First Mutual Bancorp. of Decatur, Ill., said it plans to buy three central Illinois branches, with $160 million in deposits, from First of America Bank Corp.
The sale reflects a previously announced pruning of First of America's small-town branches. The Kalamazoo, Mich.-based company has said it plans to gain $20 million to $25 million in fourth-quarter income by selling 15 branches in Michigan and five branches in Illinois. First Mutual, a $316 million-asset company, would not disclose a purchase price for the branches.
Including the most recent deal, $22 billion-asset First of America has agreements for all but six of the branches it plans to sell. The sales are part of a restructuring, focusing on more profitable geographic locations. While First of America grew aggressively over the last 10 years, it really hadn't scrutinized profitability across its branch network until about a year ago.
First of America also has deals to sell eight eastern Michigan branches, with $125 million in deposits, to Independent Bank Corp. of Ionia, Mich., and three northwestern Michigan branches, with $35 million in deposits, to First Michigan Bank Corp. of Holland, Mich.
First of America also hopes to sell four branches in southern and southwestern Michigan and two in central Illinois before the end of the year, said spokesman Tony Thompson.
Chairman and chief executive Richard F. Chormann has said the company will continue to review its network of 600 branches in Michigan, Illinois, Indiana, and Florida. Moreover, Mr. Chormann said the bank will redeploy capital raised from branch sales to "reinvest in new delivery channels."
Michael Moran, an analyst with Detroit-based Roney & Co., said three southern Michigan community banks - Pinnacle Financial Services Inc. of St. Joseph, Shoreline Financial Corp. of Benton Harbor, and Sturgis Federal Savings Bank - may be interested in the remaining First of America branches for sale in Michigan. It's unclear who might be interested in the Illinois branches.
Mr. Moran said the earnings effect from the deals should be minimal, particularly in light of a $15 million third-quarter charge First of America took for payment to the Savings Association Insurance Fund. But Mr. Moran said the revenue generated by the branches likely isn't justifying the cost to operate them.