Garnet Capital Advisors Blog

Sterling Bancorp and Hudson Valley Holding Corp. announced a definitive merger agreement on Nov. 5, which would create a larger combined entity catering to consumers and small - to medium-sized businesses in the New York metropolitan area.

Stock merger
If the proposed transaction meets certain requirements - including regulatory and shareholder approval - it will involve an exchange of 1.92 shares of Sterling Bancorp common stock for each common share of Hudson Valley.

The deal would be worth $539 million, based on Sterling Bancorp common shares' closing price on Nov. 4, 2014. The merger consideration is 18.4 percent higher than the value of Hudson Valley shares had at the end of trading on that day.

Combined entity
The deal's finalization, expected in second quarter 2015, will result in Sterling Bancorp shareholders owning 69 percent of the resulting entity and Hudson Valley stockholders controlling 31 percent.

The combined entity, which will operate under the Sterling Bancorp name, will command roughly $8.1 billion in deposits, more than $10 billion in assets and $6.6 billion in gross loans.

Jack Kopnisky and Luis Massiani, CEO and CFO of Sterling Bancorp, will serve in their respective positions at the new entity. Four directors from Hudson Valley's Board of Directors will join the board of the newly-formed bank, effective upon the transaction's closing.

Cutting costs and boosting profitability
In addition to helping the organization expand market share, the merger is expected to reduce expenses by as much as $34 million in fully phased-in cost savings per year, and bolster earnings per share for calendar years 2015 and 2016.

'Perfect strategic fit'
Kopnisky stated the deal will create several benefits.

"The unique strengths of Hudson Valley Holding Corp. and Sterling Bancorp are a perfect strategic fit, and will strengthen our position as a high performance regional bank," he said. "In particular, Sterling's commercial lending expertise will be complemented by Hudson Valley's attractive deposit base. The resulting institution will have strong asset generation capabilities, a cost effective funding mix, and a broad footprint in the dynamic marketplace centered on New York City and its surrounding region."

"We are excited by the opportunity to build on these strengths to serve our combined customer base, deliver value to stockholders, and support the economies of our local communities," he continued. "Execution is the key in such transactions, and our recent experience in uniting Sterling Bancorp and Provident New York Bancorp will provide a blueprint for success."

Bank consolidation widespread
This latest bank merger reflects the wave of consolidation that has swept the industry, as these lending institutions seek to adapt to tough times characterized by stiff competition, increasingly stringent regulations and rising expenses.

Banks looking to strengthen their fiscal position might pursue mergers and acquisitions as a method of reaching that desired result. Alternatively, banks that want to shore up their balance sheet and increase their income might consider purchasing loan portfolios.

If banks are considering this approach, they can save some time and energy by speaking with Garnet Capital Advisors, which has significant experience in loan sales.