Second Bancorp., Warren, Ohio, has agreed to buy Trumbell Financial Corp. in a stock-swap deal worth $122.4 million.
Second, a $931 million-asset bank holding company, would exchange 3.78 shares for each of Trumbell's 869,364 outstanding shares. The transaction, which is expected to close during the fourth quarter, represents 3.2 times Trumbell's book value and 31.6 times the company's estimated 1998 earnings per share.
Second and Trumbell are situated at opposite sides of Warren's county square. Second wanted to buy the neighboring $525 million-asset thrift holding company to become the clear market leader in Trumbell County, said Alan G. Brant, chairman and president of Second.
The deal would give Second 23.6% of Trumbell County's deposits. Trumbell Savings and Loan Co.would be merged into Second's lead bank, Second National Bank.
Mr. Brant said Second plans to cut more than one-third of Trumbell's operating expenses by closing two of the thrift's branches, consolidating staff functions, and combining back-office processing. An estimated cost savings of $3.3 million would make the deal accretive to earnings within a year, help lower Second's efficiency ratio, and boost its return on equity, he said.
Second also plans to use Trumbull's current deposits to make more commercial loans and to attract more deposits by adding products.
The Trumbell deal marks an important strategic move for Second, which until this year had not been an active acquirer.
The company announced last month that it would buy Enfin Inc. of Solon, Ohio, a $42 million-asset bank holding company that specializes in commercial lending to small and medium-size businesses.
"Second was in a position where they really needed to do something," said Douglas Walouke, a bank analyst at Ohio Co., Columbus. "This deal certainly makes the company more attractive."
Had Second been unable to expand through acquisitions, Mr. Walouke said, the company may have been forced to seek a merger partner.
Mr. Walouke classified the Trumbell deal as "pricey on the surface" compared with other recent deals among banks of similar size, which have fetched 22 to 24 times earnings per share. But Mr. Walouke said Second's cost savings expectations are reasonable.
If the acquisition drags on Second's earnings, the company would still be attractive to acquirers in the northern Ohio market. Mr. Walouke said FirstMerit Corp. of Akron or Charter One Financial Corp., Cleveland, would be likely bidders.