Financial Services

Merger Unites Best of UCFC and First Defiance, CEOs Say

YOUNGSTOWN, Ohio – The merger of United Community Financial Corp. here and First Defiance Financial Corp. in Defiance will combine the best of both institutions’ talent, technology and processes, the institutions’ leaders said Monday.

Donald P. Hileman, president and CEO of First Defiance, and Gary Small, president and CEO of United Community, briefed analysts and journalists on the transaction during a conference call following this morning’s announcement that the two financial institutions would merge. The $473 million stock-only transaction is expected to close in the first quarter of 2020. 

UCFC is the holding company for Home Savings Bank, which was founded here in 1889 and has branches in northeastern Ohio and western Pennsylvania. It also operates an insurance group that includes James & Sons Insurance and Eich Brothers Insurance. 

“We look at this as a very transformative partnership that allows us to position ourselves as a premiere community bank with over $6 billion in assets,” Hileman said. “We expect best-in-class performance with strong ratios for [return on assets] and return on tangible equity.”

First Defiance operates branches and affiliates in northwestern Ohio, northeastern Indiana and southwestern Michigan. The two organizations “really have northern Ohio covered with our combined franchises” and “complimentary geography,” Small said. 

“There’s really no branch overlaps, but we do benefit from similarities in the types of markets we serve,” he continued. “We think we would understand each other’s clients and opportunity very well.”

Both institutions have many of the same competitors, so First Defiance and United Community “know the ways to win,” Hileman said. 

Among the advantages the merger provides will be greater scale and efficiency, enhanced management depth and capacity, and accelerated shareholder value, Hileman said. In addition, he said the two organizations have “shared values” and similar cultures among their leadership teams.  

“We look to that leadership familiarity and strategic focus to help mitigate some of the integration risk,” he said. “We speak of like minds, if you will, in a lot of areas, and think about things in the same way. We haven’t had a lot of conflicts at this point and we would not expect that going forward.” 

In the stock-for-stock transaction, UCFC shareholders will receive 0.3715 shares of First Defiance common stock for each share of United Community stock. Based on the price at the close of business Sept. 6 of $26.32, the transaction is valued at $473 million.

The pro forma combined company will have assets of $6.1 billion, $5
billion in loans and $4.9 billion in deposits, with branches in Ohio,
Michigan, Indiana, Pennsylvania and West Virginia. 

The holding company will be based in Defiance, about 60 miles southwest of Toledo, while the bank will be headquartered in Youngstown. The new company will operate under a name jointly chosen before the deal closes.

After the merger is complete, Hileman will serve as CEO of the holding company and bank before taking over as executive chairman in 2021. Small, meanwhile, will be president of the holding company and bank before taking over as CEO when Hileman moves to chairman.

The new board of directors will be comprised of seven members chosen
by First Defiance, including Hileman and current chairman John Bookmyer,
and six by UCFC, including Small and vice chairman Richard Schiraldi.

Published by The Business Journal, Youngstown, Ohio.