People’s United Bank will cross the $50 billion asset threshold with its third bank purchase in a little more than a year.
The Bridgeport, Connecticut-based bank announced today that it will purchase Hartford-based United Bank in an all-stock transaction valued at $759 million, gobbling up the third largest state-chartered bank in Connecticut. Crossing the $50 billion asset threshold will also trigger more regulatory requirements under Dodd-Frank that could significantly up People’s United regulatory costs.
Under the terms of the deal, each United share will be exchanged for .875 of a People’s United share, valuing each share at $14.74 per United Financial Bancorp share based on the closing price of People’s United’s common stock on July 12. The deal is valued at 135 percent of United’s tangible book value.
“We are excited to welcome United Bank to People’s United,” Jack Barnes, chairman and CEO of People’s United’s holding company, said in a statement. “With the fourth largest deposit market share in the combined Hartford and Springfield market, a complementary array of commercial and retail capabilities and a shared legacy of community giving, United will solidify our presence in the Central Connecticut market and strengthen our franchise in Western Massachusetts.”
The deal gives the roughly $48 billion People’s United another $7.3 billion in assets and more than 60 branch locations concentrated in central Connecticut and Western Massachusetts.
“People’s United Bank has long-been a premier brand in Connecticut that is committed to building meaningful relationships with its customers and communities,” William H.W. Crawford, president and CEO of United Financial Bancorp, said in a statement. “We are confident their broad array of products and services, in-market knowledge and the size and strength of their balance sheet will deliver enhanced value to our stakeholders.”
People’s United in an investor presentation said it expects to realize 55 percent in cost savings of United Financial’s non-interest expenses including $88 million in pre-tax cost savings.
However, People’s is also looking at one-time costs associated with M&A expenses of $126 million, and could be on the hook for $41.7 million in potential losses due to United’s investment in a series of tax credits that were found to be tied to an alleged Ponzi scheme.
People’s United said in the presentation that it expects to run off $1.8 billion of select loan portfolios on United’s balance sheet and sell $556 million of certain investment securities.
United Bank regularly turned in many past profitable quarters, but its pace of growth slowed between 2017 and the end of 2018, and the bank also saw important shareholder metrics decline. Between the last quarter of 2018 and the first quarter of 2019, United’s return on average assets fell to .8 percent and its return on equity dropped from 9.26 percent to 7.86 percent.
The latest deal is one of several acquisitions People’s United has completed in the last 13 months.
The bank announced in June 2017 it would acquire the roughly $3 billion asset Farmington Bank in an all stock transaction valued at $544 million, a deal that would go on to close last October. Then People’s United turned its head toward Boston and purchased the $3 billion asset Belmont Savings Bank in an all stock deal valued at $327 million that closed in April.
People’s purchase of United is its largest of the three purchases, topping Rockland Trust’s $727 million purchase of Blue Hills Bank, but at $7.3 billion in assets, United is also more than double the size of Farmington, Belmont Savings and Blue Hills Bank.
Keefe, Bruyette & Woods Inc. was financial advisor and Simpson Thacher & Bartlett LLP was legal counsel to People’s United. Sandler O’Neill & Partners was financial advisor and Sullivan & Cromwell LLP was legal counsel to United Financial Bancorp Inc.
The deal is expected to close in the fourth quarter of this year.
