Ohio's Mid Am Inc. will buy a fast-growing securities broker-dealer, becoming one of the first community banking companies to make a big bet on Glass-Steagall repeal.
The $2 billion-asset Bowling Green-based holding company signed a deal Friday to buy MFI Investments Corp. of Bryan, Ohio. The company declined to disclose the price.
The deal will make Mid Am, which owns several small banks in Ohio and Michigan, the owner of a brokerage firm with $6.5 million in revenue, 250 brokers, and 75 offices in 19 states.
"The acquisition of MFI represents a strategic positioning move by Mid Am, in light of pending legislation to remove the barriers between banks and securities firms," said Edward J. Reiter, chairman and chief executive of Mid Am. "This alliance will enable Mid Am to offer a full range of financial products to its retail customers. Furthermore, upon the likely repeal of the Glass-Steagall Act, Mid Am would be able to engage in underwriting and investment banking activities."
If the act is repealed, "We can roll," said Douglas Nemec, chief financial officer of Mid Am. The holding company already has the power to do most securities business, but if remaining barriers are dropped, Mid Am would be allowed to underwrite securities through MFI.
Community banks typically use third-party contractors to sell investment products, while some develop in-house operations. It is very rare that a community bank would outright buy a broker-dealer.
Mr. Nemec said Mid Am - whose most recent acquisition was that of a Toledo collection company - had been using a third-party provider to help it sell mutual funds and annuities, and had tried to train its own employees to make sales. None of the approaches satisfied Mid Am's goals for fee-income generation.
"I mean, let's face it, we don't know the business," Mr. Nemec said. "This way, we get someone who knows the business and now we also have someone who can distribute our own products in other states. We're not just an Ohio and Michigan banking company anymore."
MFI is a third-generation family-owned brokerage started in 1959.