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UMB Financial (UMBF) to Buy Old National's HSA Business

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UMB Financial Corporation’s (UMBF - Free Report) subsidiary has signed a definitive agreement to acquire the health savings account (HSA) business of Old National Bank, a wholly-owned subsidiary of Old National Bancorp (ONB - Free Report) .

The transaction entails the transfer of around $500 million in client assets. Of this, nearly $400 million are held in deposit accounts (as of Mar 31, 2022) through 157,000 accounts across more than 3,000 employer groups. Hence, with the acquisition, UMBF will be able to significantly expand its direct-to-employer accounts and enhance revenue-generating capabilities.

The buyout is pending regulatory approvals and is anticipated to close in fourth-quarter 2022.

UMBF management noted, “This acquisition provides significant business gain and a strong, experienced team that will complement our organic growth efforts.”

The acquisition will also help UMBF to leverage Old National Bancorp’s expertise in the HAS space, as the latter is one of the largest bank holding companies headquartered in the Midwest, and has offered direct-to-employer HSAs since 2004.

“While we have been in the HSA space since the beginning, we’ve been extremely intentional in continuing to grow and evolve our business model and services based on customer needs, industry adjustments, and an ever-changing healthcare landscape,” UMBF management commented.

Markedly, UMB Financial has been focused on diversifying operations to non-interest sources of revenues in order to reduce exposure to interest rates to balance the unprecedented risks related to the rate environment. Although fee income witnessed a decline in 2021, the same saw a compounded annual growth rate (CAGR) of 5.2% for the four-year period ended 2021. In first quarter 2022, the metric witnessed an increasing trend.

Also, the company's investment in revenue-producing capabilities is likely to support growth. Going forward, revenues from diverse lines of business and verticals will keep aiding UMB Financial to provide a natural hedge against lower rate environments.

Over the past three months, shares of UMBF have lost 13.3% compared with the industry’s decline of 14.7%.

 

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Currently, UMBF carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Growth Efforts by Other Banks

First Bancorp (FBNC - Free Report) announced that it signed a definitive merger agreement to acquire GrandSouth Bancorporation in an all-stock transaction. The deal is valued at $181.1 million or $31.43 per share, based on FBNC’s stock price as of Jun 17, 2022.

At closing, shareholders of GrandSouth will receive 0.910 shares of FBNC’s common stock for each share of GrandSouth's common and preferred stock they own.

Given GrandSouth’s footprint of eight branches in South Carolina, the acquisition enables First Bancorp to scale in its targeted markets, including Greenville, Fountain Inn, Anderson, Greer, Columbia, Orangeburg and Charleston. With a focus on small business banking, the acquisition complements First Bank's strengths in that area.

F.N.B. Corp (FNB - Free Report) signed an agreement to acquire Greenville-based UB Bancorp to bolster its presence in North Carolina. The all-stock deal is valued at $19.56 per share or nearly $117 million, based on the closing stock price of FNB as of May 31, 2022.

Following the deal completion, expected in the last quarter of 2022, F.N.B. Corp will likely move to the eighth position in North Carolina in terms of deposit market share. Also, the cost of deposits of 11 basis points will be accretive to the company’s financials in a rising rate environment.