In order to shed off its petty businesses, Hartford Financial Services Group Inc. (HIG - Free Report) has agreed to sell its thrift holding company - Federal Trust Corp. to CenterState Bank of Florida, a subsidiary of CenterState Banks Inc. (CSFL - Free Report) .
Though the terms of the deal were undisclosed, Hartford stated that the transaction will result in an after-tax charge of about $70 million in the second quarter of 2011, which includes losses on certain assets and liabilities that will not be sold to CenterState.
Further, according to the SEC filing, the merger of Federal Trust Bank into CenterState Bank of Florida is expected to complete in the fourth quarter of 2011.
In addition, the deal is expected to offer CenterState about $230 million in deposits, $170 million of performing loans selected by CenterState and about $8 million in bank-owned life insurance policies, as well as the owned and leased branch locations, including personal property, furniture, fixtures and equipment in them.
CenterState will purchase the selected performing loans for 73% of their unpaid balance. CenterState will not pay a premium or receive a discount for the deposits, and branch properties will be purchased for current market value based on appraisals.
Hartford had acquired the Federal Trust for $10 million in cash in 2009 at the height of the financial crisis in order to get the financial aid. Hartford also applied to switch its business structure to a savings and loan holding company for meeting the requirements of the government. Later, Hartford received $3.4 billion in funds in late June 2009, and paid back the government in March 2010.
Hartford wants to get rid of its Federal Trust, as it is not part of its main lines of business. Apart from that, Hartford has been disposing its non-core businesses in order to concentrate on its U.S. operations and enhance its operating leverage. During the quarter, Hartford sold two non-core businesses, Canadian mutual funds and Specialty Risk Services, LLC.
In December 2010, Hartford also completed the sale of its mutual funds business Hartford Investments Canada Corp, also known as Hartford Investments, to CI Financial Corp. for approximately C$1.75 billion in assets.
Later, Hartford sold its wholly owned subsidiary SRS to Sedgwick Claims Management Services Inc. for $278 million in cash, which is expected to recognize an after-tax gain of $150 million.
Federal Trust is the holding company for Federal Trust Bank, a federally-chartered, FDIC-insured savings bank that operates 11 offices in Florida's Seminole, Orange, Volusia, Lake and Flagler counties. CenterState has six branches in the Orlando area and $260.4 million in deposits.
Currently, Hartford carries a Zacks #3 Rank, which translates into a short-term Hold recommendation, indicating no clear directional pressure on the stock over the near term.