U.S. Bancorp Acquires BankEast - Analyst Blog
January 30 2012 - 10:49AM
Zacks
U.S. Bancorp (USB) is focused
on expanding its business through acquisitions. The company’s lead
bank, U.S. Bank National Association, acquired the banking
operations of BankEast, a subsidiary of BankEast Corporation, in a
Federal Deposit Insurance Corporation (FDIC) assisted deal. It is
based in Knoxville, Tennessee.
What’s the Deal?
As part of the transaction, approximately $272 million worth of
assets and $268 million of insured and uninsured depositsof
BankEast, would be acquired by U.S. Bank.
Also, the deal is designed as a bank purchase and assumption
transaction en masse without a loss share agreement. An extensive
credit due diligence was conducted by U.S. Bank, and ultimately
BankEast was bought for an asset discount of approximately $67.5
million.
Last Friday, BankEast was closed by the Tennessee Department of
Financial Institutions, and FDIC was named the receiver. BankEast
is the seventh FDIC-insured institution to fail in the nation this
year, and the second in Tennessee.
For U.S. Bancorp, the deal is a strategic fit as the community
banking model of BankEast is quite attractive and the deal would
help it to expand in the Tennessee market. The 10 branches of
BankEast in the Knoxville area will result in U.S. Bank’s total
branch count in Tennessee to rise to 91. The company also plans to
continue expanding organically in the state.
Previous Acquisitions
U.S. Bancorp is on an acquisition spree. In 2011, the company
acquired the banking operations of First Community Bank (New
Mexico), a subsidiary of First State Bancorporation, in an
FDIC-assisted deal. Given its asset base, First Community Bank was
New Mexico’s third-largest bank. The deal added 35 New Mexico and 3
Arizona branches together with over 50,000 new deposit
customers.
In early 2011, U.S. Bank completed the purchase of Bank
of America Corp.’s (BAC) U.S. and Europe-based
securitization trust administration businesses. This transaction
included $1.1 trillion of assets under administration and provided
U.S. Bank with approximately $8 billion of deposits during its
closure.
The acquisition strengthened U.S. Bancorp’s position as a leader
in the structured finance trust business and posed as a great
complement to its corporate and municipal trust business. Moreover,
the acquisition provided the bank with a prospect of expanding its
presence in the European market with offices in Ireland and London,
England.
Earlier in 2010, the company completed the acquisition of
BB&T Corp.'s (BBT) banking operations in
Nevada. Back in October 2009, the company had acquired the FBOP
Banks in an FDIC-assisted deal. Together, these two transactions
added more than 160 branch locations to its franchise and over $15
billion in deposits.
The financial crisis has helped U.S. Bancorp make strategic
acquisitions at an affordable price. Such expansions provide the
company with ample opportunities to boost its revenue stream in the
upcoming years.
In fact, with so many consecutive bank failures, consolidation
has become a trend in the industry. For almost all the failed
banks, the FDIC enters into a purchase agreement with healthy
institutions. The largest bank failure in the U.S. banking history
was that of Washington Mutual in 2008, which was subsequently
acquired by JPMorgan Chase & Co. (JPM).
Besides JPMorgan and U.S. Bancorp, the other acquirers include
Fifth Third Bancorp (FITB) and BB&T Corp.
Our Take
We expect U.S. Bancorp to benefit from its diversified revenue
base and strategic acquisitions, thereby posting growth in core
earnings going forward. The company is the fifth-largest commercial
bank in the United States. It has weathered the economic downturn
relatively well.
The improvement in revenue and credit quality is encouraging.
Yet a sluggish economic recovery and low interest rate environment
along with regulatory issues will continue to restrict any robust
development at U.S. Bancorp.
U.S. Bancorp shares maintain a Zacks #2 Rank, which translates
into a short-term Buy recommendation.
BANK OF AMER CP (BAC): Free Stock Analysis Report
BB&T CORP (BBT): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
US BANCORP (USB): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
US Bancorp (NYSE:USB)
Historical Stock Chart
From Aug 2024 to Sep 2024
US Bancorp (NYSE:USB)
Historical Stock Chart
From Sep 2023 to Sep 2024