DEFA14A: Sterling Bancorp to be Acquired by EverBank Financial Corp for $261 Million; Announces Plan of Dissolution

Sterling Bancorp has entered into an agreement to be acquired by EverBank Financial Corp for $261 million, with a subsequent plan to dissolve the company and distribute remaining assets to shareholders.

Summary

• Sterling Bancorp, Inc. has entered into a definitive stock purchase agreement with EverBank Financial Corp, where EverBank will acquire all outstanding shares of Sterling Bank and Trust, F.S.B. for $261 million.
• Following the acquisition, Sterling Bank and Trust will merge into EverBank, National Association.
• Sterling Bancorp's board has unanimously approved a plan of dissolution, subject to shareholder approval, to wind down the company after the sale.
• Shareholders are expected to receive cash distributions in two stages: an initial distribution shortly after closing and a final distribution after resolving all obligations and liabilities, potentially six months post-closing.
• The sale is expected to close in the first quarter of 2025, pending regulatory and shareholder approvals.
• As a condition of the agreement, Sterling Bank entered into a loan purchase agreement with Bayview Acquisitions LLC to sell its residential tenant-in-common mortgage loans.
• Trustees for family trusts representing approximately 38% of Sterling's outstanding common stock have agreed to vote in favor of the sale transaction.
• The company expects to make an initial distribution of $257 million, or approximately 95% of the company's cash, to shareholders shortly after closing.
• The company expects to have approximately $11 million in cash at year-end 2024, bringing total expected cash following completion of the sale to $272 million.
• The expected initial distribution is $4.91 per share, prior to the payment of transaction costs, wind down costs and contingent liabilities.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company is being acquired and dissolved, shareholders will receive a cash distribution, and the deal provides a solution to the company's strategic challenges. However, the need for a sale indicates underlying issues with the company's long-term viability as an independent entity.

Positives

• Shareholders will receive a cash distribution from the sale of the bank.
• The board of directors has unanimously approved the sale transaction.
• The company's capital and liquidity positions are strong.
• The multiple governmental investigations have finally concluded.
• EverBank has the cash and capital to execute the transaction without needing further financing.
• Employees that hold unvested restricted stock will automatically be fully vested as of the closing date.

Negatives

• The company will be dissolved following the sale, ceasing operations.
• The mono-line nature of the Bank's legacy Advantage Loan Program business model has created a significant revenue void.
• The projected time and costs in reinventing the Bank would be punitive.
• The expected initial distribution of $4.91 per share represents an approximate 14% discount to the closing price of the Company's shares on September 13, 2024 and an 9.6% discount to the closing price on the day the exclusivity agreement was signed.

Risks

• The sale is subject to regulatory and shareholder approvals, which may not be obtained.
• The final distribution amount to shareholders is subject to the resolution of all company obligations and liabilities.
• The wind down of the company may take longer than anticipated.
• There is a risk that the final reserve for wind down expenses and contingent liabilities will differ materially from the estimates that have been prepared.
• The average daily closing balance of the Banks deposits (excluding brokered deposits) for the monthly period ending on the last day of the month before closing is not less than 85% of the average daily closing balance of such deposits for the monthly period ending on July 31, 2024.

Future Outlook

The company expects to wind down as quickly as possible after the sale, consistent with Michigan law and the Plan of Dissolution, with cash distributions to shareholders occurring in two stages.

Management Comments

• Thomas M. OBrien, Chairman, President, and Chief Executive Officer of the Company, commented: The board of directors of the Company has been considering various strategic initiatives for several years.
• Ultimately, Sterlings board of directors determined that there was no practical way to pursue any form of stand-alone independent operations given the extremely high costs required and the multiple years needed to execute a new strategic vision without risking ongoing losses and substantial loss of capital.
• In EverBank, we believe that we have found solutions to each of those corporate imperatives.

Industry Context

The announcement comes after a period of strategic evaluation by Sterling Bancorp, influenced by the collapse of several large depository institutions in March 2023 and challenging conditions in the community banking space.

Comparison to Industry Standards

• The sale of Sterling Bancorp to EverBank is part of a broader trend of consolidation in the banking industry, particularly among smaller institutions facing regulatory burdens and competitive pressures.
• The transaction is similar to other recent acquisitions of community banks by larger regional or national players seeking to expand their market presence or diversify their business lines.
• The challenges faced by Sterling, including the need for a diversified business model and the impact of regulatory concerns, are common among community banks in the current environment.

Stakeholder Impact

• Shareholders will receive cash distributions from the sale.
• Employees in California and New York branches are expected to become employees of EverBank.
• Customers will be serviced on EverBank's platform following a transition period.
• All of the Banks deposit accounts at the time of the closing will continue to enjoy the benefits of FDIC coverage as customers of EverBank.

Next Steps

• Sterling will file a proxy statement with the SEC to solicit shareholder approval for the sale and dissolution plan.
• Shareholders will vote on the proposed transaction at a special meeting.
• The company will seek regulatory approvals from the Federal Reserve and the Office of the Comptroller of the Currency.
• If approved, the sale is expected to close in the first quarter of 2025.
• Following the closing, Sterling Bancorp will wind down its operations and distribute remaining assets to shareholders.

Key Dates

Keywords

acquisition, dissolution, EverBank, Sterling Bancorp, shareholder distribution, bank sale, merger