Webster Bank to open Stamford HQ after merger with Sterling National

STAMFORD — The parent companies of Webster Bank and Sterling National Bank announced Monday they would merge in an all-stock deal worth about $10.3 billion, with the new firm deciding to locate its headquarters in Stamford.

The agreement marks the second blockbuster transaction this year for Connecticut’s banking sector, following the announcement in February that M&T Bank would acquire for $7.6 billion the parent company of Bridgeport-based People’s United Bank.

Waterbury-based Webster Financial Corp.’s union with the Pearl River, N.Y.based Sterling Bancorp would create a bank with about $63 billion in total assets, $52 billion in deposits and more than 200 branch locations in the northeast U.S. The merger is expected to close in the fourth quarter of 2021.

“We believe that we’re creating a banking powerhouse — a differentiated, commercially focused, high-performing franchise, with strong middle-market and retail-market share from metro New York to metro Boston and established and growing national health savings and commercial banking businesses,” Webster CEO, President and Chairman John Ciulla said in a call Monday to discuss the deal with investment analysts.

The combined company would keep the Webster name. It would “have a continued multi-campus presence in the greater New York City area and Waterbury,” in addition to the Stamford headquarters, the companies said in their announcement. They did not disclose the address of the future headquarters, but since 2018 Webster has maintained offices at 200 Elm St., in downtown Stamford.

Ciulla would serve as CEO and president of the combined company until 24 months after the merger’s closing, at which point he would become chairman, president and CEO.

Sterling CEO and President Jack Kopnisky would serve as executive chairman of the combined company for 24 months after the deal’s completion and would then continue in a consulting role for another 12 months.

“We are very excited to announce this terrific combination,” Kopnisky said on the call. “John (Ciulla) and I have been talking for several years about creating this type of transformative combination. We strongly believe the combined company will create shareholder returns, terrific value propositions for our clients, provide an exceptional work experience for our colleagues and support and serve our communities.”

The combined company's executive management team would include executives from both companies. Its board of directors would have 15 members, consisting of eight directors from Webster and seven from Sterling.

In the 2020 fiscal year, Webster operated with about 300 Waterbury-based employees, ranking as the city’s thirdlargest corporate employer after Stop & Shop and Walmart, according to the city’s latest annual financial report.

Messages left Monday for Waterbury Mayor Neil O’Leary and Stamford Mayor David Martin were not immediately returned.

Following the merger’s completion, Webster shareholders would own approximately 50.4 percent of the combined company, and Sterling shareholders would own about 49.6 percent, “on a fully diluted basis,” the companies said.

Webster shares closed Monday at $54.11, down nearly 6 percent from last Friday. In comparison, they hit a 52-week of $63.81 and a 52-week low of $19.76.

Reasons for merger

Founded in 1935 as the First Federal Savings and Loan Association of Waterbury in 1935, Webster has long operated as one of the largest Connecticut-headquartered banks.

It ranked third for deposits in Connecticut branches, at $23.3 billion as of June 2020, according to data from the Federal Deposit Insurance Corp.

But the greatly expanded scope of the new company would generate a range of new opportunities, according to Webster officials. They cited, for instance, their belief that the merger would increase the potential for growth and investment in the HSA Bank division, a national provider of health savings accounts. In the past quarter, it recorded deposit growth of $4 billion — up 16 percent from a year ago — which included a $719 million increase in HSA deposits.

“We’ve been competing well and held onto our market share and our position in the market even as some of the other competitors have grown inorganically,” Ciulla said. “But we knew that this was an opportunity to supercharge the growth there and the investment.”

Kopnisky is also bullish about the new company’s scope.

“We also think that scale matters — the scale to invest in top talent, scale to provide technology solutions our clients and employees want and need, scale to invest to create a best-in-class enterprise riskmanagement system and, importantly, significant investments in businesses where we can continue to distinguish ourselves,” Kopnisky said.

With more than 110 branches statewide at last report, Webster’s branch count is comparable to that of Bank of America for the largest footprint in Connecticut after Bridgeport-based People’s United Bank.

Webster and Sterling officials indicated that they were not planning to imminently close bank branches after the merger’s completion. Webster announced last December that it would close 27 banking centers across Connecticut, Massachusetts and Rhode Island, citing an “increased focus on balancing physical locations and digital banking channels.”

“Coming into this transaction, there are no immediate plans for significant branch consolidation,” Ciulla said. “We’ll continue to strategically look at the whole network .... We know that we’ll have less square footage over time than more square — that’s just going to be the trend. We don’t need to dramatically change the banking-center footprint at the outset to make this deal work.”

Also Monday, Webster announced earnings of about $106 million for the first quarter of 2021, compared with a bottom line of some $36 million in the same period last year.

The merger did not come as a shock following the announcement in February that M&T Bank would acquire People’s United’s parent company for about $7.6 billion.

If completed, the combination of People’s United and M&T would form one of the dozen-largest banks in the country. Buffalo, N.Y.-based M&T vowed to keep People’s United’s Bridgeport headquarters as its New England regional office.

On Monday, M&T reported $447 million in profits in the first quarter, a 5 percent drop from the fourth quarter of 2020 but up two-thirds from the first quarter of last year when the pandemic hit.

Connecticut banks are coming off a year in which they generated the thirdhighest profits in their history, despite the struggles of borrowers, such as borrowers, hit hard by revenue losses during the pandemic.