April 13, 2015

Sterling Bancorp makes strategic acquisition

Sterling Bancorp, one of the largest lenders doing business in the payroll lending market, recently acquired Damian Services Corporation, which provides payroll-related services to staffing firms. By making this purchase, Sterling will grow its client base, expand its lending capacity and open up new possibilities to earn fees in specialty finance, according to American Banker.

High ambition
Montebello, New York-based Sterling has been highly ambitious in recent years, announcing four mergers and acquisitions since Jack Kopnisky became CEO of Provident New York Bancorp in 2011, American Banker reported. In 2012, Provident purchased Sterling Bancorp and kept the name.

Thus far, Sterling Bancorp's efforts have produced success, helping the bank generate robust revenue growth, Kopinsky told American Banker during an interview.

"Our deals have been about creating positive operating leverage where our revenue is growing two to three times more than expenses," he advised American Banker.

Damian a 'leader' in payroll services
When Sterling announced the deal, Kopinsky elaborated in a statement on how both the lender and Damian Services can work together.

"Damian is a leader in the payroll services market and will complement Sterling's existing business in this attractive area of specialization," he stated. "We like the payroll funding business, which complements our asset-based lending skill-set, provides relatively high returns and contributes to non-interest income. The acquisition is consistent with our stated goal of growing Sterling's specialty lending and other fee-generating operations, and we see opportunities to expand this business over time."

Kopinsky has certainly set lofty goals before, American Banker reported. If he brings this same ambition to the Sterling-Damian deal, it could result in compelling synergies. Banks should keep in mind that while M&A is one way for them to bolster income, another approach involves purchasing loan portfolios.

By acquiring loan portfolios, a bank can benefit from the interest income without having to go through the cost of origination. In spite of this benefit, considering any such portfolios requires due diligence, and financial institutions can benefit from speaking with Garnet Capital Advisors, a loan sale advisory firm with experience spanning many different types of portfolio types.