Hanover Community Bank and Savoy Bank to Merge



Hanover Bancorp, parent company of Hanover Community Bank, and Savoy Bank entered into a definitive agreement pursuant to which Savoy Bank will merge into Hanover Community Bank in a stock and cash transaction valued at approximately $63 million. The agreement was unanimously approved by the boards of directors of both companies. Directors of Savoy have executed voting agreements in favor of this combination. The Savoy directors own approximately 49% of Savoy’s outstanding shares.

The merger combines two banking platforms to create a sub $5 billion asset sized community bank serving the greater New York City metro market. The combined company will have approximately $1.6 billion in assets, $1.1 billion in total deposits and eight branches, including six branches in the New York City market, with the expectation that an additional branch in New Jersey will be opened prior to closing of the merger.

Hanover will continue to operate Savoy’s single midtown Manhattan branch office, which will become the focal point and headquarters for Hanover’s business development efforts in the New York City market.

The Hanover shares to be received by Savoy shareholders as part of the transaction will be registered by Hanover with the Securities and Exchange Commission and will therefore be freely transferable. Hanover will then become a reporting company with the SEC under the Securities Exchange Act of 1934, as amended, and will publicly file its future quarterly and annual results.

“We are very pleased to announce this transformational partnership with Savoy Bank, which accelerates each company’s expansion efforts and strategic initiatives while truly creating a best-in-class community bank in the New York City market,” Michael Puorro, chairman and CEO of Hanover, said. “At Hanover, we have been focused on a high growth and high profitability strategy that has created significant shareholder value since the company was recapitalized in 2012. With Savoy we found a true partner who shares in this value creation focus and as a combined company we will better be able to compete in this fast-evolving marketplace and position the combined company for the next steps in our corporate evolution. We believe that becoming a public reporting company will improve our visibility to the investment community and enhance our shareholder liquidity options going forward.”

“The combination of Hanover and Savoy creates a sizable community bank operating in the greater NYC metro market that is poised to provide top-tier return on equity metrics, revenue and cost synergies, a more diversified balance sheet, and a lower risk profile, all while maintaining an impressive double digit balance sheet growth rate,” Brian Finneran, president and CFO of Hanover, said.

“Hanover is an excellent cultural fit with Savoy Bank, as we have complementary business models and a shared focus on the small business customers and individuals behind them. We believe the larger capital base and expanded depth of financial products and services that will be available to our customers and the opportunity for both our employees and shareholders to be part of a high growth, high performing company provides significant value for all of our stakeholders,” Metin Negrin, chairman of Savoy Bank, said. “As a major shareholder and customer of Savoy Bank, I very much look forward to being part of the Hanover organization and watching the combined company continue to scale.”

As Savoy’s largest shareholder, Negrin will become a significant shareholder of Hanover. As part of the transaction, he agreed to a voting agreement under which he will vote his shares of Hanover stock as recommended by the board of Hanover for the term of the voting agreement. Additionally, Elena Sisti, a former Citibank executive and the founding force behind Savoy Bank, will be a significant shareholder of Hanover.

“I am looking forward to sustaining and expanding my original vision for Savoy to be a leading provider of financial services to entrepreneurs in the New York City metro area,” Sisti said. “With the Hanover combination, we will achieve greater scale and impact for our customer base, and that is extremely exciting.”

“Through top-tier profitability and earnings predictability, we will be able to reinvest in the business to drive multiple growth engines, enhance our ability to compete in the fast evolving banking landscape and sustain consistent returns on capital for shareholders,” Mac Wilcox, president and CEO of Savoy, who will join Hanover as senior executive vice president, head of commercial lending and chief revenue officer, said. “We believe the combined company will also create new opportunities for our employees and enable us to attract and retain top talent.”

Under the terms of the agreement, each outstanding share of Savoy common stock will be exchanged for a combination of cash consideration and Hanover common stock. The aggregate merger consideration being paid to Savoy shareholders is estimated to be $63 million. Savoy shareholders will receive merger consideration based on a purchase price equal to 1.25 times tangible book value at the month-end prior to the closing of the merger, which is anticipated to be in early-to-mid 2021. The $63 million estimated purchase price is based on the 1.25x multiple and Savoy’s estimated equity capital at the closing time period. The actual merger consideration will be determined as of the month-end prior to closing. The merger consideration provided to Savoy will be payable 50% in cash and 50% in Hanover common stock. Hanover will issue shares of its common stock in connection with the merger at a valuation equal to 1.2 times tangible book value at the month-end prior to the closing of the merger. The calculation of tangible book value for both entities and the purchase price are subject to certain adjustments stipulated in the definitive agreement, including minimum and maximum capital thresholds. Savoy shareholders will own approximately 23% of the pro forma combined entity at closing.

The combined company will be headquartered in Mineola, NY, and will maintain Savoy’s existing single branch office in Rockefeller Center in New York City. Two members of Savoy’s board of directors will join the Hanover board of directors. Savoy directors who are not joining Hanover’s board will join a newly established New York City advisory board, which will be focused on customer retention and further expansion of the combined company’s brand.

The merger is expected to close in the first half of 2021, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by Savoy shareholders. In addition to customary closing conditions, Hanover will become an SEC registrant at the closing of the transaction.

Stephens Inc. served as financial advisor to Hanover and rendered a fairness opinion in connection with the transaction, while Windels Marx Lane & Mittendorf served as Hanover’s legal counsel. Janney Montgomery Scott served as financial advisor to Savoy and rendered a fairness opinion in connection with the transaction, while Gallet Dreyer & Berkey served as Savoy’s legal counsel.


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