MiddletownJournal.com

The landscape of the financial market is changing, and experts say there is no way to be certain how many hills are left to climb, or just how the terrain might look when all is said and done.

"We all depend on the financial system. Businesses and consumers need to have access to credit. That's how this thing that seems to be going on Wall Street affects the whole economy," said William Craighead, assistant professor of economics at Miami University.

And while the U.S. Treasury is already injecting the $700 billion in bailout funds to troubled institutions, for some it may already be too late, Craighead said.

What is clear is that more banks will fail and jobs will be lost and it may take years to wade through the mess, he said.

Ohio gets hit

Cleveland-based National City Bank, which — weakened by soured mortgage loans — agreed to a $5.6 billion takeover by PNC Financial Services Group of Pittsburgh, Pa. The deal is expected to close by year's end, officials said.

PNC will be one of the first banks to tap into the U.S. Treasury's Capital Purchase Program for a bank acquisition. Although the program was meant to encourage banks to loan again, healthy institutions can use it to take over troubled banks. PNC intends to use $7.7 billion from the program, officials said.

National City was already planning to cut 4,000 of its 29,000 jobs nationwide in the next three years. The company employs about 2,500 in southwest Ohio. PNC officials said they already plan more than $1 billion in cuts and a reduction of about 10 percent of its joint operating costs.

"There's going to be some consolidation, but the impact for the most part for the customer-facing people and the people who support them directly will not be affected," PNC spokesman Brian Goerke said.

The fate of the National City location set to open in Middletown is also still undetermined as a result of the acquisition, said Todd Morgano, spokesman for the bank.

National City joined Bear Stearns, Merrill Lynch, Wachovia and Washington Mutual on the list of major U.S. financial institutions swallowed up in the subprime mess.

Meanwhile, Cincinnati-based Fifth Third Bancorp just reported an $81 million loss for the third quarter. Almost right after that, the bank announced it would be taking a $3.45 billion federal bailout as part of the U.S. Department of Treasury's voluntary Capital Purchase Program.

It has since turned some of those funds around to assume the deposits and $36 million in assets from Freedom Bank of Florida, which was seized by regulators last week. As of Nov. 3, Freedom's four offices opened at Fifth Third branches. Freedom Bank was the 17th bank to be seized by regulators this year, and while Fifth Third officials have not announced any plans to lay off workers, analysts say the bank has enough trouble of its own, never mind the competition it is trying to take over.

Forging ahead

However, such slow economic times may be just the ticket for smaller and healthier institutions.

Institutions like Hamilton-based First Financial Bank, which reported a net income profit of $5.7 million and also just asked to participate in the Treasury's voluntary capital program.

"This additional capital will improve our already strong capital levels, increase our lending capacity, and better position us to take advantage of opportunities to advance our strategic growth plans," said Claude Davis, president and CEO of First Financial.

The bank has been increasing its presence in the Tri-State, opening new branches in Indianapolis and Kettering and constructing new branches in Crown Point, Ind., and Madeira.

While no one wishes for a poor financial climate, First Financial has never been in a better position to expand, acquire troubled institutions and add jobs, Davis said.

"This is an opportunist time for us. It presents us with more opportunities for good clients and good people for us to hire," he said. "Acquisition is on the books and if we find the right opportunity we are certainly going to take a look at it."

Contact this reporter at (513) 705-2843 or jheffner@coxohio.com.