UPDATE: Flagstar to Divest Indiana Bank Franchise

Flagstar Bancorp (NYSE: FBC) today announced that it has signed a definitive agreement to divest its 22-branch retail bank franchise in Indiana to First Financial Bancorp (Nasdaq: FFBC) for a consideration equal to a 7 percent premium based on the actual level of consumer and commercial deposits at closing. Based on $327.9 million of consumer and commercial deposits at June 30, 2011, the consummated transaction would result in a one-time gain of approximately $23 million.

Under the agreement, First Financial will also acquire Flagstar's government and municipal deposits, which were $197.9 million at June 30, 2011, for zero premium or discount. No loans will be transferred in the transaction as they are traditionally originated through Flagstar's other channels and therefore will stay with Flagstar. First Financial will pay net book value on all real estate and personal assets of the bank branches and will assume the existing leases on 14 of the branches.

Accordingly, Flagstar expects to incur minimal associated employee, contract or systems-related costs as a result of consummating this transaction.