Home Savings merger to create larger financial institution
YOUNGSTOWN — Locally headquartered Home Savings Bank will merge into First Federal Bank of the Midwest by the first quarter of 2020. The two regional banks announced their plan to merge Monday in what is expected to be a $473 million deal.
The combined company will operate under a name that will be determined in 2020 prior to the merger being finalized.
Home Savings is a subsidiary of United Community Financial Corp. First Federal is a wholly owned subsidiary of First Defiance. The holding company will be headquartered in Defiance and the bank headquartered in Youngstown.
The new company is projected to have assets of about $6 billion and operations throughout Ohio, Michigan, Indiana, Pennsylvania and West Virginia, according to Donald P. Hileman, president and CEO of First Defiance Financial Corporation.
The merger is expected to increase the scale of both companies, diversify business lines and leverage the strengths in commercial banking, residential lending and fee incomes.
“We believe the merger will deliver the best of both of the institutions talents,” Hileman said.
The merger is a stock for stock transaction.
Shareholders of United Community will receive .37 shares of First Defiance common stock for each share of United Community common stock. Based upon Friday’s closing price for First Defiance of $26.32 a share, the transaction is valued at approximately $473 million.
When completed, First Defiance shareholders will own approximately 52.5 percent of the combined company and United Community shareholders will own approximately 47.5 percent.
Hileman described the culture of the companies being very similar and said some of the top leadership previously worked together at Sky Bank. He said he believes that will make the merger easier and more efficient.
“We are people of like minds,” he said. “We do not have a lot of conflicts.”
Gary M. Small, president and CEO of United Community Financial Corp., said there is no branch overlap in the markets they serve.
“We have northern Ohio covered,” Small said. “We compete with many of the same folks. We serve in multiple communities and eight metro markets.”
Small said the combined company will have $5 billion in combined loans and $4.9 billion in deposits. The combined entity will have $58 million in revenues, he said.
Both CEOs will continue to have critical roles in the new company. Hileman will serve as the CEO of the holding company and the bank before transitioning to an executive chairman role in 2021. Small will assume the role of president of the holding company and the bank before transitioning to CEO when Hileman becomes executive chairman.
The combined company’s board of directors will be comprised of seven members designated by First Defiance and six members designated by United Community. The new board will be determined before the merger is complete.
The companies will have $30 million in pre-tax merger costs. The combined company expects to be able to pay the cost of the merger within 1.8 years.
Savings and growth of the new bank will come from increased efficiencies and expansions of loan and insurance activities, according to Hileman said.
“There are opportunities for future expansion and increased dividends,” Hileman said. “There will be some contractions.”