Less than two weeks after Intrust Financial Corp. mapped out its strategy for branch expansion in Kansas, the company received a call from Minneapolis-based U.S. Bancorp.
U.S. Bancorp - the nation's 13th-largest bank company, with $76 billion of assets - wanted to sell its 20 branches in Kansas, including some in three markets that Wichita-based Intrust had targeted.
Intrust, with $2 billion of assets, jumped at the chance. It announced late last week that it plans to purchase all 20 branches and $275 million of deposits for an undisclosed sum.
"This was a great opportunity," said Diane Iseman, a spokeswoman for Intrust. "We hope we can take their customer base and expand on it."
In total, U.S. Bancorp is selling 28 branches in Kansas and Iowa to eight community banks. The company said it was shedding the branches because they did not meet its profitability or market-share criteria.
But community banks can often hit paydirt with megabank castoffs. Experts say the branches are usually more profitable under community bank ownership because customers respond to local charm.
"Community banks do make money because they're close to their markets," said Dave Albertson, principal of Prairie Capital Markets, an Evanston, Ill., firm that brokers sales of bank branches. "Larger banks must have a cookie-cutter approach. They have to standardize the product and the personnel."
And for small banks looking to expand, it is cheaper to buy a branch rather than build one. Suku V. Radia, a partner at KPMG in Des Moines, said community banks are buying the U.S. Bank branches because they are a less expensive way to enter new markets or fend off competitors.
"You don't have a significant amount of capital tied up," Mr. Radia said. "It's not the same investment as brick-and-mortar." And, he added, premiums that community banks pay for branch deposits are tax deductible over 15 years.
Brenton Banks Inc. of Des Moines is buying two branches in Iowa from U.S. Bancorp. The Pella branch would give Brenton a retail presence in a thriving community where it currently has a loan-production office.
In Knoxville, Brenton intends to merge the U.S. Bank branch with its existing branch. The Knoxville deal gives $2 billion-asset Brenton an inexpensive way to pick up new customers without adding overhead.
Both Clear Lake (Iowa) Bank and Trust Co. and Bank Iowa in Red Oak bought out U.S. Bank in their hometowns, ensuring that new competitors would not buy into the markets.
Hartford-Carlisle Savings Bank also aims to eliminate its only other competitor in Carlisle, Iowa, its hometown-but is more focused on picking up U.S. Bank's customers there.
"They have a pretty good group of folks banking with them," said Dirk Thierer, executive vice president of the $82 million-asset thrift. "We probably would have gotten some of that business, but it would have taken longer."