CHICAGO - Old Second Bancorp, Inc. (NASDAQ: NASDAQ:OSBC), parent company of Old Second National Bank, has agreed to purchase five Illinois branch locations from First Merchants (NASDAQ:FRME) Corporation (NASDAQ: FRME), the parent company of First Merchants Bank. This acquisition will see Old Second assuming approximately $304 million in deposits and acquiring around $12 million in loans. Old Second will pay a 7.5% deposit premium, translating to an estimated $23 million in cash consideration to First Merchants.
The branches involved in the deal are situated in the Southeast Chicago Metropolitan Statistical Area (MSA), a move that bolsters Old Second's presence in the region. The transaction aligns with Old Second's growth strategy and expands its branch network, while First Merchants completes its exit from the suburban Chicago market.
The branches will continue to operate under the First Merchants brand until the closure of the deal, which is anticipated to occur near the end of 2024, subject to regulatory approval. Upon completion, the branches will be rebranded as Old Second locations.
Both financial and legal advisors were involved in the arrangement, with Keefe, Bruyette & Woods, Inc. and Nelson Mullins Riley & Scarborough LLP advising Old Second Bancorp, and Stephens Inc. and Dentons Bingham Greenebaum LLP advising First Merchants Corp .
Old Second Bancorp, headquartered in Aurora, Illinois, celebrated its 150th anniversary in 2021 and offers a comprehensive range of banking services. As of June 30, 2024, Old Second reported approximately $5.7 billion in assets, $4.5 billion in deposits, and $4.0 billion in loans.
First Merchants Corporation, based in Muncie, Indiana, operates First Merchants Bank and First Merchants Private Wealth Advisors. Its common stock is traded on the NASDAQ Global Select Market System.
The announcement includes forward-looking statements, which are subject to various risks and uncertainties that could affect the timing, realization of anticipated benefits, and integration of the branch operations. These factors are detailed in Old Second Bancorp’s regulatory filings with the U.S. Securities and Exchange Commission.
This news article is based on a press release statement from Old Second Bancorp, Inc. and First Merchants Corporation.
In other recent news, First Merchants Corporation announced a cash dividend of $0.35 per share, demonstrating its commitment to shareholder interests. The corporation also reported a strong second quarter, with notable growth in net interest income and non-interest income, despite a provision expense due to a deteriorating business loan. Analyst firms Keefe, Bruyette & Woods, Piper Sandler, and Stephens have adjusted their price targets for First Merchants, maintaining positive ratings based on the company's performance and future prospects. These adjustments reflect expectations of continued balance sheet growth, robust profitability, and positive future credit quality. First Merchants is also actively seeking acquisition opportunities in Indiana, Ohio, and Michigan, indicating ongoing discussions with potential merger and acquisition partners. Despite the provision expense that impacted earnings, the corporation's focus on organic growth and prudent capital management positions it for continued success in the upcoming quarters.
InvestingPro Insights
As First Merchants Corporation (NASDAQ: FRME) finalizes the sale of five Illinois branch locations to Old Second Bancorp, Inc., it's worth noting some of the financial metrics and analyst insights that could influence investor perception of this deal.
First Merchants Corporation has shown a commitment to shareholder returns, having raised its dividend for 12 consecutive years, with a current dividend yield of 3.63%. This aligns with the company's history of maintaining dividend payments for 36 consecutive years, underscoring a stable financial policy that could reassure investors despite the divestment of branches. Additionally, four analysts have revised their earnings upwards for the upcoming period, signaling confidence in the company's financial outlook post-transaction.
InvestingPro Data for First Merchants Corporation reveals a market capitalization of $2.25 billion and a price-to-earnings (P/E) ratio of 12.36, which adjusts slightly to 12.2 when considering the last twelve months as of Q2 2024. This valuation metric suggests that the company is reasonably priced relative to its earnings. However, it's important to note that the company has experienced a revenue decline of 11.08% over the last twelve months as of Q2 2024, which may reflect the challenges faced in the current economic environment.
In terms of stock performance, First Merchants Corporation has shown resilience with a strong return over the last three months, posting a 16.9% price total return, which is particularly relevant for investors looking at short-term gains.
For those interested in further insights and a deeper dive into First Merchants Corporation's financials, InvestingPro offers additional tips and data points to help investors make more informed decisions. There are currently 7 more InvestingPro Tips available for First Merchants Corporation at https://www.investing.com/pro/FRME, providing a comprehensive analysis of the company's performance and future outlook.
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