NEW YORK ( TheStreet) -- Investors Bancorp ( ISBC) of Short Hills, N.J., has agreed to purchase the troubled Brooklyn Federal Bancorp ( BFSB) for 80 cents a share, or an aggregate of $10.3 million.

The deal price represents a discount to Brooklyn Federal's closing price of 85 cents a share, on Tuesday.

Investors Bancorp also announced "a separate agreement with a real estate investment fund," to sell most of Brooklyn Federal's commercial real estate loan portfolio upon completion of the merger, which is expected in the fourth quarter.

The deal will expand Investors Bancorp's presence in New York, with five full-service branches in Brooklyn and Long Island, and $411 million in deposits.

As of June 30, Brooklyn Federal's main subsidiary Brooklyn Federal Savings Bank had $469.5 million in total assets and $117.3 million in nonaccrual loans, according to regulatory data supplied by SNL Financial, for a very high nonperforming assets ratio of nearly 25%.

Most of the problem loans are categorized as commercial real estate or multifamily mortgage loans. The thrift subsidiary was operating under an Office of Thrift Supervision cease and desist order from March 31, under which it agreed to raise additional capital or merge with another institution.

Investors Bancorp was recently included among TheStreet's 10 Banks with Solid Revenue, which highlighted bank and thrift holding companies that had achieved significant year-over-year revenue improvements, irrespective of the releases of loan loss reserves that have boosted the bottom line earnings of the most familiar U.S banking names over the past several quarters.

Both holding companies are mutual holding companies, meaning that only some of the common shares float publicly, while the rest are held by a mutual holding company, which is controlled by the depositors. Brooklyn Federal's common shareholders will receive 80 cents in cash for each common share they hold, while Brooklyn Federal's common shares held by the mutual holding company will be converted into common shares of Investors Bancorp.

Investors Bancorp said the deal would result in "0.5% dilution fully-converted tangible book value at closing," and that the transaction was expected to be "accretive to EPS in 2012," with an estimated "internal rate of return in excess of 20%."

Investors Bancorp was advised by RBC Capital Markets and Luse Gorman Pomerenk & Schick, P.C. Brooklyn Federal was advised by Sandler O'Neill + Partners, L.P. and Paul Hastings LLP.


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

To contact the writer, click here: Philip van Doorn.

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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 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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