Banking / Financial

Northfield Bancorp Merges with VSB Bancorp

Northfield Bancorp, Inc., parent company of Northfield Bank, and VSB Bancorp, Inc., parent company of Victory State Bank, have merged.

The transaction reflects an in-market acquisition of an institution that shares similar core values and commitment to the Staten Island community, including a focus on serving commercial and retail borrowers and depositors, through its six locations on the island.  Upon completion of the transaction, it is estimated that Northfield will have combined assets of $5.2 billion, loans of $3.5 billion, and deposits of $3.7 billion.

Key Transaction Highlights:

  • Strengthens competitive position in the Staten Island marketplace;
  • Lowers funding costs with approximately $325 million of deposits, including $145 million of non-interest bearing demand accounts,
  • Adds total loans of approximately $157 million, with an average yield of 5.77%;
  • Creates economies of scale with significant identified cost-savings, and low execution risk;
  • Provides expanded offerings, including a suite of commercial cash management services, business lending, home equity loans and lines, and lending capacity to Victory customers; and
  • Deploys excess capital, with a modest level of tangible book value dilution, meaningful earnings accretion and acceptable period of tangible book value earn-back.

Key Financial Highlights:

  • 8.5% accretive to Northfield’s 2021 earnings per share;
  • Less than 2.5% dilutive to tangible book value per share at closing; and
  • Earn back of tangible book value dilution projected to be 3.75 years using the cross-over method.

Northfield’s President & CEO, Steven M. Klein commented, “This merger will strengthen our over 130 year commitment to the people and businesses of Staten Island and provide greater lending capacity to Victory’s customers, improve efficiency in our combined organization, expand our market share of core deposits, and further leverage our strong capital base to support earnings growth.”

Ralph M. Branca, Victory’s President and CEO, commented, “We have an added benefit of merging into a local institution with a major presence in the Staten Island marketplace.  Our customers will now have access to a larger branch network and array of services that will address their ever changing needs.”

Under the terms of the agreement, each share of VSB common stock will be exchanged for shares of Northfield common stock for total consideration of approximately $62.9 million.  The price for VSB shareholders is fixed at $33.30 per share, subject to a 5% collar.  The final exchange ratio will be determined using $33.30 divided by Northfield’s ten-day average stock price just prior to closing, as defined in the definitive agreement (the “Average Stock Price”); provided, however, that if the Average Stock Price is greater than $17.99, then the exchange ratio will be 1.8514, and if the Average Stock Price is less than $16.27, then the exchange ratio will be 2.0463.

Joseph J. LiBassi, Chairman of Victory, added “Our original stockholders’ adjusted cost per share is $4.00. That is a return of over 730%, without considering the 49 quarterly cash dividends that we have paid.”

Based on the value of consideration paid, the transaction represents 162% of VSB’s tangible book value, 16.3x trailing twelve months earnings, and a 9.0% premium on Victory’s core deposits.

The definitive agreement has been approved by the boards of directors of each entity.  The completion of the transaction is subject to the approval of VSB’s stockholders and normal and customary regulatory approvals for both companies.

All VSB directors and executive officers have entered into voting agreements to vote their shares in favor of the transaction.

The transaction is expected to close in the second quarter of 2020.  Ralph M. Branca, Victory’s President and CEO, will join Northfield in a leadership role for the Staten Island marketplace and Joseph J. LiBassi, has entered into a consulting agreement for a three year period to assist in the transition.

Sandler O’Neill + Partners, L.P. served as financial advisor, and Luse Gorman, PC served as legal counsel to Northfield.  FinPro Capital Advisors, Inc. rendered a fairness opinion in connection with the transaction, and Gallet Dreyer & Berkey, LLP served as legal counsel to Victory.

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