Sterling Bancorp (STL.N) said it would buy Astoria Financial Corp (AF.N) in an all-stock deal valued at about $2.2 billion to create the sixth largest regional bank in the New York City area by deposits.
Astoria's shareholders will receive 0.875 Sterling shares for each share held. The resulting offer price of $21.92 per share represents a premium of 18.6 percent to Astoria's Monday closing price.
Astoria's shares were up 11.8 percent at $20.67 in morning trading, while Sterling's stock was down 3.4 percent at $24.20.
The deal follows a spree of mergers between regional U.S. banks last year, which were spurred by low interest rates, lagging returns on equity and tough regulations.
However, U.S. President Donald Trump has promised simpler regulations and last month ordered reviews of major banking regulations put in place following the 2008 financial crisis.
Federal Reserve policymakers have also signaled that a long-stalled 'liftoff' of interest rates may finally get underway this year.
The deal between Sterling and Astoria will create a regional bank that will have a diverse business mix, serving business-owners as well as consumers in the greater New York City metropolitan area, the companies said on Tuesday.
Sterling said it expected the deal to add about 9 percent to its earnings per share in 2018 and about 16 percent in 2019, if the merger closes in the fourth quarter.
Sterling shareholders will own about 60 percent of the combined company, with Astoria stockholders holding the rest.
The combined company will be led by Sterling's Chief Executive Officer Jack Kopnisky and will have about $29 billion in assets, $20 billion in loans and $19 billion in deposits, the company said.
RBC Capital Markets and Citi are the lead financial advisers to Sterling Bancorp while Sandler O'Neill + Partners advised Astoria Financial.
(Reporting by Nikhil Subba in Bengaluru; Editing by Sai Sachin Ravikumar and Sriraj Kalluvila)