Trustcorp to merge with Society Corp. of Cleveland

TOLEDO, Ohio -- The Society Corp. of Cleveland has come to the rescue of Trustcorp Inc., a financially troubled bank holding company, with an agreement for the merger of Trustcorp into Society.

The announcement Monday came after unanimous votes for approval by boards of directors of Society and Trustcorp to create a three-state financial institution with approximately $16 billion in assets.


The agreement with Toledo's $5.9 billion bank will extend Society's franchises in Ohio, Michigan and Indiana. Society Corp. had total assets of nearly $10 billion at March 31.

Based on Friday's closing stock prices, the deal will be worth $1.4 billion. The combination would make Society the third largest bank holding company in Ohio and the 40th largest in the nation. Society currently is ranked fourth in Ohio and 54th nationally.

Under the agreement, Trustcorp common shareholders will receive 0.75 of a Society Corp. common share for each share of Trustcorp common stock.

Trustcorp, which has been under regulatory scrutiny because of its loan practices, has charged off $76.6 million, which resulted in an $11.4 million loss in fourth-quarter earnings because of bad commercial real estate loans, particularly in the downtown Toledo area.


Six of its top officials, including chairman George Haigh, have left the bank since March.

Trustcorp has also granted Society an option to buy authorized, but unissued, shares of Trustcorp common stock equal to 24.9 percent of the Trustcorp shares that are outstanding.

The merger will be tax free to the Trustcorp shareholders and be accounted for as a pooling of interests.

The agreement requires approval of the shareholders of both banks and regulatory agencies. Shareholder meetings have not been set, but will be held soon as possible.

The merger is expected to be completed by the end of the year, Society and Trustcorp officials said.

'This combination represents an extraordinary opportunity for Society,' said Robert W. Gillespie, chairman and chief executive officer of Society Corp. 'The merger of these two excellent financial services companies significantly broadens Society's strong presence statewide in Ohio and provides an interstate foothold in the Michigan and Indiana markets.'

Chester Devenow, Trustcorp Inc.'s chairman, said, he was pleased with the agreement.

'We believe our partnership with a quality company like Society Corp. will be in the best interest of our shareholders, our customers, our employees and the communities we serve,' Devenow said.

Devenow said Trustcorp shareholders would own approximately 35 percent of Society stock after the merger and will be represented on Society's board of directors.


Trustcorp's board on May 10 announced its decision to seek a sale of the bank or part of its assets to improve shareholder value.

Gillespie said 'substantial additional contributions' to Trustcorp's loan loss reserves will be necessary. Gillespie said Society is known for its credit quality and will apply its own 'rigorous standards to this portfolio.'

Trustcorp's acquisitions gave it access to South Bend and Elkhart, Ind., and Ann Arbor, Mich., and a smaller presence in Indianapolis and Fort Wayne, Ind. Society said it intends to remain in those areas.

Gillespie said Trustcorp has several non-bank subsidiaries, including an insurance agency, a travel agency and an investment advisory unit that will 'enhance Society's product capabilities in the future.'

Society has bank affiliates based in Cleveland, Canton, Columbus and Dayton with more than 200 banking offices across Ohio.

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