The story behind EverBank’s deal to acquire troubled Sterling Bancorp (Courtesy of the Jacksonville Business Journal) — EverBank Financial Corp. is expanding into California with the acquisition of a bank that struggled after a 2017 initial public offering and has been actively seeking a buyer for almost two years.
Jacksonville-based EverBank announced Sept. 16 that it agreed to buy Sterling Bancorp Inc., a Michigan-based bank with 25 of its 27 branches in the Los Angeles and San Francisco markets.
Sterling’s stock has dropped since the IPO at $12 a share in 2017, and it agreed to sell the bank at a price below its recent trading price.
EverBank is paying $261 million in cash to buy the bank and Sterling said in a Securities and Exchange Commission filing its stockholders would receive about $4.91 per share in the deal, lower than Sterling’s closing price of $5.75 on the last trading day before the announcement.
That news sent Sterling’s stock down $1.09 to $4.66 on Sept. 16.
Sterling’s problems started in 2019 with investigations launched by regulatory agencies and the U.S. Department of Justice.
In March 2023, the Justice Department announced the company agreed to plead guilty to securities fraud related to a mortgage program at the bank.
“For years, Sterling originated residential mortgages that were rife with fraud to pad its bottom line and then lied about these loans in its IPO and subsequent public filings, defrauding unwitting investors,” Assistant Attorney General Kenneth A. Polite Jr. said in a news release.
Sterling’s penalties included $27.2 million in restitution to shareholders.
In a news release announcing the deal with EverBank, Sterling CEO Thomas O’Brien said the bank has changed since “the difficult days of 2020,” when he joined the company.
“At that time, we were facing serious existential threats, which has evolved into a situation where our capital and liquidity positions are strong and the multiple governmental investigations have finally concluded, though our earnings capacity has diminished,” he said.
Sterling retained an investment banker in December 2022 to explore merger opportunities. It eventually found EverBank.
“We were focused on finding a transaction that would be fully funded and not likely to raise regulatory concerns in the application process, while also providing our shareholders with as attractive a consideration as we could develop,” O’Brien said.
EverBank, known mainly as an online bank, has four branches in the Jacksonville market and six in other Florida cities. Acquiring Sterling marks a significant expansion of its branch network.
EverBank has only made two other acquisitions of banks in its history.
The institution then known as First Alliance Bank bought Marine National Bank, a small Jacksonville bank, in 2001.
After changing its name to EverBank in 2004, it bought the failed Bank of Florida Corp. in 2010.
EverBank has been under new ownership since August 2023, when a group of investment firms bought the bank from TIAA, which had owned it since 2018. It was known as TIAA Bank during the years of TIAA ownership.
EverBank said in a news release the acquisition of Sterling, expected to be completed in early 2025, is part of a “long-term focused growth strategy.”