Long Island's North Fork to pay $142 million for a local thrift.

North Fork Bancorp of Long Island agreed Monday to acquire Metro Bancshares in a $142 million stock transaction that is to increase its assets by 50%.

Once the deal closes, North Fork, Long Island's largest bank, will have 45 branches and just under $3 billion of assets.

Strength on Long Island

North Fork executives said the acquisition, which they hope to close by yearend, would cut costs and add revenues by transforming Metro from a thrift into a full-service commercial bank.

The deal also would strengthen $1.9 billion-asset North Fork, which is based in Suffolk County on eastern Long Island, in the adjoining, more densely populated Nassau County, as well as in Queens County, New York City.

"The acquisition meets North Fork's goal to expand its geographic presence on Long Island," said John Adam Kanas, chairman, president, and chief executive officer of the Mattituck, N.Y.-based bank.

Metro has $1 billion of assets and is the parent of Bayside Federal Saving Bank, which has some $900 million in deposits and 80,000 retail customers.

"Metro is a sound organization with excellent performance ratios," said Daniel M. Healy, executive vice president and chief financial officer of North Fork. Metro's return on assets is 1.29%; its return on equity, 16.46%.

North Fork officials said the acquisition would give it a new line of multifamily mortgage products.

North Fork expects the deal to bring cost savings of $8 million to $10.7 million by the end of June 1995, largely by cutting jobs and consolidating three branches. Those savings would equal 35% to 47% of Metro's current expenses.

North Fork is one of the most efficient banks in the industry, with an overhead ratio, or percentage of revenue dollars going to expenses, of 51.6%. The bank expects to take an after-tax charge of $11 million for the merger and restructuring.

The acquisition will be accretive to earnings by the end of 1995, adding about 18 cents to projected earnings per share of $1.50, North Fork said.

Wall Street recently began paying attention to North Fork, which in 1993 posted a healthy profit of $15.1 million, or $1.05 a share, after a loss in 1991 and a small profit in 1992. The bank's ROA is 1.15%; its ROE, 14.22%.

Earlier this year, regulators ended several memorandums of understanding in effect with North Fork, and the bank reinstated its dividend.

"North Fork continues to build its Long Island franchise while other, larger players are deemphasizing the market," said Thomas Hanley, banking analyst at CS First Boston Inc., in a recent report. "Meanwhile, the company remains a low-cost producer."

Mr. Hanley sees North Fork as an attractive takeover target and has a "buy" rating on the stock. The purchase price of Metro is 1.7 times its fully diluted book value.

The stock swap, pending necessary approvals, will be treated as a tax-free exchange and a pooling of interests. Each share of Metro will be swapped for a minimum 1.645 share, or maximum 1.759 share, of North Fork common stock.

The agreement allows Metro to terminate the transaction if the average closing price of North Fork shares falls below $12.50, unless North Fork elects to increase the exchange ratio.

Total shares outstanding of North Fork will increase by nine million, to 23 million, after the deal.

North Fork stock closed Monday at $14.125, up 12.5 cents.

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