The $4.3 billion-asset Sterling Bancshares of Houston said Friday it has a deal to buy MBM Advisors Inc., a Houston investment firm that manages about $700 million of assets.
Sterling would pay a guaranteed $9 million in cash and could pay an additional $7 million if MBM meets certain expectations, according to a Securities and Exchange Commission filing made on Friday morning. The deal is expected to close by the end of this quarter.
"This acquisition will greatly assist our business owner customers and their employees in achieving their long-term financial goals, while helping us achieve our strategic objective of diversifying our revenue base and increasing noninterest income," J. Downey Bridgwater, Sterling's chairman, president, and chief executive officer, said in a press release.
Sterling's noninterest income has lagged behind that of its peers, banking companies with assets of $1 billion to $10 billion, according to data from the Federal Deposit Insurance Corp.Last year, Sterling had $30 million of noninterest income, or 0.85% of its earning assets. Its peers averaged a 1.80% ratio of noninterest income to earning assets.
Dan Bass, the managing director of the Houston office of the investment banking group Carson Medlin Co., said in an interview Friday that the deal would push Sterling in the right direction but would leave it short of its peers' level of noninterest income.
"Given where they are as far as fee-based revenue relative to other revenue, I think they should pursue other opportunities, because it gives them less dependency on the spread," Mr. Bass said.
Because Sterling and MBM focus on the same market segment — small and midsize businesses — the deal would create cross-selling opportunities in Dallas and Houston where MBM has offices, Mr. Bridgwater said. MBM specializes in retirement plans and is one of the largest pension service companies in the U.S. It would retain its name and management team.