Tuesday, July 13, 1999

Fifth Third gains Peoples


Buy adds 9 branches, 25,000 new customers

BY JEFF McKINNEY
The Cincinnati Enquirer

        Fifth Third Bancorp is growing more fond of Indiana as the Cincinnati bank's appetite for more banks and thrifts gets bigger.

        Fifth Third's latest nibble came Monday when it agreed to pay $227 million in stock to buy Indianapolis-based Peoples Bank Corp., its second buy of an Indiana bank since mid-June.

INFOGRAPHIC
5/3 leaps to third-largest bank in Indiana.
        The purchase of the parent of Peoples Bank & Trust Co. will give Fifth Third a bank with assets of $650 million, nine branches in Indianapolis, deposits of $566 million and 25,000 new customers.

        But more important, Wall Street analysts say, it shows how Fifth Third will use its highly valued stock to continue gobbling up any bank or thrift in the Hoosier State that's willing to sell.

        They contend that Fifth Third's strategy in Indiana is not much different from its expansion last year, when Cincinnati's largest bank acquired two of Ohio's largest thrifts for about $1.6 billion.

        The purchases of Dayton's CitFed Bancorp Inc. and Columbus' State Savings Co. made Fifth Third one of the three largest players in Cincinnati, Columbus and Cleveland, and Ohio's largest mortgage lender. Its recent purchase of Cleveland's Emerald Financial Corp. made it the state's second-largest bank based on deposits.

        “I would not be surprised to see them go after more Indiana institutions, particu larly those of any size in any major cities like Fort Wayne or South Bend, because that has been their pattern,” said Timothy Willi of A.G. Edwards of St. Louis.

        Fifth Third, which entered Indiana in 1989 through branch expansions, began its aggressive expansion in the state last month with its buy of Evansville-based CNB Bancshares Inc. for about $2.3 billion in stock.

        That deal, expected to be completed later this year, coupled with its pending purchase of Peoples Bank, will make Fifth Third Indiana's third-largest bank, with assets of almost $7 billion, 148 branches and more than 300,000 individual and business customers.

        But there's plenty of room for growth in the Hoosier State.

        Of the 25 largest financial institutions in Indiana, the state's five largest banks control 44 percent of the deposits, according to SNL Securities, a bank research firm. Those banks are Chicago's Bank One Corp., Cleveland's National City Corp., Fifth Third, Tennessee's Union Planters Corp. and Evansville's Old National Bancorp.

        That means the rest of the state's deposits are dominated by smaller community banks or thrifts throughout Indiana, including such entities as 1st Source Corp., First Financial Corp., First Indiana Corp., First Merchants Corp. and Irwin Financial Corp.

        Mr. Willi of A.G. Edwards

        said that given Fifth Third's appetite, strong stock price and aggressive stance to go “after any bank's customers,” all of those institutions could become bait. Robert Niehaus, a Fifth Third executive vice president, said Fifth Third is continuing to court several about potential mergers.

        But whether a deal will happen will be based on those entities' willingness to sell, and any partner would have to offer Fifth Third the potential to increase the franchise's annual growth rate by 20 percent or better.

        Mr. Niehaus said Fifth Third agreed to pay a hefty premium for Peoples Bank because it's a good-quality institution with a loyal customer base, and has good earnings and strong commercial lending. It is one of Indianapolis' premier banks in the trust and private-banking business.

        Mr. Niehaus said Fifth Third has not determined where it will cut costs with the Peoples Bank deal, but said the 200 employees it will pick up will have the option to remain with Fifth Third.

        “There will probably be some functional areas that will be eliminated, but we have 460 job openings that we're trying to fill within our bank,” he said.

       



- Fifth Third gains Peoples
Dillard's at Kenwood loses day to inventory
INDUSTRY NOTES: BANKING
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PEOPLE ON THE MOVE
TRISTATE MARKET SPOTLIGHT