For The Tribune
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 Tuesday. The transaction, valued at $1 billion, is expected to close in early 2018.
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“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.
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.
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.
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.
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.
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 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.
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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