On July 31, First Financial purchased the 19 branches of West Chester Twp.-based Peoples Community Bank from the Federal Deposit Insurance Corp. Peoples was the first Ohio bank closed by the federal government during the financial crisis.
Almost twice the size it was a few months ago at 131 branches, analysts say the company has used its strong capital to make solid, FDIC-backed transactions to grow its footprint. The recent additions mark First Financial as the fourth largest bank in terms of deposits in Greater Cincinnati.
The bank’s president and chief execitive Claude Davis, a Hamilton resident, admitted he took some criticism for his conservatism when he joined the bank in 2004. He was skeptical of subprime mortgages at the height of their popularity in 2006, and First Financial lost that money in the short-term. But now his strategies have helped lead the company to long-term growth.
Davis sees more growth through acquisitions when possible.
“We’ll pause for now while we integrate the new companies but in the long-term acquisitions will always be a bit of the strategy,” he said. “Our core strategy is still organic growth and looking at adding new clients through existing markets and build new branches in the right market areas.”
First Financial eyes growth, continued success
One hometown bank just got a whole lot bigger.
Hamilton-based First Financial Bank has made a push to increase its footprint. Recently, the company purchased 27 branches from the failed operations of Indiana-based Irwin Union Bank and Trust Company and Irwin Union Bank through an agreement with the Federal Deposit Insurance Corporation. That deal closed Sept. 18 and the banks are already operating under First Financial.
It is the second time in less than three months the company has grown through insolvent bank acquisitions. It added another 19 branches to its portfolio from Peoples Community Bank July 31, when the West Chester Twp.-based bank was closed by federal regulators, the first in Ohio.
It’s part of an aggressive growth strategy, one which First Financial has been able to achieve due to conservative offerings and strong capital, said Claude Davis, president and CEO of First Financial.
With the FDIC guaranteeing to cover up to 80 percent of any losses on the loans First Financial took over, and all nonperforming and defaulted loans excluded from the transaction, Davis said he feels confident the acquisitions will prove profitable.
In the Irwin move, First Financial paid $14 million as a premium on deposits, but the $652 million discount it received on the loans made the transaction in effect like “the FDIC is paying us the difference between those two to assume the institution.”
On the back of the Peoples’ acquisition, Davis said another large takeover was not planned. However, Irwin, a company he worked for in Columbus, Ind. for 17 years before moving to First Financial, proved to be too good a chance to expand into Indiana.
“Irwin had a very good Indiana franchise and Irwin in combination with our other Indiana branches takes our deposit share from 19th to 5th,” he said. “That was the most compelling strategical reason and second it was a very good financial deal for our shareholders.”
While the company is growing out-of-state, Hamilton still remains important to First Financial as its banking headquarters and center for support staff, Davis said.
“The role of Hamilton hasn’t changed and if anything it will become more important because the support staff here will be supporting a much larger company,” he said.
There are no plans to move the bank’s headquarters out of Hamilton, as the company did with its holding company, First Financial Bancorp, in late 2007.
Ultimately, while the financial crisis has helped shape the troubled economy, the outcome will be better-run banks, like First Financial, taking over failed institutions and making the industry better as a whole “and that is better for the people who do business with them,” said Steve Wyatt, professor and chair of finance at Miami University.
Wyatt described First Financial as a “pretty impressive and well-run bank” that has been well-positioned to complete acquisitions like the Peoples and Irwin deals at a very opportune time, especially since the deals don’t include non-performing loans.
“What you want are those really good loans that have been tested in a really good way. Through this all, these loans are being paid,” he said. “Thinking of the future, the quality of those loans are going to get better.”
But there are many challenges ahead, not the least of which Wyatt said is making sure the bank can maintain capital so that it does not find itself overextended.
One item the First Financial officials will be considering over the next several months is what to do about the 13 banks it acquired outside of its core market of Ohio, Indiana and Kentucky. With Irwin branches spread out into new western territories like California and New Mexico, Davis said there will be discussions if those locations are “good strategic plans for us or not.”
“At our core, we are a Midwestern bank,” he said.
Contact this reporter at (513) 705-2843 or jheffner@coxohio.com.
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