Flagstar Bank will acquire 52 Wells Fargo bank branches throughout the Midwest with approximately $2.3 billion in deposits and $130 million in loans, along with certain related assets, the companies announced Tuesday. The acquisitions will more than double Flagstar’s customer base once finalized.
The purchase includes 33 branches in Indiana, 26 of which are in Fort Wayne, Ind., and 14 branches in the Upper Peninsula of Michigan, making Flagstar No. 1 in market share in both regions, according to a Flagstar press release. It also includes four locations in Wisconsin and one in Ohio.
The branches to be acquired will continue to operate as Wells Fargo branches until the transaction has closed. Once the closing is finalized, they immediately will be re-branded as Flagstar branches. The company said it intends to keep all branches and retain all employees at closing.
Flagstar stated that it would pay an effective deposit premium of approximately 7 percent based on balances as of Dec. 31, 2017. Management expects the transaction will be moderately accretive to 2019 earnings per share.
“We’re excited to welcome the Wells Fargo employees and customers to Flagstar Bank,” Flagstar President and CEO Alessandro DiNello said in a press release. “Wells Fargo’s primary goal throughout the negotiation of this transaction has been to make sure its customers and employees experience a seamless transition to Flagstar, and we will ensure that happens. We are confident customers will like Flagstar’s big bank line-up of quality products and services delivered with the high-touch personal service of a community bank. Flagstar has a long tradition of supporting its communities and fully expects to continue its commitment to good corporate citizenship and community reinvestment in our expanded market area.”
Wells Fargo Head of Community Banking and Consumer Lending Mary Mack said the decision to sell the branches to Flagstar aligns with Wells Fargo’s plan, announced in January, to reduce its branch network to approximately 5,000 branches by the end of 2020, through consolidations and divestitures.
“We are very pleased to reach this agreement with Flagstar, as they are committed to providing excellent service to our customers and providing a great workplace for our team members,” Mack said in a Wells Fargo press release. “As we continue to reduce our branch network, we believe this sale to Flagstar will result in the best outcome for customers, team members and other stakeholders in these markets. We will be working closely with Flagstar over the coming months to ensure a smooth transition and uninterrupted service. We remain committed to these communities, and Wells Fargo will continue to have a presence in the area with other businesses including commercial lending, wealth management, retail brokerage, and home lending.”
Branch customers will not be required to take any immediate action relating to the acquisition, and Wells Fargo and Flagstar will communicate with them in advance of any changes as they work together to care for customers and team members, the Wells Fargo release states.
Headquartered in Detroit, Flagstar said it viewed the acquisition as a chance to expand its Midwestern footprint, giving the company 151 branches in the region. It also has eight California-based branches.
“Being able to increase our presence in the Midwest market – a geography we know well and find very attractive – is a terrific opportunity for us,” DiNello said. “This transaction significantly expands our banking footprint, more than doubling our customer base. We’re also excited about the opportunity to meaningfully transform the bank's balance sheet, while benefiting from funding that’s both more efficient and less sensitive to rising interest rates. This acquisition strengthens our funding platform and enhances franchise value.”
The transaction brings liquidity that the company can use to repay short-term Federal Home Loan Bank advances, the release states. From a longer-term standpoint, the bank says that having a larger branch network will increase access to core deposits and other business opportunities.
The transaction is subject to regulatory approval and customary closing conditions, and is expected to close in the fourth quarter of 2018. Flagstar was advised by the law firm of Skadden, Arps, Slate, Meagher & Flom LLP.