WATERBURY, Conn. – Connecticut-based Webster Financial Corp. announced on Monday it will merge with a similarly sized New York bank.
The all-stock transaction, valued at $10.3 billion, will merge the holding company for Webster Bank with Sterling Bancorp, resulting in a combined company under Webster’s name headquartered in Stamford, Conn.
After the deal closes, Webster shareholders will own a slight majority – 50.4% – of the combined company, while Sterling shareholders will own 49.6%, the company stated.
The two banks will continue their “multi-campus presence” across the greater New York City area and Waterbury, Conn.
The deal will not impact Webster’s existing footprint across Rhode Island or southeastern Massachusetts, spokeswoman Kelly Raskauskas said in an email.
The bank had 27 branches across the state and in Bristol County, Mass., according to PBN’s 2021 Book of Lists, three of which are slated to close this year as part of a slew of branch closings across the region.
The combined bank will have $63 billion in assets, $52 billion in deposits, and $42 billion in loans, the release stated.
The release highlighted the two banks’ “complementary businesses” and “strong franchises in commercial, health savings and consumer and digital banking” as well as its dense Northeast footprint as providing opportunities for growth.
“We are bringing together two high-performing organizations with strong cultural and business model alignment to create a powerhouse Northeast bank,” John R. Ciulla, chairman, president and CEO of Webster, said in a statement. “This combination provides exceptional financial benefits and enables us to more aggressively invest in key businesses and activities to enhance value for our customers, our communities, our shareholders and our bankers.”
Ciulla will serve as president and CEO of the combined company for the first 24 months, after which he will also assume the title of chairman. Jack L. Kopnisky, president and CEO of Sterling, will serve as executive chairman for the first 24 months and continue in a “consulting capacity” for 12 months after.
The deal is expected to close in the fourth quarter of 2021.
The news comes as Webster on Monday announced its first-quarter profit of $105.5 million – more than three times the bank’s $36 million earnings a year ago.
Like other national and regional banks, the company saw its net income spike primarily by letting go of millions it had previously stored in anticipation of bad loans due to the pandemic. The company reported negative $25.8 million in credit loss provisions this quarter, compared to $76 million a year ago. It cited “improvements in the forecasted economic outlook and favorable credit trends” as reason why it was able to slash its loan loss reserves.
Earnings per diluted share also rose from 39 cents one year prior to $1.17 in the first quarter.
Total revenue declined 10.2% to $312.3 million, driven by decreases in interest and fees on loans and leases amid a continued low interest rate environment. The $235.6 million in interest income represented a 14.2% drop over a year ago.
Non-interest income increased 4.6% year over year to $76.8 million, reflecting a $2.9 million boost due to fair value adjustments, $1.5 million more in miscellaneous fee income, $1.8 million in loan and lease fees and $.6 million in fees through its HSA bank.
Interest expenses were slashed by 73% year over year to $11.8 million due to cuts in both deposits and borrowings.
However, non-interest expenses increased 5.1% to $188 million, including a $9.4 million hike to “strategic optimization initiative charges,” $2 million more in employee compensation and benefits and a $4.8 million increase in professional and outside services.
Net interest margin, the difference between interest income generated versus the amount of interest paid out to lenders, declined by 31 basis points to 2.92%.
Total assets at the end of the quarter stood at $33.3 billion, an increase of 5.1% over a year ago. This includes $21.3 billion in loans and leases, a 1.9% increase driven by commercial real estate loans that was partially offset by declines in commercial and consumer loans and residential mortgages. As of March 31, the bank had also approved $1.3 billion in Paycheck Protection Program loans under the second round of the program.
Quarterly deposits of $28.5 billion represented a 4.1% year-over-year increase, driven by increases in demand deposits, health savings accounts and certificates of deposit.
“First quarter results were favorably impacted by positive credit trends and an improving economic outlook resulting in a meaningful release of loan reserve,” Glenn MacInnes, executive vice president and chief financial officer, said in a statement. “While near term our liquidity position results in net interest margin compression, it along with our strong capital level positions us well for future growth.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
Updated to include details on the bank’s first quarter earnings and adds information that the deal is not expected to impact the bank’s footprint in Rhode Island or southeastern Massachusetts.
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