WAYNE, N.J. ( TheStreet) -- Valley National Bancorp ( VLY) announced an agreement to acquire State Bancorp ( STBC) of Jericho, N.Y., in an exchange of shares valued at $222 million.

The deal will enable Valley to expand its market footprint in New York, adding additional branches in Manhattan and Queens, and mark the company's entry into Nassau and Suffolk counties on Long Island.

State Bancorp had $1.6 billion in total assets as of March 31, operating 17 State Bank of Long Island branches.

The merger, announced late Thursday, is expected to be completed in the fourth quarter, and will leave Valley National with roughly $16 billion in total assets, with 215 branches in a market area covering 16 counties in northern and central New Jersey, Manhattan, Brooklyn, Queens and Long Island.

The transaction will be a one-for-one exchange of shares, which Valley said was a 185% premium to State Bancorp's tangible book value, "subject to accounting adjustments." In addition, Valley will redeem $37 million in preferred State Bancorp shares held by the government for bailout funds provided through the Troubled Assets Relief Program, or TARP, in December 2008.

Valley National CEO Gerald Lipkin said the deal would "add another attractive and well-positioned institution with tremendous potential in a region with very strong demographics," and leave the combined bank "a larger and more heavily capitalized institution."

State Bancorp CEO Thomas M. O'Brien said his company's shareholders were "receiving an attractive premium to the recent market price, an expected increase in cash dividends and the opportunity to invest in one of the region's premier banking franchises for long-term growth."

Commenting on State Bancorp's reasons for selling, O'Brien said, "The ever increasing regulatory and compliance costs and complexity are making it more difficult for the traditional community bank to independently produce long term attractive returns to shareholders.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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