FirstMerit Corp. of Akron, Ohio, would strengthen its presence in northeast Ohio and suburban Cleveland with a deal announced Monday to buy Security First Corp. for $256 million of stock.
Security First, a $678 million-asset thrift company based in Mayfield Heights, Ohio, would be FirstMerit's second acquisition in the last five months in suburban Cleveland. The company announced Nov. 3 that it would buy $602 million-asset Cobancorp of Elyria, Ohio. That deal is expected to close in May.
John R. Cochran, chairman and chief executive, said the acquisition would add to market share in six of the 11 counties in which FirstMerit operates.
Company officials acknowledged that their acquisition was overshadowed by the Citicorp-Travelers Group merger announcement. A planned conference call with analysts was postponed until Tuesday after company officials sensed little interest in the wake of the megamerger announcement.
FirstMerit is paying 3.5 times Security First's book value and 25 times its estimated 1998 earnings. Both are relatively high for a thrift, but analyst Douglas Walouke of Ohio Co. noted that FirstMerit's stock price is strong. FirstMerit said the acquisition would add to earnings within the first year.
FirstMerit plans to cut expenses by $7 million, half of Security First's operating costs. Nine of its 14 branches would be closed. It was unclear how many of the 140 full-time employees would lose their jobs. Much of Security First's 50-person back office would be cut.
Security First's top executive would survive, however. Chairman Charles F. Valentine is to head a new residential construction division.
The company also hopes Security First will provide an additional $1.3 million in fee-based revenue, primarily credit card and investment products, in 1999.
FirstMerit, which has $5.3 billion of assets, would take a $10 million merger-related charge and would add $7 million to its loan-loss reserves when the deal closes.