Branch divestitures resulting from the merger of Norwest Corp. and Wells Fargo & Co. will let two acquirers add significantly to their market shares in fast-growing western states.
California Federal Bank of San Francisco announced a definitive agreement Monday to buy 12 Norwest branches in Nevada. Cal Fed will add $637 million of deposits, bringing its market share rank in the state to third from sixth, plus $40 million of loans.
Meanwhile, Compass Bancshares of Birmingham, Ala., said it would buy 15 Norwest and Wells offices in Arizona, with $442 million of deposits and $137 million of loans. Including the pending acquisition of Arizona Bank of Tucson, the Alabama company would rank fourth in Arizona.
Compass and Cal Fed did not disclose further details of the purchases, which are both to be paid for in cash and are slated to close in the second quarter. The Federal Reserve Board and Justice Department cleared the Norwest-Wells combination last month, contingent on the divestitures.
Cal Fed, which is owned by Golden State Bancorp, would increase its Nevada branches to 19 from 7. Most are in Las Vegas and Reno, two of the fastest-growing metropolitan markets in the country. Four are in the more remote towns of Elko, West Fallon, Winnemucca, and Yerington.
"This puts Golden State in a strong position to build market share," said Joseph K. Morford, an analyst at Van Kasper & Co.
With about $1.1 billion of deposits in the state, Cal Fed would trail Wells Fargo & Co.'s $5 billion and BankAmerica Corp.'s $4.4 billion, according to mid-September statistics cited by Dain Rauscher of Minneapolis.
Analysts said that crossing the billion-dollar deposit threshold in the state gives the $52 billion-asset Cal Fed enough heft and momentum to market itself as a convenience-oriented institution.
"Because people in these markets emphasize convenience, service, and product selection over price, even smaller players can make a decent buck," said Dain Rauscher analyst R. Jay Tejera.
For $15.2 billion-asset Compass, the transaction would add one Wells Fargo branch in Flagstaff and 14 Norwest branches, including nine in Phoenix.
The additions appear to fit perfectly into the growth strategy described in July by Compass chairman and chief executive officer D. Paul Jones Jr., soon after announcing the deal to buy $758 million-asset Arizona Bank. He said he wanted to get stronger in Phoenix and Flagstaff.
After its two Arizona deals close, Compass would follow Wells Fargo, BankAmerica, and Banc One Corp., respectively, in market share there.
"It is a good place to be," said Peyton N. Green, an analyst at Sterne, Agee & Leach, regarding the Alabama banking company's market position.
The Norwest-Wells deal also is in line with Compass' strategy of looking outside Alabama for acquisitions in higher-growth markets, said Compass chief financial officer Gary R. Hegel.
Arizona household income is projected to grow 21% in the next five years and total households by 15%, according to Mr. Hegel. When adding Arizona to its operations in Texas, Alabama, and Florida, the company's market in aggregate would be in the midst of a 23% projected growth in household income and 9% in households, said Mr. Hegel.
"It is the high-growth prospect" that is taking the company to Arizona, he said.
