First of America Bank Corp. said it expects to book a fourth-quarter gain of more than $20 million from the sale of 20 small-town branches in Michigan and Illinois.

The Kalamazoo, Mich.-based company said last week it would sell five branches in central Illinois and 15 across Michigan. Eight of the Michigan branches will be sold to Ionia-based Independent Bank Corp. in a transaction announced last month. Sales agreements have not been reached for the other bank offices.

The sale of $375 million in deposits would be 2% of First of America's total deposits of $18 billion.

The branch sales follow a strategy the company began to implement two years ago to increase efficiency. In the first quarter, $22 billion-asset First of America sold three Illinois branches and one Michigan office for $4.4 million.

First of America predicted the more recent sales would add between $20 million and $25 million in fourth-quarter income, and 20 cents to 25 cents in earnings per share.

Chairman and chief executive Richard Chormann said the branch sales are not a ploy to inflate earnings, however. Even without them, he said, the company would be able to make consensus estimates of $4.06 per share for 1996.

"We're comfortable with those estimates," Mr. Chormann said. "I'm sure the analysts will understand this is not to make consensus estimates."

Nor is the sale a retreat from First of America's traditional focus on small to midsize cities, he said. With the sale of the branches, First of America will still have about 600 remaining in Michigan, Illinois, Indiana, and Florida.

First of America's branch reduction will be ongoing. No specific target on the number to be sold has been set. The company said it is identifying those offices with the "lowest return and lowest potential" and putting them on the block.

"We have a big branch network," Mr. Chormann said. "We recognize we have some work ahead."

Mr. Chormann said income from the sales will be used to pay for new supermarket banks in Florida, Illinois, and Indiana.

Analysts were generally pleased with the announcement, but expressed concern about First of America's ability to increase core revenues.

"It's kind of a mixed reaction," said Michael Moran, an analyst with Roney & Co. in Detroit. "It's very positive, focusing on distribution channels, and the book gain is fantastic. But as far as an ongoing operating revenue stream - it has no effect."

In Michigan, in particular, it seems a good time to sell branches because of interest from community banks, Mr. Moran said.

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