First Bank in St. Louis says it hopes its first agency purchase will be a springboard for smaller deals in cities like Chicago, Los Angeles, Dallas, and Houston where it has bank branches.
Chief financial officer Steven F. Schepman said the bank already has another insurance-related purchase lined up: a deal for Universal Premium Acceptance Corp., a Lenexa, Kan., company that finances property and casualty premiums for small businesses.
Universal Premium's nationwide client base will broaden the reach of First Bank's insurance businesses, he said, once the deal closes on May 30.
A call to the Kansas company for comment was not immediately returned.
The Clayton, Mo., insurance agency Adrian N. Baker & Co., whose purchase was announced Friday, is, in effect, the bank's foundation agency, Mr. Schepman said, though it obtained a small personal lines agency in the late 1980s in connection with the purchase of a savings and loan. The St. Louis bank is a subsidiary of $9.2 billion-asset First Banks Inc.
The bank insurance market in Missouri and Iowa is relatively nascent, said Paul Vredenburg, a senior vice president at Marsh, Berry & Co. Inc., a Concord, Ohio, insurance consulting firm. Banks seeking insurance-related acquisitions in the region do not face significant competition, he said. Marsh Berry helped broker the Baker agency deal.
"In the Midwest, there are not a lot of banks that have been making large foundation insurance acquisitions," Mr. Vredenburg said. "For banks that are interested in making that initial acquisition and developing a footprint, it's a great opportunity."
Mr. Schepman said this deal gives First Bank access to insurance carriers. "We anticipate making additional [agency] acquisitions that will be smaller in Chicago, Los Angeles, Dallas, and Houston," he said.
Future agency purchases would complement First Bank's branch expansion plan. It outlined plans last week to build nine branches in four states, some of them in rural areas where residential development is expected. First Banks said it wants to get in on the ground floor with residents who move into these developments in coming years.
First Bank has bought 12 banks in the last five years and has deals pending for two others. It has committed $22 million to branch building in the next year and currently has about 180 branches in Missouri, California, Texas, and Illinois.
The Baker agency deal's terms were not disclosed, and a call to the agency's president, Adrian N. Baker 2d, was not returned.
First Bank's desire to increase fee-based income was a major driver of the Baker deal, Mr. Schepman said. The bank is trying to increase the proportion of fee income to 25% of total revenue, he said.
The fee income percentage now is "way below that," he said. "It's not even worth mentioning."
First Bank has been familiar with the Baker agency for some time as one of its clients. The companies also have overlapping client bases, said Marsh Berry's Mr. Vredenburg.
"They were writing policies on the bank itself, and we got to know them that way," Mr. Schepman said.
Midwest regional banking companies that have done agency deals in recent years include Sky Financial Group Inc. in Bowling Green, Ohio. Sky has bought several agencies, and its executives have signaled that it continues to hunt for property/casualty acquisition targets while looking ultimately to join the top 25 bank insurance operations in the country.
