New home for First Financial

June 19, 2011

Alexander Coolidge, Cincinnati Enquirer

A year after moving to downtown Cincinnati and after a flurry of acquisitions, First Financial Bancorp is ready to affix its name to the city’s skyline.

The region’s largest community bank plans to move into the Chemed Center – where it will become the signature tenant this fall – renaming the building at 255 E. Fifth Street the First Financial Center.

The move cements chief executive Claude Davis’ seven-year strategy of rebuilding the company around the First Financial brand and taking it to new heights – 29 stories to be exact.

“The skyline sign was one of the requirements as we looked for a new headquarters – it helps us build brand identity which is important,” Davis said.

First Financial’s decision comes after city officials agreed this spring to give the bank $3.6 million in tax incentives to stay here, retaining 95 jobs and adding 55 more. Economists say the bank is the sort of employer the city needs more of: up-and-coming and adding local jobs.

Gaining size through acquisitions
Davis’s bid to raise First Financial’s profile comes after a string of victories: early this month the bank announced it would acquire 16 branches in Southwest Ohio from ailing Liberty Savings Bank – its third major acquisition in less than two years. Last month it announced its 82nd straight quarterly profit. And last year it was named ‘Small Business Lender of the Year’ by the U.S. Small Business Administration.

First Financial has nearly doubled in size since 2009 when it made two acquisitions of banks seized by regulators: West Chester-based Peoples Community Bank and Columbus, Indiana-based Irwin Financial Corp. The bank now has $6.3 billion in assets and 102 branches in Ohio, Kentucky and Indiana – compared with $3.7 billion in assets and 81 branches in early 2009.

The Peoples acquisition helped First Financial edge out Huntington Bank as Greater Cincinnati and Northern Kentucky’s No. 4 bank with 48 local branches and more than $2.2 billion in deposits. The bank’s latest acquisition – closing this fall – will make it the No. 7 bank in Dayton up from No. 11. There could be more deals.

“Our first growth strategy has been organic – one client at a time – but we are also in pursuit to be an acquirer,” Davis said.

First Financial’s growth spurt in the last two years comes after five years of retooling and refocusing its business strategy. Davis joined the bank in 2004 when First Financial was just the name of the holding company of seven different banking subsidiaries all pursuing their own business strategies and acting independently of each other.

Under Davis, First Financial rebuilt its operations around the parent company’s name and focused on commercial lending, retail banking and wealth management. From 2005 to early 2007, the bank shed nearly $1 billion in assets as it exited some businesses such as its mortgage-servicing operation and its indirect auto financing business through dealerships. The bank also tightened its lending standards in 2005 and sold off riskier commercial and residential loans from its portfolio that didn’t meet those standards.

Consequently, First Financial sat out much of the build up of the real estate bubble, while other lenders threw money at dubious residential and commercial projects as they chased growth.

“It’s not like we saw the financial crisis coming, but we feel good about the moves we made pre-2008,” Davis said. “It allowed us to be in a strong position going into the credit crisis.”

Moving into leadership
First Financial’s internal transformation of its portfolio coincided with visible external changes. Along with the ‘Another Step on the Path to Success’ marketing campaign, the bank made the strategic decision to move its holding company headquarters from Hamilton to Norwood in 2008, and into downtown in 2010.

Davis said the benefits of moving are two-fold. First, there is more interaction with major companies in the region, and thus more potential business to underwrite their loans. And, downtown is a powerful draw for talent to work for the bank.

“Being downtown allowed me to connect with the Cincinnati business leadership in a way I wasn’t prior to coming here,” he said. “And it’s the central business district – it’s the energy level of being here.”

Davis said the prospect of living and working downtown is a powerful draw in recruiting managers – from senior executives down to more junior wealth and commercial lending managers.

Daewoo Park, chairman of Xavier University’s management and entrepreneurship department, said the city needs employers like First Financial, too. He said it’s important for Cincinnati to maintain corporate headquarters within its boarders and in the region to foster economic growth. And while First Financial is not a Fortune 500 company, he noted Fifth Third Bancorp and U.S. Bancorp both began in Cincinnati as growing community banks like First Financial.

“The more headquarters we have downtown, the better the business environment – it creates a cluster effect,” he said, adding those clustered businesses attract other employers and college graduates, which spurs the overall economy.

Strong base going forward
First Financial’s growth may not let up soon. It’s a strong player in a weakened landscape as banks face twin pressures of costly new regulations from the Dodd-Frank financial reform bill and tepid growth from a weak economy.

Analysts predict a period of industry consolidation as weak players sell off to stronger ones that will become larger as a result.

“It’s a mixed outlook – for banks that are healthy, they’ve never been stronger, they have high capital and high liquidity – First Financial is in that category,” Davis said of his bank.

Davis said First Financial will exercise discipline in making acquisitions. He said the bank will target banks with similar business models and cultures operating in geographies where it makes sense for First Financial to expand.

Download this Article