Sterling Bancorp May Take Fed Funds for Acquisitions

Sterling Bancorp (STL), a New York-based bank serving small- and medium-size businesses, is considering an offer of U.S. government funds and may use the money for acquisitions.

``This marketplace is presenting extraordinary opportunities to develop new business relationships,'' President John Millman said in an interview on Nov. 5. ``There are a lot of folks out there who may not want to continue alone.''

The federal government in October began offering money to banks that need to raise capital and make loans. Companies accepting funds under the Troubled Asset Relief Program also are encouraged to acquire troubled banks as a private-sector solution to the credit crisis.

The government's funds would provide ``pretty cheap capital'' at 5 percent annual interest for five years, Millman said. The bank could receive as much as $42 million, which would help it obtain additional assets and make more loans, he said.

Sterling Bancorp fell 26 cents, or 2 percent, to $13.03 at 4:05 p.m. in New York Stock Exchange composite trading. The shares have dropped 4.5 percent this year.

Millman said the bank doesn't have plans to increase its dividend, which has remained at 19 cents a quarter since 2005.

``We're seeing one of the most hostile banking environments that any of us can remember for decades,'' Millman said. ```It makes sense to maintain as high a level of capital as possible.''

The bank boosted its net interest margin, or difference between what it charges for loans and pays account holders, to 4.46 percent in the third quarter ended Sept. 30.

``If rates continue down, we'll be hard pressed to grow the margin, but I believe our margins will be substantially above our peer levels,'' Millman said. ``That will be offset by greater growth opportunities. We expect to see the loan business grow.''

To contact the reporter on this story: Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net.

To contact the editor responsible for this story: Colleen McElroy at cmcelroy@bloomberg.net.

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