First Financial: What a Difference a Year Makes

TRAVERSE CITY – On Friday, September 18, 2009, the international financial crisis hit home on Grandview Parkway: Along with 26 other Irwin Union Banks that were part of the Indiana-based Irwin Financial Corporation, federal and state regulators shut down the TC branch of Irwin Union Bank and handed receivership over to the Federal Deposit Insurance Corporation (FDIC). Then, in lightning quick fashion orchestrated by the FDIC, Ohio-based First Financial swept in and purchased the failed banks, assuming responsibility for roughly 2.5 billion in deposits.

If people were expecting some nightmare banking scenario to follow, they would have been disappointed. The acquisition of Irwin here in Traverse City and around the Midwest proceeded like clockwork. The Irwin banks were shuttered on Friday, and on Saturday, each reopened as First Financial. Over the next few months, First Financial execs regularly flew in from Ohio to meet with local clients here in TC, and the branch mounted an extensive communications campaign to tell local consumers about their new bank.

By last February, the TC branch was completely absorbed into the well-capitalized First Financial, with its software fully integrated and its original staff intact.

Most important of all, the management and staff have been able to make loans in the ten months since the acquisition – something they had a hard time doing earlier, says Randy Williams, the Traverse City market president under both Irwin Union and First Financial. He says the branch's supply of money for lending had been tight before First Financial's purchase.

Though the TC branch of Irwin was ultimately entangled its parent institution's woes, Williams describes its balance sheet as "relatively clean" when First Financial acquired it.

First Financial was able to tackle Irwin Union thanks to its conservative operating practices and stable market, says Roger Furrer, First Financial regional president for Greater Dayton and Michigan. "We operate in a fairly steady economic situation in southern Indiana and Ohio and in Kentucky, without the booms and busts that you find elsewhere," he says.

And the bank wasn't exposed to the meltdown in derivatives – mortgages packaged into risky securities – outside its home market. "That just wasn't part of the operating strategy," says Furrer.

He adds, "And we always kept our capital levels well above the target levels that the regulators set for us."

That doesn't mean First Financial has been immune to the fray of the financial markets. The FDIC asked First Financial to participate in the Troubled Asset Relief Program (TARP) as part of its drive to increase the general level of liquidity in the nation's banks, says Furrer, and the bank complied, accepting $80 million in TARP funds. Soon after, it held two public offerings to improve its capital position. "Ultimately, the second one led to the repayment of the TARP funds," he says.

Now it seems the bank is poised for success, and considers its branch in fast-growing northern Michigan an asset – a complement to its stable, rural base of business in Indiana, Kentucky and Ohio. The Traverse City-based portfolio includes loans to consumers, as well as to wineries, oil and gas concerns, destination resorts and other businesses.

In return, First Financial has given its new addition wealth management services, which cover investments, insurance and retirement planning. "That's a big improvement in the overall products that we will be able to deliver in the market," says Furrer.

Last year, First Financial was named a Small Business Administration lender of the year on the strength of its guaranteed loans for business start-ups and expansions in its home market. The SBA also considers it a preferred lender, which "allows us to document and close the transaction and then inform the SBA that it has been done," Furrer says.

The SBA, along with the U.S. Department of Agriculture, provides loan guarantees to encourage banks to increase their lending to businesses so they can expand employment. In this regard, First Financial's capabilities dovetail with one of the Traverse City office's strengths, Williams says. "We do a lot of SBA and USDA lending, so we're going to be a good complement to that market."

And if that results in more jobs in the region, more than just First Financial's customers will be applauding the acquisition. BN

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