Wells Fargo continued to shrink its retail banking footprint this week with the sale of its banking branches in Indiana, Michigan, Wisconsin, and Ohio. The 52 branches will be acquired by Troy Michigan-based Flagstar Bank. Bloomberg reported in January that Wells Fargo had closed or consolidated more than 200 branches in 2017 and expects to close around 850 more by the end of 2020, leaving it with 5,000.
A press release from Flagstar Bancorp, Inc., said its Flagstar Bank. FSB subsidiary had signed a definitive agreement to acquire the branches which have approximately $2.3 billion in deposits and $130 million in loans, along with certain related assets. The purchase includes 33 locations in Indiana, including 26 branches in Fort Wayne, 14 branches in the Upper Peninsula of Michigan, four locations in Wisconsin and one in Ohio. Flagstar said it is buying bank branches only; residential mortgages are not included in the transaction.
Flagstar will pay an effective deposit premium of about 7 percent based on the Wells Fargo balances as of December 31, 2017. The acquisition will give Flagstar nearly 200,000 new customers, nearly doubling its customer base. The transaction also allows Flagstar to transform its balance sheet - moving funding from wholesale borrowings to core deposits - which will make the bank's funding model more efficient and less sensitive to rising interest rates.
The branches earmarked for purchase will continue to operate under the Wells Fargo name until the transaction is complete. This is expected in the fourth quarter of this year, pending regulatory approval. They then will be immediately rebranded as Flagstar branches. The bank intends to keep all branches open and offer jobs to all 500 employees.
Crain's Detroit Business says Flagstar presently operates 99 branches in Michigan and eight in California which it purchased from Desert Community Bank. The bank has $17.7 billion in total assets and reported $35 million in net income for the first quarter of 2018, up from $27 million a year earlier. Flagstar says it provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 92 retail locations in 31 states. The bank also services $104 billion of home loans representing over 470,000 borrowers.
"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," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp in a statement.
Wells Fargo, based in San Francisco, will maintain some commercial lending, wealth management, retail brokerage and home lending operations in the four states.
