Provident New York Bancorp acquired Sterling Bancorp in a $344 million all-stock deal, joining a list of U.S. lenders to pair up in the face of stiffer rules and capital requirements.
Provident shareholders will own 53 percent of the combined firm, which will be rebranded Sterling National Bank, the Montebello, New York-based company said today in a statement. The deal is expected to be completed in the fourth quarter.
Smaller banks are under pressure as new regulations and capital levels squeeze earnings. As acquisitions involving big banks stall, lenders with just a few dozen branches are increasingly combining to counter rising costs and falling profits, said Jeff Davis, managing director with Memphis, Tennessee-based Mercer Capital.
“To the extent that investors continue to look for large deals, it’s not going to happen right now because public policy is not going to allow it,” Davis said. “What we’ve seen is what I’d call some of these trophy, small regionals or large community banks, sell.”
Provident will have $7 billion in assets and 46 branches in the New York City metro area after the deal is completed, the firm said in a separate release. The deal is structured as an all-stock merger of equals, with Sterling shareholders receiving 1.2625 shares of Provident stock for every Sterling share they own. Provident also plans to raise $80 million through a debt offering, the firm said.
“It provides greater diversity of product sets, clients and revenue streams,” Provident Chief Executive Officer Jack Kopnisky, 57, said in a statement. “The combined business will be a more effective competitor.”
Sterling gained 13 percent -- the most in four years -- to close at $11.32 in New York and Provident rose 3.1 percent to $9.08. Sterling shares climbed 24 percent this year, while Provident’s slipped 2.5 percent.
Two similar all-stock mergers were announced in February between banks with $1 billion to $10 billion in assets. SCBT Financial Corp., based in Columbia, South Carolina, reached a $300 million with First Financial Holdings Inc., and Tupelo, Mississippi-based Renasant Corp. said it would acquire in-state competitor First M&F Corp. for more than $100 million.
Such acquisitions will dominate U.S. bank mergers for the foreseeable future because lenders with $50 billion or more in assets are reluctant to strike deals for fear of upsetting investors and regulators, said Johnny Guerry, principal with Clover Partners LP, a Dallas-based hedge fund that invests in banks.
“The overall banking industry is in drastic need of consolidation,” Guerry said. “You’re going to have a roll-up that starts at the bottom.”