” Joseph D. Roberto, chairman, president and CEO of PCSB, said. “Partnering with Brookline will allow PCSB to deliver even more value to our communities and customers as we continue to expand in the lower Hudson Valley [in New York].”

Under the terms of the merger agreement, stockholders of PCSB will receive, for each share of PCSB they own, at each holder’s election, either $22 in cash consideration or 1.3284 shares of Brookline common stock, subject to allocation procedures to ensure 60% of the outstanding shares of PCSB common stock will be converted to Brookline common stock. The receipt of Brookline common stock by stockholders of PCSB is expected to be tax-free.

The transaction is presently valued at approximately $313 million in the aggregate, or approximately $20.72 per PCSB share based on Brookline’s common stock price of $14.96 at close on May 23.

The transaction is expected to lead to double-digit earnings per share accretion of approximately 13% to Brookline’s earnings per share (on a fully phased-in basis), excluding the impact of expected revenue enhancement opportunities. In addition, the transaction is expected to lead to an IRR of approximately 15%, exceeding Brookline’s cost of capital.

Brookline is estimated to have pro forma capital ratios of 8.6% TCE/TA and 13% total risk-based capital ratio at close. The combined company will have total assets of $10.6 billion, loans of $8.5 billion and deposits of $8.7 billion (as of March 31).

Upon completion of the merger, PCSB Bank will retain its New York bank charter and board of directors and its headquarters will remain in Yorktown Heights, NY. Brookline will select one PCSB director to join its board of directors. In addition, following the closing, Michael P. Goldrick, currently PCSB Bank’s executive vice president and chief lending officer, will become PCSB Bank’s president and CEO.

The boards of directors of both companies unanimously approved the transaction, which is expected to be completed in the second half of 2022, subject to approval by PCSB stockholders as well as regulatory approvals and other customary closing conditions.

Performance Trust Capital Partners represented Brookline as financial advisor and Goodwin Procter served as its legal counsel in this transaction. Piper Sandler represented PCSB as financial advisor and Luse Gorman served as its legal counsel.