Michigan’s Flagstar Bank is scooping up 52 branches in Michigan, Indiana and Ohio in a deal with Wells Fargo, which will exit the retail market in those states through the sale.
The move is part of Wells Fargo’s previously announced plan to reduce its retail branch network to about 5,000 branches by the end of 2020, through consolidations and divestitures.
The Troy-based Flagstar also nets $2.3 billion in deposits and $130 million in loans as part of the deal, which includes 33 offices in Indiana, 14 in Michigan and one in Ohio. Also included are four Wisconsin branches.
The $17.7 billion Flagstar will pay an effective deposit premium of approximately 7 percent based on Dec. 31, 2017 numbers, about $161 million.
“We’re excited to welcome the Wells Fargo employees and customers to Flagstar Bank,” said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. “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.”
The deal doubles Flagstar’s customer base, DiNello said, and brings liquidity which the bank can use to repay short-term Federal Home Loan Bank advances.
Flagstar expects to have 151 branches in the Midwest and eight in California after the deal closes in the fourth quarter.
The $1.9 trillion Wells Fargo will continue to have a presence in the affected areas through other business lines, including commercial lending, wealth management, retail brokerage, and home lending, said Mary Mack, head of community banking and consumer lending.
The sale is unrelated to an asset cap imposed by the Federal Reserve that limits the lender’s growth until it fixes compliance and consumer-related missteps, Mary Eshet, a spokeswoman for the bank, told Bloomberg.
Flagstar intends to keep all branches and retain all employees at closing. It was advised by the law firm of Skadden, Arps, Slate, Meagher & Flom LLP.