Driven by a strong balance sheet and focus on improving market share, First Merchants Corporation FRME announced its second merger deal this year. The company has signed a definitive agreement under which Ameriana Bancorp will merge with First Merchants.
Expected to close in the fourth quarter of 2015, the deal is still subject to regulatory approvals and consent from shareholders of Ameriana Bancorp. Further, full integration is likely to be completed by second quarter of 2016.
Under terms of the deal, shareholders of Ameriana Bancorp will receive 0.9037 shares of First Merchants for each share held. Hence, based on the closing price of First Merchants’ share on Jun 26, the transaction value is projected to be nearly $68.7 million.
As of Mar 31, 2015, Ameriana Bancorp had assets worth $483 million, deposits of $391 million and loans of $325 million. Following completion of the merger, the combined entity will have $6.4 billion in total assets. Further, total banking offices will rise to 126, located in 27 Indiana counties and in 2 counties each in Ohio and Illinois.
Michael C. Rechin, President and Chief Executive Officer of First Merchants, said, “With the addition of significant deposits in Henry and Madison counties, First Merchants will hold the lead market share position. Our partnership will add new neighboring communities of Greenfield, New Palestine, New Castle, Knightstown and Morristown. The merger will also add five locations to our thirteen banking centers in Hamilton County, the fastest growing Indiana market.”
Moreover, upon completion, the merger will be 1% accretive to earnings in 2016; while for 2017, it will likely support earnings in the range of 3–4%. Also, the deal would lead to pre-tax cost savings of $9.8 million and roughly 6–8 branches will be consolidated.
Of late, First Merchants seems to be on an acquisition spree. In Apr 2015, the company completed the merger deal with C Financial Corporation based in Columbus, OH (announced in Jan 2015). Earlier in Nov 2014, First Merchants had announced the closure of its merger with Community Bancshares, Inc. Further, in Jun 2015, the company announced the sale of First Merchants Insurance Group (FMIG), a licensed insurance agency, to USI Insurance Services for $18 million.
We believe First Merchants’ strong cash position and stable balance sheet will support its inorganic growth going forward. Further, the company has been consistently focused on improving efficiency and expense management amid a low interest rate environment.
Currently, First Merchants carries a Zacks Rank #4 (Sell). Better-ranked banks include Commerce Bancshares, Inc. CBSH, Huntington Bancshares Incorporated HBAN and German American Bancorp Inc. GABC. All these stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment