Leaders of two Midwestern banks that are about to merge expect to reduce expenses in economies of scale by about 13 percent through the closure of 45 to 50 branches and a 17 percent reduction in workforce.
But the two company CEOs said they are of the same mindset that continuing philanthropic support of the communities they serve is important.
MainSource Financial Group, based in Greensburg, is being purchased by First Financial Bancorp, based in Cincinnati, Ohio, the companies announced jointly on Tuesday. The transaction, valued at $1 billion, is expected to close in early 2018.
“It was a really good cultural fit and strategic fit,” said Claude E. Davis, CEO of First Financial, who will transition to executive chairman of the merged bank for a three-year term.
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Post-merger, the financial institution will have about $14 billion in assets.
Currently the banks have about 2,400 employees combined (1,500 from First Financial and 900 from MainSource) and 200 banking centers throughout Indiana, Ohio and Kentucky. Those number will drop when the merger becomes effective, however.
First Financial and MainSource both have branches in central and southern Indiana. But with overlap existing in markets and some branches in close proximity, approximately one-fourth of the offices will close, the banks’ top executives said.
“Every town, every community we’ll see what makes sense,” said Archie M. Brown Jr., chairman, president and CEO of MainSource, who will be president and CEO of the merged company.
About 400 positions will be eliminated as well, Brown said, although most of that can be taken care of through attrition, such as retirements or people leaving for other jobs, he said.
Both companies have recent experience in consolidating operations.
Brown noted that MainSource has closed about 25 offices in the past five years, and Davis said First Financial has closed more then 70.
With employee attrition rates as high as 28 percent annually in company banking centers and many offices close enough for employees to commute to new locations, Brown said he believes that the merged companies will reach their target employment levels naturally.
‘Strategic fit’
Discussions of a merger began in late winter, and took root when Davis and Brown, both age 56, met for one of their periodic lunch meetings. They said they soon realized that combining forces made sense for their two companies’ needs and futures.
Davis said that as First Financial moved closer toward having $10 billion in assets, it faced a steeper financial and regulatory impact that would have cost the company about $15 million annually. However, as a merged company with about $14 billion in anticipated assets when the deal closes, the cost could be absorbed better, he said.
Brown said the merger also fit with the two banks’ strategic growth plans.
After entering the Columbus, Bloomington, Louisville, Indianapolis and Cincinnati markets, MainSource knew it needed to build a greater presence in metro markets, Brown said.
“This accelerates us five to 10 years,” Brown said.
Both bank leaders said they think the merged company will be one of the preeminent banking institutions in the Midwest — the sixth largest in Indiana.
Different situation
Looming impacts of the merger, however, have created a sense of loss for many MainSource employees, especially in Greensburg where MainSource is based, Brown said.
That’s come out of town hall meetings Brown and Davis have conducted with employees this week.
“There is a sense of loss for any company in our position. Our company is 100 years old; our company is performing well,” Brown said.
Both Brown and Davis said that the two companies are treating this more as a merger rather than an acquisition.
The idea is to retain the best of what each does, Davis said. And, the top 30 leaders in the merged company will include half from each bank, Brown said.
The deal with MainSource is far different from the one with Irwin Union Bank and Trust in 2009, when First Financial purchased the financially troubled Columbus-based bank. That acquisition followed one 45 days earlier of another struggling bank in Cincinnati, doubling First Financial’s size.
“It taught us how to deal with a big acquisition,” Davis said of the Irwin Union purchase — a bank he had worked at for 17 years.
“This I see differently — more transformational, strategic,” Davis said of the MainSource deal.
Continued philanthropy
Despite changes that will occur with the merger, both Davis and Brown said a commitment to philanthropy will remain strong.
“We’re not expecting or seeing cutbacks related to philanthropy,” Davis said.
The joint company will create a public community development plan, with the assistance of a Washington, D.C.-based consultant, for all of their communities that will address how it will approach things such as philanthropy and lending, Davis said.
“We will make some commitments around all of those areas,” Davis said.
In Columbus, for example, First Financial is the title sponsor of the annual Ethnic Expo. MainSource is an executive sponsor of the Mill Race Marathon and both have sponsored the annual CANstruction competition, which supports local food banks.
“We don’t see our philanthropy declining at all. If anything, we’ll see it increase,” Davis said.
However, the only specific details about community commitments to have been finalized is for Greensburg to keep at least 100 jobs and $1 million in community support over the next five years.
“We’ve talked high level, and the big commitments we’re going to continue to make,” Brown said.
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- First Financial shareholders would own 63 percent of the company, MainSource shareholders 37 percent
- The company will have about $14 billion in assets when the sale closes early next year.
- The company will have its headquarters in Cincinnati, Ohio, where First Financial is already based.
- First Financial CEO Claude E. Davis will transition to the role of executive chairman for a three-year term
- MainSource Chairman, President and CEO Archie M. Brown Jr. will move into the role of president and CEO
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