Saturday, March 6, 2004

Hamilton bank new target?


First Financial Bancorp without CEO 7 months

By Jeff McKinney
The Cincinnati Enquirer

In the wake of the acquisition of Provident Bank last month, speculation is rising that another large, locally based bank could be bought.

Wall Street analysts point to First Financial Bancorp, the Hamilton-based banking company that operates the Tristate's fifth-largest bank with 34 branches and $1.17 billion in deposits. The bank has operated without a president and CEO for seven months.

As Cleveland-based banking giant National City Corp. prepares to enter the Cincinnati market with its planned buyout of Provident Financial Group Inc., the area's second-largest banking company based on deposits, some analysts are wondering whether First Financial could be next.

Even if First Financial isn't sold, whoever takes over as First Financial's new CEO will face a major challenge of turning around a bank whose profits and stock price have been lackluster in recent years. The bank has assets of $3.9 billion.

"The board is at a point where they must ask themselves if they can hire someone who can turn around the company and improve earnings or if they can do better for shareholders by selling the company," said Fred Cummings of McDonald Investments in Cleveland.

First Financial board members are not tipping their hand.

Bruce Leep, First Financial's chairman and interim president and CEO, declined requests for an interview and two other board members would not comment.

In a statement Leep said "we certainly are aware of the recent increase in merger and acquisition activity in Ohio, but company policy precludes us from commenting on speculation. Our board of directors has an ongoing responsibility to look at all viable options that we deem to be in the best interest of our shareholders.

"The board's search committee is interviewing candidates for a new CEO," Leep added, "and they are expected to finalize their selection in the next one to four months."

Those who follow First Financial closely said the most likely candidate to be the next CEO is Rick Blossom, now CEO of Second Bancorp in Warren, Ohio. Blossom, who was president of First Financial's lead bank in Hamilton before leaving in 1999, could be available after Second Bancorp is acquired by Sky Financial Group Inc. of Bowling Green, Ohio, a deal expected to be completed in the second quarter. Blossom was out of the office this week and not available for comment.

Some analysts contend that speculation about the bank possibly being acquired is driving the stock's recent performance. First Financial's stock closed Friday at $18.82, an increase of 18 percent since January.

Daniel Cardenas of Howe Barnes Investments in Chicago says the possibility of acquisition must be playing into the rise in stock price.

"It's still a turnaround story and has been for a while, but that leg is getting a little tired," Cardenas said.

Analysts note that First Financial is not saddled with major credit quality issues or regulatory pressures that could force it to seek a buyer.

Cummings of McDonald Investments recently raised his rating on First Financial's stock to "buy" from "hold," saying the worst of its credit problems are behind it and the company could post strong profits again by next year.

Wilson Smith of investment bank Cohen Brothers & Co. in Philadelphia said First Financial appears set to remain independent. He argues that if the banking company wanted to sell, it would have done so by now.

First Financial's 18 percent stock jump since January compares to about 4 percent for the 551 banks in the Nasdaq Bank Index.

"First Financial's performance has not been superior to the group, so any higher valuation of the stock would partially have to be tied to acquisition speculation," Smith said.

Other analysts say with its strong market share in fast-growing Butler County, First Financial could still be an enticing target for other large banks wanting to expand in the Tristate.

Indeed, First Financial enjoys a 32.5 percent deposit market share in the Hamilton-Middletown area, with deposits of nearly $996.5 million and 25 branches, according to the Federal Deposit Insurance Corp.

"The likelihood (of First Financial being acquired) might have diminished a little with National City doing the Provident deal," said Ross Demmele, a banking analyst at Hilliard Lyons in Louisville. "But the ante is still high with other big institutions in that market looking to make some headway."

E-mail jmckinney@enquirer.com



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