Valley National Bancorp To Acquire Bank Leumi USA Creating A Premier Commercial Bank With Unique, Sustainable and Diverse Growth Opportunities

Valley National Bancorp and Bank Leumi Le-Israel Corporation  announced that they have entered into a definitive merger agreement whereby Valley will acquire Leumi, the US subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA (“Bank Leumi”). This strategic combination broadens Valley’s commercial product offerings and enhances Valley’s funding verticals. As a result of the mutually beneficial transaction, Valley will greatly expand its technology and venture capital banking business, and Bank Leumi Le-Israel B.M. will enhance its exposure to the U.S. banking market. This combination further solidifies Valley’s position as a top-tier, relationship-focused commercial bank. The pro forma company will be the 29^th largest publicly traded U.S. bank by assets¹, and will be well-positioned for strong, sustainable, and diversified growth.

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Bank Leumi provides full-service relationship banking for middle-market commercial clients and private banking services for high net-worth individuals. As of June 30, 2021, Bank Leumi had total assets of $8.4 billion, total deposits of $7.1 billion, and gross l**** of $5.4 billion. The loan portfolio is well diversified by asset class with nearly 1/3^rd of the portfolio in commercial and industrial l****. Bank Leumi operates five commercial offices in New York, Los Angeles, Palo Alto, Chicago, and Miami, a strategically located distribution network that drives the geographic diversity of its loan portfolio. The bank’s commercial focus has contributed to its exceptional funding base which includes nearly $2 billion of low-cost deposits in the technology and venture capital space.

With approximately 20% of revenue coming from non-interest sources, the combination with Bank Leumi will increase Valley’s revenue diversity. Bank Leumi’s fee income is primarily driven by cash management services for commercial customers, and investment management fees within Bank Leumi’s private bank. As of June 30, 2021, the private bank contained approximately $4.1 billion of assets under management from both domestic and international high net worth clients. Valley expects to leverage Bank Leumi’s platform to further enhance and grow its own private banking business.

The transaction is expected to be approximately 7% accretive to Valley’s 2023 earnings on a fully-phased in basis. Tangible book value dilution is expected to be roughly 1% with an earnback period of approximately one year. The transaction is expected to be effectively neutral to Valley’s tangible common equity to tangible asset ratio at close.

Under the terms of the merger agreement, the shareholders of Leumi will receive 3.8025 shares of Valley common stock and $5.08 in cash (subject to specified adjustments) for each share of Leumi common stock they own. The transaction is valued at an estimated $1,148 million, inclusive of the value of options, based on Valley’s closing stock price on September 22, 2021. Upon completion of the acquisition, Bank Leumi Le-Israel B.M. will own over 14% of Valley’s common stock.

Valley and Bank Leumi Le-Israel B.M. have also entered into an agreement providing for an ongoing business relationship which will include loan participations and customer referrals. The strategic relationship will enable Bank Leumi Le-Israel B.M. to expand its activity in the US. The merger agreement further provides that, effective as of and contingent upon the merger, Valley will add two directors designated by Bank Leumi Le-Israel B.M. to its board of directors. It is currently anticipated that Bank Leumi President and CEO Avner Mendelson will be one of these designees and join the board as Vice Chairman. Bank Leumi Le-Israel B.M. has agreed to a four-year lock-up with respect to the shares of Valley common stock to be issued in the transaction, with 25% of the shares being released from the lock-up on each anniversary of closing. Following the closing, Bank Leumi Le-Israel B.M. will also be subject to customary voting and standstill agreements.

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Ira Robbins, Valley’s Chairman, President & CEO commented that, “We are extremely excited about the combination with Bank Leumi and the diverse growth opportunities that we expect the partnership will bring. Bank Leumi’s unique deposit verticals, including the technology and venture capital business, will continue the significant funding improvement that we have driven over the last few years. On the lending side, Bank Leumi will add diversification into niche C&I segments and new geographies including in California and Illinois. We are also eager to scale Bank Leumi’s private banking platform across Valley’s larger customer base and footprint. Leveraging these new and distinct platforms and skillsets will represent the next exciting phase of our evolution as a premier full-service commercial bank.”

Bank Leumi Le-Israel B.M.’s CEO Hanan Friedman added that, “For Leumi, this is a strategic move designed to deepen and expand our exposure to the U.S. The merger will provide Leumi significant and unprecedented presence and market access for an Israeli bank in the U.S. This is positive news for our commercial and technology customers, who will enjoy a wider range of product offerings and the capabilities of a top and prosperous U.S. bank. Valley’s strong and experienced team which is headed by Chairman, President and CEO Ira Robbins, will benefit from the addition of Leumi USA team members. This ensures an ongoing commitment to Israeli customers and Leumi USA employees, who will enjoy the benefits of working with a top bank with an impressive growth trajectory.”

Avner Mendelson, President and CEO of Bank Leumi USA said, “After years of transformation, and significant growth establishing Bank Leumi USA as a top middle market bank, this merger is a natural step and strategic milestone in our growth journey. In Valley, we have found an unparalleled cultural and strategic partner with a shared client focus and commitment to building lasting relationships. Our high-caliber talent, impressive regional presence, and business lines will become growth engines for Valley’s commercial business and support Valley’s growth vision. I am excited and energized by the opportunities this merger brings for our bank’s clients and employees.”

This strategically compelling acquisition introduces new and exciting business capabilities. Valley will be well-positioned for growth in diverse and attractive new commercial businesses and markets in Los Angeles, Palo Alto, and Chicago, where Bank Leumi has approximately $1.7 billion of deposits and approximately $1.5 billion of l**** in aggregate. On a pro forma basis as of June 30, 2021, and inclusive of the impact of the proposed acquisition of The Westchester Bank which is expected to close in the fourth quarter of 2021, Valley would have $51 billion of assets, $42 billion of deposits and $39 billion of l****.

Valley has a track record of successfully integrating acquisitions in a way that minimizes customer disruption and delivers profitable growth while maintaining strong credit metrics and a well-capitalized balance sheet. Integration risk in the transaction is expected to be mitigated by Leumi’s relative size and manageable physical footprint, Valley’s familiarity with the majority of Bank Leumi’s operating markets and the leadership and employee continuity that is anticipated. The transaction is expected to close by late first quarter or early second quarter of 2022, subject to the receipt of required regulatory approvals, approval of Valley shareholders, as well as other customary conditions. Leumi shareholders have already approved the transaction.

Morgan Stanley & Co. LLC served as financial advisor to Valley and Wachtell, Lipton, Rosen & Katz served as its legal counsel. Piper Sandler & Co. served as financial advisor to Leumi, and both Davis Polk & Wardwell LLP and Meitar & Co. served as its legal counsel.

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