First Tennessee Bank, the major subsidiary of First Horizon National Corporation (FHN), is set to further enhance its footprint in Tennessee by acquiring 13 branches and four remote ATMs in the state from Bank of America Corporation (BAC). The acquisition of the branches is expected to close later this year.
According to the terms of the deal, First Tennessee will assume deposits worth $660 million, for a 3.32% premium. The deal also includes some loan balances, though not significant.
This transaction will allow First Tennessee to further spread its wings in several parts of Middle and East Tennessee including Waverly, Columbia, Lawrenceburg and Johnson City. Upon closure of the deal, the company will recruit all the existing employees of the branches.
What Incited the Deal?
Being a leading bank in the state, the latest deal comes as part of First Tennessee’s strategy to capture greater deposit market share in the Tennessee market. Notably, First Tennessee is already operating more than 170 financial centers in Tennessee and the adjoining areas.
For a major regional bank like Bank of America, the deal seems to be an effort to reduce a number of branches to save costs. Notably in recent months, BofA inked deals with Washington Federal Inc. (WAFD) and Huntington Bancshares Incorporated (HBAN) to shed a number of branches.
Branch shedding has become a trend in the banking industry in recent years. Given the regulatory restrictions and higher capital requirement, cost control measures have become a priority in the banking space – particularly for the mega banks. Shedding or consolidation of branches significantly contributes to such an objective.
On the other hand, as customers are gradually shifting towards banking transactions through the online banking mode and mobile applications, several large banks in the U.S. are opting for reducing their branches and focus more on technology upgrade.
Smaller or medium banking institutions are grabbing this opportunity as branch acquisitions pave the way for their business expansion. These banks tend to explore strategic locations that provide easy accessibility to customers and thus increase their client base.
First Horizon currently carries a Zacks Rank #3 (Hold).