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Northfield Bancorp to acquire VSB Bancorp in all-stock deal

Woodbridge, N.J.-based Northfield Bancorp Inc., parent of Northfield Bank, agreed to buy Staten Island, N.Y.-based VSB Bancorp Inc., parent of Victory State Bank, in a $62.9 million all-stock deal.

Each common share of VSB Bancorp stock will be exchanged for common shares of Northfield stock. The price for VSB Bancorp shareholders is fixed at $33.30 per share and is subject to a 5% collar.

The final exchange ratio will be determined using $33.30 divided by Northfield's 10-day average stock price prior to closing. However, 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.

S&P Global Market Intelligence valuations for bank and thrift targets in the Mid-Atlantic region between Dec. 23, 2018, and Dec. 23, 2019, averaged 146.35% of book and 156.98% of tangible book and had a median of 20.79x last-12-months earnings, on an aggregate basis.

The transaction represents 162% of VSB Bancorp's tangible book value, 16.3x trailing 12-months earnings and a 9.0% premium on Victory's core deposits. The deal will be 8.5% accretive to Northfield Bancorp's 2021 earnings per share and less than 2.5% dilutive to tangible book value per share at closing. The earn-back period of tangible book value dilution is projected to be 3.75 years using the crossover method.

The transaction is expected to close in the second quarter of 2020. VSB Bancorp has agreed to pay Northfield Bancorp a termination fee of $2.5 million if the merger is not completed under certain circumstances.

S&P Global Market Intelligence calculates the deal is 163.2% of common equity and tangible common equity and 16.8x earnings, on an aggregate basis. The deal value is 16.55% of assets and 19.11% of deposits. The tangible book premium to core deposits ratio is 8.74%.

Victory State Bank President and CEO Ralph Branca will join Northfield in a leadership role for the Staten Island marketplace, and Joseph LiBassi, chairman of Victory State Bank, has entered into a consulting agreement for a three-year period to assist in the transition.

Based on S&P Global Market Intelligence data, Northfield Bancorp will expand in Richmond County, N.Y., by six branches to be ranked fourth with a 14.37% share of approximately $14.03 billion in total market deposits.

Upon the close of the transaction, Northfield will have estimated total combined assets of $5.2 billion. Victory State Bank operates six full-service locations in Staten Island.

Sandler O'Neill & Partners LP served as financial adviser 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 State Bank.

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