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The banks said the merger would create the third largest New York-based savings and loan based on assets, combining New York Community's strength in mortgage lending with Roslyn's strength in adding deposits. The combined companies would have $20 billion of assets, $11.3 billion of deposits and 145 banking offices in southeastern New York and New Jersey.

"It's very positive for New York Community," said Mark Stickle, senior equity analyst for Banc One Investment Advisors Corp. in Columbus, Ohio, whose $90 billion of assets include about 1.1 million of the bank's shares. "The company is a demonstrated acquirer and is in a position to develop and create value from the Roslyn franchise."

Roslyn stockholders would receive 0.75 of a New York Community share for each Roslyn share, valuing Roslyn stock at $21.81 based on Friday closing prices.

Roslyn shares rose 4.3 percent, or 90 cents, to $21.75 on the Nasdaq. New York Community shares rose 7.3 percent, or $1.98, to $29.08 on the New York Stock Exchange (News - Websites).

The merger would help New York Community, which runs Queens County Savings Bank and Richmond County Savings Bank, expand in the Bronx, Brooklyn, Queens and Long Island, New York.

The combined bank would rank fourth in New York-area deposits behind J.P. Morgan Chase & Co. (NYSE:JPM - News), Citigroup Inc. (NYSE:C - News) and Astoria Financial Corp. (NYSE:AF - News), the banks said.

"There's a great deal of retail competition in the New York banking market," said Joseph Ficalora, New York Community's president and chief executive, in an interview. "There was no question other players in the market (were) seeking to acquire Roslyn." Ficalora will retain his positions after the merger.

New York Community is based in Westbury, New York, and Roslyn in nearby Jericho.

JOBS

The banks expect the merger to add to profit immediately and boost 2004 profit more than 10 percent. They expect less than $45 million of after-tax charges and $31 million of annual pretax savings.

"There will be some loss of jobs," though no decisions have been made to shut branches," Ficalora said. "Though some jobs will be lost or changed, we will also be adding jobs."

The banks employed more than 2,300 people at year end.

The transaction is expected to close in the fourth quarter, pending shareholder and regulatory approval.

The purchase is the largest of a New York bank since Washington Mutual Inc. (NYSE:WM - News) paid more than $5 billion for Dime Bancorp last year. Published reports said Roslyn was seeking up to $1.8 billion, about $23 per share, to merge, and also drew interest from GreenPoint Financial Corp. (NYSE:GPT - News)

CUTTING RISK

Harry Terris, who oversees bank merger research at SNL Financial in Charlottesville, Virginia, labeled the purchase price "pretty good," and called it "unlikely" that other banks might try to top New York Community's bid.

"When people heard Roslyn was looking for $23 a share, most people thought it was pretty high," he said.

Roslyn Chief Executive Joseph Mancino and New York Community Chairman Michael Manzulli will be co-chairmen of the combined company.

"It was a perfect fit," said Mancino, who said he began talks with Ficalora a couple of weeks ago.

The banks plan to slash their combined $11.8 billion securities portfolio by $3.5 billion, or 30 percent, to reduce interest rate risk, Ficalora said.

Stickle called the portfolio "an anchor around Roslyn's neck. It took on too much mortgage-backed product, milking it for the short term, without enough regard for (the) long term if rates rise."

He sees more New York S&L mergers, perhaps involving Astoria as an acquisition target or GreenPoint as an acquirer.