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.”
Fidelity National Information Services Inc., commonly known as FIS, provides technology services to most of the nation’s biggest banks.
So when CEO Stephanie Ferris spoke at a Goldman Sachs technology conference Sept. 11, she was asked for her insight about mergers and acquisitions in the banking sector.
“It’s definitely still slow,” Ferris said.
“I think there is a big desire to do more M&As, primarily for banks either with CEOs ready to retire or if you have to make a very significant technology investment and you’re smaller, or you’re hitting a regulatory hurdle that you just don’t think from a financial standpoint you can afford to invest in,” she said.
Ferris said FIS tends to benefit from bank mergers.
“We generally serve the larger part of the bank market which tends to be the acquirer,” she said.
“When M&A activity does pick up we tend to be on the positive side of it.”
Goldman Sachs analyst Will Nance, who moderated the session, maintained his “buy” rating on FIS in a note after the conference.
“Management provided color on drivers of growth in each segment, and outlined additional opportunities for cross-sell, expansion, and operational efficiencies. Management also reiterated confidence in guidance for 3Q and 4Q, and was optimistic on the drivers of longer-term growth in banking and capital markets,” he said.
Fidelity National Financial Inc. CEO Mike Nolan and Chief Financial Officer Tony Park said at a Sept. 10 Barclays conference that a decrease in mortgage rates is increasing business for the title insurance company.
They said title insurance policies for mortgage refinancings were up 43% in August.
Barclays analyst Terry Ma, who hosted the session, maintained an “equal weight” rating on Fidelity’s stock.
“If volumes continue to increase, particularly commercial in the back half of 2024, we expect FNF’s margins to expand and for title companies to come off of the trough the industry has been experiencing. That said, we believe some of the rebound may already be priced in. So, we continue to believe the risk-reward is balanced,” Ma said in his research note.
Jacksonville-based Fidelity spun off FIS in 2006.
Evercore ISI analyst Steve Sakwa said in a Sept. 16 note the prospect of lower rates is having a positive impact on real estate investment trust stocks.
However, he downgraded his rating on Jacksonville-based Regency Centers Corp. from “outperform” to “in line,” saying “there is limited upside to reach our revised price target of $75.”
Sakwa said the neighborhood shopping center developer, which was trading at $74.68 at the time of his report, had risen 22% in the last 90 days.
“The stock has clearly benefitted from the solid leasing environment despite mixed sales trends from the retailers,” he wrote.
Lithia Motors Inc., which acquired two Jacksonville-area auto dealerships from Duval Motor Co., is an aggressive purchaser of dealerships across the country, according to one analyst.
Medford, Oregon-based Lithia announced Sept. 10 it acquired Duval Honda and Duval Acura and a Subaru dealership in Gainesville from the Jacksonville-based company.
Duval Motor Co. is holding on to its other dealership, Duval Ford, which traces its roots in Jacksonville to 1916.
Lithia “has a long history of completing and integrating acquisitions at an accelerated pace,” Stephens analyst Jeff Lick said in a Sept. 11 research report as he initiated coverage of six publicly traded auto dealership operators.
Lithia is the largest of the six with 301 new car dealerships across the country.
“Over the last 15 years, and certainly the last five, Lithia has been the most aggressive and consistent acquirer of dealerships of the Public 6,” said Lick, who rated Lithia at “overweight.”
“Their track record as an integrator is impressive, in our view,” he said.
“Lithia sees itself as a platform mobility company providing all the products and services associated with vehicular mobility; new, used, service and parts, finance and insurance, physical and digital distribution, fleet management, charging and software.”
Two of the other “Public 6” are also active in the Jacksonville market.
Asbury Automotive Group Inc., which operates eight dealerships under the Coggin brand in Northeast Florida, was rated “equal weight” by Lick and AutoNation Inc., which has two new and one used car dealership in the area, was rated “overweight.”
Fort Lauderdale-based AutoNation has 251 new car dealerships and Duluth, Georgia-based Asbury has 157.
CSX Corp. Chief executive Joe Hinrichs said at a Sept. 12 Morgan Stanley conference that freight volume on the Jacksonville-based railroad has been up in the third quarter, with transport of automobiles lagging behind other sectors.
“Autos are up for the year although they slowed down,” Hinrichs said.
“I wouldn’t say we saw a slowdown anywhere else.”
He said “the overall economy has been kind of fits and starts,” but “overall the demand environment has held up pretty well given the external environment.”
Hinrichs also commented on CSX’s recent efforts to reach agreements with unions on new labor contracts before the current deals run out at the end of the year.
CSX has announced agreements covering more than half of its union labor force.
Hinrichs said CSX worked to get individual contracts done after efforts to get industrywide contracts fell short.
“We couldn’t get there as a coalition so we quickly, CSX, wanted to do this,” he said.
“We think the advantages outweigh the costs.”
Hinrichs said there is more work ahead with union contracts.
“They have to be ratified, but also there’s still more agreements to be done.”
AutoManager Acquisition Inc. announced Sept. 10 it acquired EverLogic Inc., a Jacksonville-based company that provides management software specifically for RV and trailer dealerships.
Mike Goodwin, who founded EverLogic in 2003, will continue to serve as president of the business, AutoManager said.
Canoga Park, California-based AutoManager also provides dealer management software.
“We have been impressed with EverLogic’s product suite, team, and its market presence, particularly in RV, and we believe that AutoManager and EverLogic can achieve more together than we can as separate companies,” AutoManager CEO Jake Morley said in a news release.
“We look forward to pooling our resources as a combined company and accelerating growth for our respective brands by reaching more dealers with better business management tools and technology,” he said.
Terms of the deal were not announced.