Moving to expand its presence among the burgeoning immigrant communities of New York City, Astoria Financial Corp. said Monday it would acquire Greater New York Savings Bank for $293 million.
The deal, which was praised by Wall Street analysts, would for the first time put Astoria in the heart of populous Brooklyn while also boosting its branch network on suburban Long Island.
Much like Astoria's traditional base in neighboring Queens, Brooklyn is a center of cheap deposits amid a potential market of 2.3 million people scattered across richly diverse ethnic neighborhoods.
Executives at Astoria Financial, which will be the name of the combined institution, said they had long coveted a beachhead in Brooklyn, home to New York landmarks like Coney Island.
"The only way to get into Brooklyn was to get there through people who already knew it," asserted George L. Engelke Jr., Astoria's president and chief executive. "We wouldn't get there by going in and opening random branches," he said.
The deal is the fifth-largest announced this year between thrifts, according to Sheshunoff Information Services. Many analysts expect more deals in the Northeast, where merger activity has been relatively slight over the last year.
"The (thrift) market has recently been moving at a very fast consolidation clip so far this year, and the ingredients are there for it to continue," said Michael Hodes, an analyst at Goldman, Sachs & Co., New York
At the same time, however, some analysts cautioned that further interest rate hikes by the Federal Reserve and continued slippage in bank and thrift stock prices as a result could dampen merger activity.
"We still expect to see more deals this year, but a market downturn could effect the pace," said Kevin Timmons, a thrift specialist at First Albany Corp.
The acquisition would create an institution with $9.8 billion in assets and a 5.5% market share, with 51 branches in Brooklyn, Queens, and Nassau and Suffolk counties.
Astoria Financial also has three branches in suburban Westchester County and five in northern New York State.
Mr. Engelke, 58, will retain his current titles. Gerard C. Keegan, 50, Greater New York's chairman, president, and chief executive officer, will become vice chairman, director, and chief administrative officer of the new Astoria Financial.
The agreement is for $19 per share of Greater New York common stock, and is valued at 1.68 times book value, or a premium-to-market of 20%. Astoria will take a one-time, pretax charge of $31.6 million.
The two thrifts' executives said they hoped to save 45% of Greater New York's expenses-or $23.6 million in pretax dollars-through reductions in staff, office space, and professional services. Mr. Engelke and Mr. Keegan declined to elaborate on staff reductions.
No branches are slated for closure. And indeed, three Brooklyn branches for which Greater New York already has obtained approval are to open under the Astoria banner later this year.
Astoria already ranks as the state's 12th-largest financial institution, with $7.3 billion in assets. It is tied with Republic New York Corp. for third in thrift deposits citywide, behind GreenPoint Financial Corp. and Dime Bancorp, according to data provided by the companies.
The combination would boost Astoria Financial's deposit ranking among thrifts nationally to 13th, from 17th.
Analysts said the deal would benefit both institutions, and many moved Monday to raise their earnings estimates for Astoria Financial.
"This deal makes a lot of sense for Astoria, especially," said Thomas F. Theurkauf Jr., an analyst at Keefe, Bruyette & Woods. "It brings them low- cost, stable core deposits. That's an attractive funding mechanism."
But some analysts said they were surprised by the relatively low acquisition price for Greater New York, which many described as "a plum" for any acquirer.
"There has been a lot of speculation about the thrift market in New York," said First Albany's Mr. Timmons. "But I would have thought that Greater would hold out for a higher price down the road."
Executives said they hope to close the deal by the end of the third quarter, pending regulatory approvals.
