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Regulators closed Fidelity Bank in Dearborn, Mich., at a cost of about $93 million to the Deposit Insurance Fund.
March 30 -
With its expenses continuing to run above its long-term expectations, Huntington Bancshares Inc. said Thursday that is planning to close 29 free-standing branches across its six-state network during the first quarter.
January 19 -
Huntington National Bank is committing $2 billion to help jumpstart Michigan's sputtering economy.
June 2
A failed-bank deal in Michigan last week could be a financial and symbolic boon for Huntington Bancshares (HBAN).
The Columbus, Ohio, company's purchase Friday of the 15-branch Fidelity Bank in Dearborn from the Federal Deposit Insurance Corp. should improve the profits and mergers-and-acquisitions credibility of one of banking's high profile turnaround stories, analysts say.
The $800 million-asset Fidelity is Huntington's second failed bank purchase under Chief Executive Stephen Steinour, who took over the $54 billion-asset bank in 2009. The acquisition is also its largest bank takeover since the near-ruinous 2007 closing of a subprime credit provider.
With Fidelity, Huntington proves that it is not just on the mend, but on the offense, experts say. The transaction should also remove the takeover target some on Wall Street have placed on its back.
"I think that they are, probably, in a very good position to be a little bit more aggressive about doing more things like this," says Thomas Mitchell, an analyst with Miller Tabak.
Steinour has maintained for at least a year that Huntington would consider smart acquisitions.
"Almost every banker says that," Mitchell says. "I think what matters is whether you do things. Actions speak louder than words."
There is no loss-sharing agreement. Huntington instead agreed to acquire Fidelity's assets at a discount, suggesting that Huntington was able to do an unusually swift due diligence of Fidelity's loans.
Mike Fezzey, president of Huntington's southeastern Michigan operations, said the deal team was familiar with Fidelity.
"Even though this was seemingly pretty quick, I think there was due diligence on this as well as other opportunities that may or may not occur," he says. "There is a genuine appetite and interest in growing the footprint here."
He said Huntington wants to expand in Michigan because it is an important growth market with unfair image problems.
The move appears to be a safer bet than Huntington's acquisition of Bowling Green, Ohio's Sky Financial for $3.6 billion in 2007. Huntington lost nearly $3.5 billion in 2008 and 2009 due largely to Sky's partnership with a subprime commercial lender. The deal-gone-bad forced the early retirement of Thomas Hoaglin, Steinour's predecessor CEO.
Fidelity hints at the M&A strategy of Steinour, a veteran dealmaker who previously ran Citizens Financial Group. He won the top job there after overseeing its foray into Pennsylvania.
Fidelity is basically a bite-size expansion in an important secondary market. The deal appears to have standard strategic benefits but some unusual financial ones. While the deal will only modestly depreciate Huntington's capital, it will actually increase the value of its tangible book, which is unusual. And the $150 million discount on Fidelity's assets creates negative good will that should increase the value of Huntington's tangible book by an estimated 1%.
