Wells Fargo announced Tuesday it agreed to sell 52 retail bank branches in the Midwest to Flagstar Bancorp.
This move is part of Wells Fargo’s previous announcement that it plans to reduce its retail bank branches by about 5,000 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,” said Mary Mack, Wells Fargo head of community banking and consumer lending. “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,” Mack said. “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.”
The bank agreed to sell retail branches in Indiana, Michigan, Ohio and Wisconsin, bolstering Flagstar’s presence in the Midwest. This move involves about 490 team members, all of whom will receive offers of employment from Flagstar.
“We're excited to welcome the Wells Fargo employees and customers to Flagstar Bank,” Flagstar President and CEO Alessandro DiNello said. “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.”
The transaction is about $2.3 billion in deposits and $130 million in loans, and is expected to close in the fourth quarter of this year. Flagstar will pay a deposit premium of about 7% based on balances as of December 31, 2017.
“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,” he said. “This acquisition strengthens our funding platform and enhances franchise value.”
The transaction will increase liquidity at FBC that can be used to repay short-term Federal Home Loan Bank advances, the company explained. It also moves funding from wholesale borrowings to core deposit, reducing rate sensitivity of funding base.
Wells Fargo’s announcement to sells its retail branches comes on the heals of its announcement its mortgage profits are struggling amid increased competition.
Margins will continue to narrow not only for Wells Fargo, but also for other banks as competitors fight for the diminishing market share of originations. Movement Mortgage, for example, recently announced it will lay off 100 of its employees across four locations as it faces lower originations and slower growth than it expected.
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