First Financial to merge with MainSource Financial

Cincinnati-based First Financial’s acquisition of MainSource Financial in Indiana will result in a combined institution with more than $13 billion in assets.

On July 25, $8.7 billion First Financial Bancorp in Cincinnati announced it is acquiring the $4.6 billion MainSource Financial Group of Greensburg, Ind., in a stock-for-stock transaction valued at about $1 billion. MainSource shareholders will own approximately 37 percent of the merged bank.

The resulting institution will have more than $13 billion in assets when the deal closes in first quarter 2018. The combined First Financial Bank will be the sixth largest in deposit market share in Indiana and the fourth largest in the greater Cincinnati area. And, with the recent acquisition of First Capital Bank of Kentucky by MainSource, First Financial will have an immediate and sizeable position in Louisville, Ky.

“The transaction will allow the combined company to better meet the needs of its communities in a rapidly changing banking environment,” the banks said in a press release,” while providing the efficiencies and scale required to comply with regulatory requirements and costs associated with crossing the $10 billion asset threshold.” The bank expects to have increased expenditures related to the $10 billion threshold of $14.5 million due to interchange fee revenue loss ($12 million), costs involved with heightened regulatory oversight ($2 million), and a $500,000 reduction in Federal Reserve dividend payments.

First Financial CEO Claude E. Davis will transition into the role of executive chairman for a three-year term. MainSource President and CEO Archie M. Brown, Jr., will continue in that role for the combined bank.

The combined board will have nine members from First Financial’s board and six from MainSource. Directors will be selected and identified prior to the closing of the transaction. Leadership from both banks will take the top management positions at the bank.

“By taking the best of both banks, we believe that the combined company will be even more effective in meeting the lending, economic development and financial education needs of the communities we serve,” Davis said.

The new bank will be headquartered in Cincinnati, with the Greensburg location becoming a hub. As part of the merger, the companies also announced an intention to develop a comprehensive Community Development Plan which will include a commitment of maintaining 100 jobs and $1 million in community support to Greensburg over the next five years. “By strengthening our position as the preeminent community bank in our region, we recognize the chance to make a larger impact to the communities and individuals who rely on us,” Davis said.

First Financial’s subsidiary First Financial Bank has 102 offices in Ohio, Indiana and Kentucky, providing four lines of business: commercial and private banking, retail banking, investment commercial real estate and commercial finance. MainSource Bank provides consumer and commercial banking services through 101 banking centers in Indiana, Ohio, Kentucky and Illinois.

Davis said he expected both organizations to be able to “learn from each other to accelerate growth. … We just see this as really synergistic and value-add.”

The bank expects to have cost savings of $43 million with 40 percent of that due to the consolidation of 45 to 50 banking centers, or about 13 percent. Three-quarters of the cost savings are expected to be realized within a year of the deal closing.

In a webcast for investors, First Financial CFO John Gavigan said regulators might require divestiture of a few branches due to deposit concentrations, but estimated the effect would not have a material impact.