A community bank determined to flex its muscle in the competitive northwestern Ohio market is using a rival's branches to help accomplish its goal.
First Financial Bancorp, a $2.4 billion-asset bank holding company in Hamilton, Ohio, plans to combine two subsidiary banks and then buy nine branches from Cleveland's $67.6 billion-asset KeyCorp.
The plan is to combine Citizens Commercial Bank and Trust Co., Calina, with $214 million of assets, and Van Wert (Ohio) National Bank, a $130 million-asset institution.
The new bank, which has not yet been named, would then pay an undisclosed amount in cash for nine KeyCorp branches in northwest Ohio. The deal is expected to close in the fourth quarter, pending regulatory approval, and it would create a bank with $580 million of assets.
KeyCorp has a plan to streamline its operations by selling 140 branches in 14 states. It is closing another 140 branches.
First Financial's plan is an important move in the Ohio banking market. The company has been sitting on a large amount of capital, waiting for the right opportunity to increase loans and deposits, said Fred Cummings, a bank analyst at Cleveland's McDonald & Company Investments.
Mr. Cummings said First Financial's deposit growth has been sluggish and acquisition opportunities in its region have been few.
"I think it's a good opportunity for First Financial to leverage its capital," he said. "It's a good strategic fit."
Michael Riley, a senior vice president at First Financial, said the proposal to merge Citizens Commercial and Van Wert National came from a business plan designed by the two banks' boards of directors.
"They wanted to reach a critical mass where they would be allowed to do some bigger things," he said.
First Financial has traditionally allowed its affiliates to maintain separate managements, said Ross A. Demmerle, another McDonald banking analyst, but the merger would combine the strengths of the two banks without alienating their customer base.
Although the First Financial affiliates wouldn't reveal how much they have agreed to pay for KeyCorp's branches, Mr. Demmerle said they are not overpaying because earnings won't be significantly affected. Analysts have said that other banks have paid too much for some cast-off KeyCorp branches.
Stanley N. Pontius, First Financial's chairman and chief executive officer, said the merger would cause less than a 3-cents-per-share dilution in the fourth quarter. The KeyCorp acquisition would break even after the first year, he said.
By adding the KeyCorp branches, First Financial would solidify its presence in the northwest Ohio market. The area, however, remains competitive.
Mr. Riley said the new offices would face competition from other local banks and thrifts but First Financial would try to win customers with its focus on personalized service.
"Our banks are very strong niche players," he said.
First Financial, which will persist in seeking acquisitions, may have to battle for them with the Cincinnati regionals Fifth Third Bancorp and $10 billion-asset Star Banc Corp. This month, Fifth Third, which has $20 billion of assets, announced its intention to acquire eight thrift branches in First Financial's backyard.
Still, the analysts were complimentary of First Financial's management.
"They're chugging along," Mr. Cummings said. u
