Huntington Bancshares Agrees to Merge With TCF Financial

Together, the banks would have about $170 billion in assets, with a network of branches around the country that is especially concentrated in Midwestern states such as Illinois and Michigan.

The deal, if completed, would vault Huntington closer to its fiercest in-state competitors,

Fifth Third Bancorp

and

Key Corp.

, which have about $200 billion and $170 billion in assets, respectively.

TCF’s network would add about 475 new branches, including in a handful of states where Huntington lacks a physical presence. Huntington’s 839 branches are spread across seven states.

The combined company will have two headquarters——one for its larger commercial segment in Detroit, and one for its consumer business in Columbus, Huntington Chief Executive

Steve Steinour

said. He will remain CEO while TFC’s executive chairman,

Gary Torgow,

will remain chairman. Talks between the men, who have known each other for decades, began in October and progressed quickly, Mr. Steinour said.

Huntington has a reputation as an acquisition hound. It bought fellow Ohio bank FirstMerit Corp. in 2016 in a deal that significantly strengthened its Midwestern presence. TCF is no stranger to deal making either.

The merger comes less than two years after it closed on a deal with Chemical Financial Corp. that roughly doubled its size.

Bank deals have picked up pace this year, especially among regional banks that have been seeking scale to better compete with larger competitors such as

JPMorgan Chase

& Co. and

Bank of America Corp.

With larger budgets to develop flashy apps and support a wide network of branches, big national banks have been adding customers and expanding into regions that were once dominated by regional banks. Consolidating allows banks to eliminate overlapping costs for things like regulatory compliance and digital investment that often weigh on earnings.

Low interest rates are particularly tough on regional banks, which rely more on lending profits than their larger counterparts. Net interest margin, or the difference between what a bank pays its depositors and earns from lending, hit a record low for commercial banks in the third quarter.

First Citizens Bancshares Inc.

agreed to buy

CIT Group Inc.

in October in a deal that would create a bank with about $100 billion in assets. In November,

PNC Financial Services Group Inc.

agreed to buy the U.S. arm of Spain’s

BBVA

for $11.6 billion, a combination that would create the fifth-largest U.S. retail bank, with more than $550 billion in assets.

Two larger regional banks,

BB&T

and SunTrust, merged last year to become Truist Financial Corp., the largest bank deal since the financial crisis ushered in stricter regulations.

“This merger is an ideal opportunity; it bolsters both of us,” Mr. Steinour said in an interview. “We’ll be able to do things together that neither of us could do independently.”

Goldman Sachs Group Inc.

was financial adviser to Huntington and Wachtell, Lipton, Rosen & Katz was legal adviser. Keefe, Bruyette & Woods was financial adviser to TCF while Simpson Thacher & Bartlett LLP was legal adviser.

Write to Cara Lombardo at [email protected] and Orla McCaffrey at [email protected]