8-K: First Merchants to Acquire First Savings in $241M All-Stock Deal

First Merchants Corporation announced a definitive agreement to acquire First Savings Financial Group, Inc. in an all-stock transaction valued at approximately $241.3 million, expanding its Indiana footprint and specialty lending capabilities.

Summary

• First Merchants Corporation (FRME) will acquire First Savings Financial Group, Inc. (FSFG) in an all-stock transaction valued at approximately $241.3 million.
• First Savings shareholders will receive 0.85 shares of First Merchants common stock for each share of First Savings common stock, in a tax-free exchange.
• Based on First Merchants' closing price of $39.53 on September 24, 2025, the implied value for each First Savings share is $33.60.
• First Merchants expects to issue approximately 5.95 million shares of its common stock.
• The merger is anticipated to be accretive to First Merchants' earnings per share by approximately 11% in 2027 (the first full year of combined operations) and for the last 9 months of 2026 with fully-phased cost savings.
• The tangible book value earnback period is estimated at 3.0 years using the crossover method, with a 4.8% tangible book value dilution at closing.
• The combined entity will have approximately $21.0 billion in assets and 127 branches across Indiana, Michigan, and Ohio.
• First Merchants will remain the second largest financial holding company headquartered in Indiana and will rank 4th in deposit market share in Indiana.
• First Savings' specialty business lines, including triple net lease financing, first lien HELOCs, and SBA lending, will be integrated and invested in by First Merchants.
• The transaction is expected to close in the first quarter of 2026, with system integration planned for the second quarter of 2026.

Sentiment

Score: 8

Explanation: The merger presents a strategically sound expansion into a key region with strong financial accretion and a manageable earnback period. The integration of specialty lending lines offers diversified growth potential. While there is initial tangible book value dilution and integration risks, the overall outlook is positive for First Merchants.

Positives

• The acquisition significantly expands First Merchants' presence in Southern Indiana, including the Louisville MSA, enhancing its statewide footprint.
• First Merchants anticipates approximately 11% EPS accretion in 2027, indicating a positive financial impact for shareholders.
• The integration of First Savings' specialty lending verticals (triple net lease financing, first lien HELOCs, and SBA lending) is expected to support steady, diversified loan growth across economic cycles.
• The transaction is structured as a tax-free exchange for First Savings common shareholders.
• First Merchants is an experienced acquirer, having conducted comprehensive due diligence, suggesting a well-planned integration.
• The lack of market overlap between the two companies is expected to preserve customer-facing jobs.
• The combined company will have a strong pro forma capital position with an estimated CET1 ratio of ~10.9% and a total risk-based capital ratio of ~12.6% at closing.
• First Savings' executive team, with an average tenure of ~14 years, brings deep-rooted market experience and a demonstrated track record of asset generation.

Negatives

• The transaction will result in a tangible book value dilution of 4.8% at closing, although an earnback period of 3.0 years is projected.
• Integration of the businesses may be more difficult, time-consuming, or costly than expected, potentially impacting expected synergies.
• There is a risk that expected revenue synergies and cost savings may not be fully realized or realized within the expected timeframe.
• Customer and employee relationships and business operations could be disrupted by the merger.
• Revenues following the merger may be lower than expected.

Risks

• The businesses of First Merchants and First Savings may not be integrated successfully, or integration may be more difficult, time-consuming, or costly than expected.
• Expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame.
• Revenues following the merger may be lower than expected.
• Customer and employee relationships and business operations may be disrupted by the merger.
• The ability to obtain required regulatory approvals or the approval of First Savings common shareholders, and the ability to complete the merger on the expected timeframe, may be hindered.
• Possible changes in monetary and fiscal policies, and laws and regulations, could adversely affect the combined entity.
• The effects of easing restrictions on participants in the financial services industry could increase competition.
• The cost and other effects of legal and administrative cases could impact financial results.
• Possible changes in the creditworthiness of customers and the possible impairment of collectability of loans pose a risk.
• Fluctuations in market rates of interest could negatively affect profitability.
• Competitive factors in the banking industry may intensify.
• Changes in banking legislation or regulatory requirements of federal and state agencies applicable to bank holding companies and banks could impact operations.
• Continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends is not guaranteed.
• Changes in market, economic, operational, liquidity (including the ability to grow and maintain core deposits and retain large uninsured deposits), credit, and interest rate risks are associated with the business.
• The impacts of epidemics, pandemics, or other infectious disease outbreaks could affect operations and financial performance.

Future Outlook

First Merchants anticipates the merger to be accretive to its earnings per share by approximately 11% in 2027, the first full year of combined operations, with a tangible book value earnback period of 3.0 years. The company expects to realize 27.5% of First Savings' noninterest expense as cost savings, phased in at 67% during the last 9 months of 2026 and 100% thereafter. The combined company aims to leverage First Savings' specialty lending platforms for diversified loan growth and capitalize on commercial banking opportunities in the Louisville MSA.

