A Seamless Fit

A Seamless Fit

 

While the origins of FirstMerit parallel those of Huntington, the recent past of the two banks reflects just as many similarities. “Banks that have been headquartered in the Midwest for a long time really have significant histories and close attachments to the communities and markets that they participate in,” said former FirstMerit director Lizabeth Ardisana. “I think there’s a lot of synergies and a lot of cultural similarities that make these [integrations] easier.”

While the origins of FirstMerit parallel those of Huntington, the recent past of the two banks reflects just as many similarities. “Banks that have been headquartered in the Midwest for a long time really have significant histories and close attachments to the communities and markets that they participate in,” said former FirstMerit director Lizabeth Ardisana. “I think there’s a lot of synergies and a lot of cultural similarities that make these [integrations] easier.”1

Gina D. France—founder, president and CEO of France Strategic Partners2—joined the Akron-based FirstMerit board in 2004;3 around the same time,4 Ardisana, owner and CEO of technical staffing and communications firm ASG Renaissance,5 had joined the Flint-based Citizens Bank, as it was then called.6

“Economic times were relatively decent,” recalled France of the mid-2000s, “but FirstMerit had grown, like so many banks, through a series of acquisitions and was still digesting a bit of a travel loan portfolio” stemming from its 1999 acquisition of Signal Bank, headquartered in Wooster, Ohio.7 She credited CEO Paul Greig, who joined FirstMerit in 2006, with reconciling this loan business and strengthening the company’s balance sheet, such that when the economic downturn hit, FirstMerit was able to weather the storm extremely well.8 According to France:

We stuck to what we knew. For a while, that didn’t feel particularly dynamic when you looked at other banks that were flying high. Again, it turned out to be very, very powerful to us. We didn’t have big loan losses in other parts of the country. I think it spoke not only to Paul, but to our board who had a number of directors who had been through an economic downturn in the ’90s. It was that benefit of experience on the board that kept us sticking to our knitting, and certainly played out well during the recession.”9

Citizens had a slightly harder time during the recession, according to director and Meadowbrook Insurance Group president and CEO Robert S. Cubbin. He’d joined the Citizens board shortly after the bank had merged with Lansing-based Republic Bank in April 2007.10 The resultant bank and newly formed holding company Citizens Republic Bancorp had a robust commercial real estate portfolio in Michigan, which was hit hard during the coming recession. The board appointed new CEO Cathy Nash in early 2009,11 and she deftly led the turnaround effort that followed, according to Cubbin.12

Well before Citizens and FirstMerit joined forces in 2013, their hometown histories were intertwined. Flint’s connection to the auto industry, and Citizens’ role in the origins of General Motors, paired nicely with Akron’s prominent rubber industry. Founded in 1925 as Smithers Laboratories,13 this mainstay of the Akron tire industry brought president and CEO of The Smithers Group, J. Michael Hochschwender, to the FirstMerit board in 2005.14 Hochschwender, France and the other directors managed through the challenges of the Great Recession, and FirstMerit emerged in a position to make some strategic acquisitions of banks that didn’t fare as well in the preceding years. Their initial focus was Chicago.

France noted FirstMerit’s strength in the corporate arena—and the tremendous number of corporate opportunities in Chicago—as well as CEO Paul Greig’s personal history in the Windy City. “If [Greig] had not known that market I seriously doubt whether we would have entertained it as a board,” said France. “But he knew the people, he knew how to build a team there, and he knew the ins and outs of that market.”15 After acquiring the failed George Washington Savings Bank and Midwest Bank and Trust Company in 2010,16 FirstMerit built a commercial team around Pete Gillespie and added a second Chicago director to its board.17 Hochschwender remembers the main challenge was successfully replacing the combined bank’s portfolio of covered loans with new, originated loans, positioning FirstMerit for success in their new Chicago footprint.18

Next, FirstMerit set its sights on Michigan, as did Huntington Bank in the post-downturn years. “Michigan was poised to rebound quite quickly,” said France. “You had to look behind the headlines and the hype, and look at the economic base. It actually was one of the most attractive markets. … [Citizens] was a stretch transaction for us, but certainly one that paid off.”19 Ardisana and Cubbin came to the FirstMerit board when the acquisition was completed in April 2013.20

With increased size comes an increased risk of losing that hometown feel, however. “In the old days, the community bank was one of the most important institutions in any town,” mused Ardisana. “I do think, even as banks get larger, it’s really important that they recognize that the only way you’ll have a successful bank, is you have to have a successful community. … FirstMerit did a great job of really making people feel like it was still a hometown bank.”21

On the other side of the table, Citizens’ board had become better acquainted with Huntington during this period, as it considered combining with the Columbus institution as part of its due diligence. “It was a good fit between either one of the banks but I think the fit at the time seemed better with FirstMerit,” said Cubbin.22

Huntington came calling again in 2016. “We were absolutely not looking to be acquired, but the economics were attractive certainly, the return for our shareholders,” said France. “The bank had a 171-year history. You don’t make these kinds of decisions lightly by any means. It’s one you can’t undo. … When we looked at everything that’s going on in the banking industry, it just was a compelling case, not only for shareholders, but also our customers and our communities.”23

Along with the expanded footprint, Huntington’s strength in retail, small business lending and auto finance complemented FirstMerit’s strengths in commercial lending as well as niche markets like RV and marine lending.24 But more importantly, the cultural fit appears to be nearly seamless. France, Ardisana, Cubbin and Hochschwender were selected from among the FirstMerit directors to transition to the Huntington board and so far the combined team has worked extremely well together. The new directors unanimously agreed that the future appears bright and, according to Ardisana, the first board meeting of the combined bank left her and her colleagues excited for what’s to come:

They took the best of us and added it to the best of them. It’s a really dynamic board. I just see great opportunities to continue that same sort of growth. … Like everything else, we’re going to have to adapt to new ways of banking, new ways of people living and operating. I just saw a lot of enthusiasm for doing that. A lot of growth opportunity. My thought is let’s get this thing integrated as soon as possible, so we can move on to the next thing.25

robert-cubbin-cropped

Bob Cubbin

beth3b_rgb-1

Lizabeth Ardisana

m-hochswinder-3723

J. Michael Hochschwender

ginafra1

Gina D. France