First Financial Bank
The decision by a Cleveland-area community bank’s parent company to concentrate on its core insurance business opened the way for Cincinnati-based First Financial to
The $18.5 billion-asset First Financial said Monday it would pay $325 million in cash and stock for the $2.2 billion-asset Westfield Bancorp in Westfield Center, Ohio. Projected to close in the fourth quarter, the acquisition would give First Financial seven branches in the Cleveland-Akron metropolitan area, while bolstering several of its specialty-lending lines of business.
In return, Westfield’s owner, Ohio Farmers Insurance Co., would receive an infusion of capital to reinvest in its core personal, commercial and specialty insurance businesses.
“We saw the opportunity to really increase our focus even further and completely on property and casualty insurance,” Ohio Farmers Chairman and CEO Ed Largent told American Banker on Tuesday.
“Selling the bank eliminates the increased complexity that comes with a bank holding company from a regulatory standpoint,” Largent said.
Joe Kohmann, Ohio Farmers’ chief operating officer, told American Banker that the company has increased Westfield Bank’s autonomy as it has grown. “From a parent company perspective, we’ve been standing ready to provide the bank additional capital to grow, but this is just the right time for us both to go separate ways and focus on our core businesses,” Kohmann said.
Ohio Farmers does business as Westfield. It chartered Westfield Bank in 2001. Its decision to focus on insurance handed First Financial an opportunity to expand in the northeast Ohio region, where it maintains a single commercial loan office in Cleveland.
First Financial expects to triple its northeast Ohio loan commitments to $1.5 billion while adding $1.5 billion in local deposits, according to President and CEO Archie Brown. About 40% of the state’s population is in the region, Brown said.
First Financial
“The question was how could we get in the market in a bigger way and truly expand,” Brown told American Banker in an interview Tuesday. “We were contacted to see if we were interested in evaluating Westfield as maybe a company to buy. We said. `Absolutely, we’re interested,’ and the process unfolded from there.”
With nearly $21 billion in assets and more than $16 billion in deposits, the combined institution would rank as the eighth-largest bank doing business in Ohio and the largest community bank, Brown said on a conference call with analysts on Tuesday.
First Financial is projecting cost savings amounting to about 40% of Westfield’s annual expense base, which totaled $43 million in 2024, according to the Federal Deposit Insurance Corp. It’s also projecting 2026 earnings-per-share of $3.08, which works out to 12.4% accretion.
Brown “noted the ability to grow the combined franchise and generate revenue synergies which are not included in the deal,” Truist Securities Analyst Brian Foran wrote Tuesday in a research note.
Though First Financial has been an active acquirer, its deals in recent years have involved nonbank specialty-finance firms. First Financial’s last bank purchase came in 2018, when it
Seven years later, a significantly larger First Financial anticipates the job of integrating Westfield will proceed smoothly. “We view this merger combination as lower risk,” Brown said on the call, citing Westfield’s size relative to First Financial and its “stellar” credit-quality performance.
First Financial has been seeking to expand its commercial lending business. It opened a loan production office in Chicago in February 2024 and another in Grand Rapids, Michigan, in January.
According to First Financial, Westfield’s net chargeoffs have averaged 4 basis points of total loans over the past five years. Meanwhile the deal’s gross credit mark, reflecting the mark-to-market discount on Westfield’s loan book, totaled $18.9 million, just 1.1% of the $1.6 billion portfolio. Credit marks in several recent mergers have trended significantly higher, according to a recent research note by Seaport Research Partners senior analyst Laurie Havener Hunsicker.
Acquiring Westfield would give First Financial an opportunity to market its consumer products, including checking accounts and home equity loans, to Westfield customers, Brown said on the conference call. Commercial clients would see a higher lending limit and larger product set. At the same time, both banks operate specialty-lending units focusing on insurance premium finance and serving the credit needs of insurance agencies and registered investment advisors.
First Financial projected a post-close Common Equity Tier 1 capital ratio of 11%, which would leave it with ample means to consider additional deals — a scenario Brown did not discount. “I think it would certainly depend on size and timing, but we still think there’s potentially something to do over the course of the next year beyond this,” Brown said on the conference call.