Management Comments

• Mark Hardwick, CEO of First Merchants, stated, "We view First Savings Bank as a meaningful addition to our Indiana deposit network. Its presence strengthens our southern Indiana growth potential. We are also excited about the opportunities the triple net lease financing, first lien HELOCs and SBA lending verticals will offer by supporting steady, diversified loan growth across economic cycles."
• Larry W. Myers, President and Chief Executive Officer of First Savings, commented, "For nearly 90 years, First Savings Bank has combined strong performance for our shareholders with a deep commitment to our community and the development of innovative business lines. By joining with First Merchants, we are ensuring that these values endure while opening the door to exciting new opportunities for customers, employees and investors."
• Mike Stewart, President of First Merchants, noted, "This acquisition represents more than just growth its a reaffirmation of our purpose. We are proud to welcome a community bank that shares our deep-rooted commitment to Hoosier values by serving our communities with genuine care, dependable service and lasting trust. First Savings connection to its southern Indiana communities mirrors our own, and together, we will continue to empower individuals and businesses across Indiana."

Industry Context

This merger reflects a continuing trend of consolidation within the regional banking sector, particularly in the Midwest, as institutions seek to gain scale, expand geographic reach, and diversify revenue streams. The focus on integrating First Savings' specialty lending lines (triple net lease, HELOCs, SBA) aligns with a broader industry strategy to enhance fee income and achieve more resilient loan growth beyond traditional commercial and retail banking, especially in a dynamic interest rate environment. The expansion into the Southern Indiana/Louisville MSA region positions First Merchants to compete more effectively in a growing market, leveraging the established community ties of First Savings.

Comparison to Industry Standards

• The 11% EPS accretion in the first full year of combined operations (2027) is a strong indicator of value creation, generally considered attractive in bank M&A, often exceeding typical accretion targets of 5-10%.
• A tangible book value earnback period of 3.0 years is considered favorable, as many bank mergers target earnback periods of 3-5 years, demonstrating efficient capital deployment.
• The cost savings target of 27.5% of First Savings' noninterest expense is within the higher end of typical bank merger synergy targets, which often range from 20-35%, suggesting a disciplined approach to integration and efficiency.
• The pro forma combined assets of $21.0 billion positions First Merchants as a significant regional player, comparable in scale to other mid-sized regional banks actively participating in consolidation, such as Old National Bancorp or German American Bancorp within the Indiana market.

Management Changes

Corporate Governance

Related Party Transactions

• Members of the Board of Directors of First Savings and certain executive officers of First Savings have entered into a Voting Agreement, agreeing to vote their shares of First Savings common stock in favor of the merger.

Stakeholder Impact

• Shareholders of First Savings will receive First Merchants common stock, participating in the combined entity's future growth and benefiting from the expected EPS accretion.
• Shareholders of First Merchants will experience initial tangible book value dilution but are expected to benefit from long-term EPS accretion and expanded market presence.
• Employees of First Savings and its subsidiaries will be eligible to participate in First Merchants' employee benefit plans, with service recognized for eligibility, vesting, vacation, and severance.
• Certain First Savings employees not offered employment or terminated within 12 months post-merger will receive severance benefits based on years of service.
• Customers of First Savings Bank will become customers of First Merchants Bank, gaining access to a larger banking network and potentially broader product offerings.
• The local communities served by First Savings are expected to benefit from First Merchants' continued investment and commitment, mirroring First Savings' deep-rooted community ties.

Next Steps

• First Savings will hold a shareholder meeting to obtain requisite approval from its common shareholders for the merger.
• First Merchants will file a Registration Statement on Form S-4 with the SEC, including a Proxy Statement for First Savings and a Prospectus for First Merchants.
• First Merchants will seek regulatory approvals from the Federal Reserve Board, Indiana DFI, and FDIC for the merger and bank merger.
• First Merchants will cause its shares to be issued in the merger to be approved for listing on the Nasdaq Global Select Market.
• First Merchants will appoint Larry W. Myers, First Savings' President and CEO, to its Board of Directors.
• First Merchants Bank will form a new Bank Advisory Board, inviting certain First Savings directors to join.
• First Savings will amend employment agreements and terminate certain equity incentive and deferred compensation plans prior to the Effective Time.

Key Dates

Recommendation

The acquisition of First Savings by First Merchants is strategically sound, expanding First Merchants' footprint into attractive Southern Indiana markets and integrating valuable specialty lending platforms. The projected 11% EPS accretion in 2027 and a relatively short 3.0-year tangible book value earnback period indicate strong financial benefits. While initial dilution and integration risks exist, First Merchants' track record as an experienced acquirer and the substantial cost savings potential mitigate these concerns. The deal positions First Merchants for enhanced diversified growth and increased market share, making it an attractive long-term investment.

Keywords

Bank Merger, Financial Acquisition, Regional Banking, Indiana Banking, First Merchants, First Savings, All-Stock Transaction, EPS Accretion, Tangible Book Value, Specialty Lending, SBA Lending, HELOCs, Triple Net Lease Finance