WKSU News: FirstMerit buying Michigan bank for $912 million

Thursday, September 13, 2012 FirstMerit buying Michigan bank for $912 million Marks first expansion into Wisconing for Akron-based bank by WKSU's KABIR BHATIA	Reporter Kabir Bhatia

Akron-based FirstMerit Bank announced today that it's buying a Michigan-based bank in a deal valued at nearly a billion dollars. WKSU's Kabir Bhatia reports.

FirstMerit buying Michigan bank for $912 million

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FirstMerit is swapping stock to buy Citizens Republic Bank in a deal that amounts to a 13 percent premium for Citizens’ shareholders.

The combined company will have $24 billion in assets and employ more than 5,000 people in Pennsylvania, Ohio, Michigan, Illinois, and, in a first for FirstMerit, Wisconsin.

Case Western Reserve University banking professor William Mahnic says consolidating operations is one way banks can increase profits now that the feds are clamping down on credit-card fees.

“So if banks can’t replace the income that they used to earn, what they need to do is work on the other side of the equation. And that’s reducing costs. The easiest for a bank to reduce its cost, is to grow, because banks have a lot of fixed costs based in their operation center. If they can buy another bank, eliminate their fixed costs, do their processing through the original processing center, they can save a lot of money. And that falls to the bottom line.”

But, Firstmerit CEO Paul Greig says it’s too early to discuss details.

“The transition and integration activity in planning really begins today. So it would be premature for us to give any specificity on what synergies will occur from a cost savings perspective.”

Prof. Mahnic also says he’s surprised more regional banks aren’t consolidating.

“Too many banks that will eventually become buyers are still recovering from the credit crisis. And they just don’t have the balance sheet that’s necessary – or, the stock price history if they’re going to use stock as a consideration – to convince sellers to sell to them.”

Mahnic says an increase in acquisitions of smaller, regional banks is likely in the next year or two.

As part of the Citizens deal, FirstMerit will repay the federal government about $345 million it gave Citizens’ in the banking bailout. The entire deal is expected to close next year, and the acquired branches will re-branded as FirstMerit.