Astoria to make Sterling a regional power in New York

Jack Kopnisky is eager to try again at turning a struggling thrift into a thriving commercial banking institution. He has restructured Provident New York Bancorp, in Montebello, by diversifying its lending operations as well as leading it through numerous acquisitions, including the 2013 purchase of Sterling Bancorp. Sterling was adopted by Provident. Now, Sterling’s president/CEO, Kopnisky, wants to do the same with Astoria Financial, after his company purchases the Lake Success, N.Y. thrift. On Tuesday, the companies reached a $2.2million merger agreement that would create a bank with assets in excess of $29 billion. The first task is to get approval. This was not the case with Astoria’s recently ended sale to New York Community Bank, Westbury. Regulators dragged their feet signing off on the transaction. Kopnisky stated Tuesday during a conference call to discuss this deal. Kopnisky stated that the company was transparent and clear with regulators, both at the local and national levels. “We went through it with them before we did any due diligence, and then we went through it with them after. … They are very clear about our intentions, what we found, and what they intend to do in future. “Sterling’s deal won’t be weighed down with the baggage that likely didomed New York Community Bancorp’s bid. There are no concerns about commercial real-estate exposure. This would be about 300% of total capital risk-based capital after closing. Sterling will not be near the $50 billion threshold that would allow it to be designated a systemically important financial institution. Collyn Gilbert, an analyst with Keefe, Bruyette & Woods, said that this should be good news for Astoria shareholders still reeling from the New York Community deal’s collapse. Gilbert stated that Sterling has a “very strong execution track record of being capable of integrating deals and being able do what they say.” This is the team to bet on if you want to make a bet on any management group. Joseph Ficalora (New York Community’s president/CEO) said that he was pleased with the Astoria Bank president and board’s execution of a very attractive transaction. Ficalora had previously hinted at the possibility of a re-examination of the Astoria deal. Sterling has a plan to make the most of Astoria. It is a thrift that boasts a 117% loan–to-deposit ratio, 72% efficiency ratio, and a strong focus on multifamily and residential lending. Commercial-and-industrial loans make up just 1% of Astoria’s $10.4 billion portfolio. The plan involves spending two to three years replacing Astoria’s lower-yielding assets with commercial-and-industrial credits, making its balance sheet look more like Sterling’s, said Luis Massiani, Sterling’s chief financial officer. Astoria also plans to be more aggressive in recruiting lending teams in Astoria’s home turf. This strategy makes sense when it is applied to Long Island, where Astoria has a significant presence. Redman stated that “When you combine Sterling’s diversified asset origination expertise and Astoria’s strong presence on Long Island… we will create strong regional banks that will provide an extraordinary value.” “While the deal is not strategic for Sterling, it brings compelling strategy benefits… [and] comes along with attractive financial metrics,” Casey Haire of Jefferies, an analyst, wrote in his research note. He described the transaction as “smart” and said Sterling management took advantage of New York City’s strong currency and position as lone buyers. Gilbert stated that he understood why Astoria’s Long Island franchise would be scaled up. It brings a balance sheet that is kind of under-levered, with a lot liquidity and a lot low-cost deposits. “The acquisition should place Sterling in a better financial position to benefit from rising interest rates,” Anthony Polini, an analyst with American Capital Partners, wrote in his note to clients. While the price tag was the highest for a bank deal this past year, Kopnisky set out ambitious goals. He expects to earn $425 per year on $1.2 billion in revenue once integration is completed in late 2019. Sterling targets a 1.5% return for tangible assets and 16% return for tangible equity. The efficiency ratio is expected below 45%. Sterling plans to reduce annual noninterest expenses by $100,000,000 by closing up to five branches of both companies. According to Theodore Kovaleff (a New York-based banking analyst who closely follows both banks), “This is certain to move Sterling up the big leagues.” Astoria is the fourth major purchase Sterling has made since Kopnisky was appointed CEO in 2011. Astoria is the fourth major acquisition Sterling has announced since Kopnisky became CEO in 2011. The goal is to close the deal by the end this year. Kopnisky stated that they do mortgages and multifamily lending, as well as jumbo mortgages and deposit-driven branch banks. It’s actually simpler from a business model standpoint than the old Sterling. “But, the deal is large enough that Kopnisky declared an embargo on bank buyouts. He said, “I’m going put [deals] aside for the next two to three years.”