FirstMerit’s Chicago expansion could be sidetracked

By Becky Yerak

FirstMerit Bank, which entered the Chicago market in 2010 through two acquisitions and has expressed interest in doing more deals in the Windy City, might be sitting on the sidelines in the market for at least a year.

On Thursday, the Akron, Ohio-based bank announced that it would buy Citizens Republic Bancorp of Flint, Mich. for nearly $1 billion.

At least one analyst said that the Michigan deal would likely distract FirstMerit from adding to its Chicago footprint for at least a year.

“Most investors had figured any meaningful” deal would occur in Chicago, Sandler O’Neill & Partners wrote in a report late Thursday afternoon. For one thing, Chicago has better demographics than its slower-growth home base in Northeast Ohio, Sandler said. Although Michigan is recovering, its “long-term prospects seem more likely to resemble those of Ohio than those of Chicago,” Sandler wrote.

Reaction was punishing, as FirstMerit stock closed down 11.3 percent, to $15.23 a share.

The Chicago area accounts for about a quarter of FirstMerit’s deposits, but assuming the Citizens’ deal is consummated, that percentage would fall to 16 percent, Sandler estimates.

Discussing the proposed deal on a conference call, FirstMerit’s chief executive said his bank would be unlikely to do another deal for about a year. But he didn’t think any attractive Chicago franchises would become available in the next year anyway. 

“Hopefully, that will be the case,” Sandler wrote. “Should one of Chicago’s prized assets come up for bid sooner than expected, FirstMerit may not be in a position to capitalize on such an opportunity.”

Twitter: @beckyyerak


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