With the troubles of the automobile industry battering its home territory, First Place Financial Corp. is buying its way into the more stable markets of southern Ohio.
First Place, a Warren, Ohio, banking company, announced Wednesday that it plans to buy the $1 billion-asset Camco Financial Corp. in Cambridge for $97.2 million in cash and stock, which would create the ninth-largest banking company based in the state, with $4.4 billion of assets.
"This deal does a great job of diversifying the company by taking us further into the markets of Columbus, Cincinnati, and Dayton," Steven R. Lewis, First Place's president and chief executive officer, said in a conference call Wednesday. "Those areas are less reliant on the auto industry, compared to our presence in suburban Cleveland and suburban Detroit."
Expected to close in the fourth quarter, the Camco deal is the third, and by far the largest, First Place has announced in the last eight months.
In September, it said it would buy $54 million-asset Hicksville Building and Loan Savings Bank — the price was not disclosed — and in early April the company announced it would buy $64 million-asset OC Financial Inc. in Dublin, Ohio, for $7.2 million. (The Hicksville deal closed in October.)
Since going public in 1999, First Place has completed six other deals, mostly in northeast Ohio.
"Acquisitions are not the only way to grow," said Mr. Lewis. "But it is the most meaningful way of gaining market share" — particularly in slow-growing Ohio.
Camco is the parent of Advantage Bank, which has 28 branches, including a handful in Kentucky and West Virginia. The branches are to be rebranded under the First Place banner.
With Camco's retail focus, the deal would give First Place a good source of deposits to fund its commercial loan growth, Mr. Lewis said. First Place has commercial loan offices in some of Camco's markets.
Camco, meanwhile, was looking for a strategic partner to help bring down its cost structure while expanding its nontraditional services such as insurance and wealth management, Mr. Lewis added.
In what has been a slow year so far for mergers and acquisitions, First Place's deal for Camco would rank as the sixth-largest, by price, announced in 2008, accord to SNL Financial LC.
Analyst Chris McGratty of KBW Inc.'s Keefe, Bruyette & Woods Inc. said the deal's timing was surprising, given rising credit concerns at both companies and across Ohio. But he added that it could have a positive impact in the long term because it would give First Place a presence in more vibrant markets.
"I think this is a deal [First Place believes] is opportunistic," Mr. McGratty said. "In the long term, it is a potential positive, but in the near term they are going to be quite busy."
In the first quarter, First Place reported earnings of $4.8 million, down 26% from the year earlier. The decline was attributed to a $3.3 million increase in the provision for loan losses.
Camco reported a $1 million loss for the quarter, compared to a $1.5 million profit the year earlier. The loss was attributed to an increase in the loan-loss provision. Nonperforming loans totaled $28.4 million, up 11% from the fourth quarter.
Most of First Place's credit problems are in single-family home mortgages that have gone into default, according to Mr. Lewis. In an earnings press release last month he said the increase in nonperforming loans was a direct result of weak economic conditions in northeast Ohio and southeast Michigan.
In March metropolitan Detroit's unemployment rate was 8.1%; Cleveland's was 6.3%; and Youngstown's was 6.8%, according to the Bureau of Labor Statistics. The jobless rate in Columbus was 4.6%. Because the latter city is the state capital as well as home to Ohio State University, it is "relatively recession proof," Mr. Lewis said Wednesday.
Mr. McGratty said he saw no specific red flags looming for Camco, but he predicted that credit quality would continue to deteriorate throughout its markets. This could have contributed to what he called the deal's "fair pricing." Camco stockholders are to get $13.58 in cash or just under one First Place share for each share owned. The expected transaction value is 1.19 times Camco's tangible book value at Dec. 31.
Camco's shares closed at $11.54 Wednesday, up 16%. First Place's fell 11%, to $11.86.
