8-K: First Merchants to Acquire First Savings Financial Group

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, with FSFG merging into First Merchants, and First Savings Bank merging into First Merchants Bank.
• The transaction is valued at approximately $241.3 million, or $33.60 per share of FSFG common stock, based on First Merchants' closing price of $39.53 on September 24, 2025.
• Each FSFG shareholder will receive 0.85 shares of First Merchants common stock for each FSFG common stock owned.
• The merger is expected to close in the first calendar quarter of 2026, with system integration anticipated in the second quarter of 2026.
• The combined entity will have approximately $21.0 billion in assets and operate 127 branches across Indiana, Michigan, and Ohio.
• First Merchants anticipates earnings per share accretion of approximately 11% in 2027, the first full year of combined operations, with a tangible book value earnback period of 3.0 years.
• Estimated cost savings are 27.5% of FSFG's noninterest expense, with 67% phased-in during the last 9 months of 2026 and 100% thereafter.
• Larry W. Myers, FSFG's President and CEO, will join the First Merchants Board of Directors, and Tony Schoen, FSFG's CFO, will oversee FSFG's specialty business lines post-closing.

Sentiment

Score: 8

Explanation: The filing announces a strategic acquisition with clear financial benefits, including significant EPS accretion and a reasonable TBV earnback period. The expansion into new markets and integration of specialty lending lines are positive for future growth and diversification. While there is TBV dilution and integration risks, the overall tone and projected outcomes are highly favorable.

Positives

• The combination creates a larger banking franchise with over $20 billion in assets, ranking 4th in Indiana deposit market share.
• Expands First Merchants' geographic footprint into Southern Indiana, including the Louisville MSA, offering new commercial banking opportunities.
• FSFG's nationally-focused specialty lending lines (Triple-Net-Lease Finance, SBA Lending, First Lien HELOCs) are attractive and will be invested in to support diversified loan growth and enhance fee income.
• Expected 11% EPS accretion for First Merchants in 2027, the first full year of combined operations.
• The tangible book value dilution is manageable with an estimated earnback period of 3.0 years using the crossover method.
• The lack of market overlap is expected to preserve customer-facing jobs, ensuring continuity for clients.
• The transaction is intended to qualify as a tax-free reorganization for FSFG shareholders (except for cash in lieu of fractional shares).
• First Merchants has a strong historical track record of organic growth (8.2% CAGR since 2014) and successful acquisitions, indicating strong integration capabilities.

Negatives

• An estimated 4.8% tangible book value dilution for First Merchants at closing.
• A termination fee of $10.0 million is payable by FSFG to First Merchants under specified circumstances, including if FSFG terminates for a superior acquisition proposal.
• Estimated after-tax merger charges of $24.5 million.
• An anticipated annual after-tax reduction of approximately $0.8 million in noninterest income related to the Durbin interchange impact.

Risks

• The risk that the businesses of First Merchants and First Savings will not be integrated successfully or that such 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.
• Possible changes in monetary and fiscal policies, and laws and regulations.
• The effects of easing restrictions on participants in the financial services industry.
• The cost and other effects of legal and administrative cases.
• Possible changes in the creditworthiness of customers and the possible impairment of collectability of loans.
• Fluctuations in market rates of interest.
• Competitive factors in the banking industry.
• Changes in banking legislation or regulatory requirements of federal and state agencies applicable to bank holding companies and banks.
• Continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends.
• 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 associated with First Merchants' business.
• The impacts of epidemics, pandemics or other infectious disease outbreaks.

Future Outlook

First Merchants expects the merger to be accretive to 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 combined company anticipates achieving 27.5% cost savings from FSFG's noninterest expense, fully phased-in after 2026. First Merchants plans to continue investing in FSFG's specialty business lines to support diversified loan growth and enhance fee income.

Management Comments

• "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." Mark Hardwick, CEO of First Merchants.
• "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." Larry W. Myers, President and Chief Executive Officer of First Savings.
• "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." Mike Stewart, President of First Merchants.

Industry Context

This merger reflects a continuing trend of consolidation within the regional banking sector, driven by the pursuit of scale, expanded geographic reach, and diversification of revenue streams. The combined entity will become the second largest financial holding company headquartered in Indiana and the fourth largest in terms of deposit market share within the state, positioning it strongly against larger national and regional competitors. The integration of First Savings' specialty lending lines, such as Triple-Net-Lease Finance, SBA Lending, and First Lien HELOCs, into First Merchants' larger balance sheet aligns with an industry focus on specialized, higher-growth, and fee-income generating segments to offset traditional banking pressures.

Comparison to Industry Standards

• The combined entity will have approximately $21.0 billion in assets, making it the second largest financial holding company headquartered in Indiana, demonstrating significant regional scale.
• The pro forma deposit market share in Indiana will be 4th, indicating a strong competitive position within the state.
• First Merchants' historical 10-year total return (2014-2024) of 230.1% outperformed the KBW NASDAQ Regional Banking Index (200.3%), suggesting a strong track record compared to regional banking peers.
• The expected 11% EPS accretion and 3.0-year tangible book value earnback period are generally considered favorable metrics for bank mergers, often aligning with or exceeding industry averages for successful integrations.
• The estimated cost savings of 27.5% of FSFG's noninterest expense is a robust target, indicative of potential operational efficiencies often sought in such consolidations.

Management Changes

Corporate Governance

Legal Proceedings

• No claims of any kind, actions, suits, proceedings, arbitrations, or investigations pending or threatened that could reasonably be expected to have a Material Adverse Effect on either party or the transaction are disclosed.

Related Party Transactions

• Directors and certain executive officers of FSFG and/or First Savings Bank have entered into voting agreements with First Merchants, agreeing to vote their FSFG common stock in favor of the merger. These individuals collectively own 1,002,454 shares of FSFG common stock.

Stakeholder Impact

• Shareholders of FSFG will receive First Merchants common stock in a tax-free exchange (except for fractional shares), gaining ownership in a larger, more diversified entity with expected EPS accretion.
• Shareholders of First Merchants are expected to benefit from EPS accretion and strategic expansion, though with initial tangible book value dilution.
• Employees of FSFG are expected to see customer-facing jobs preserved due to lack of market overlap. They will participate in First Merchants' benefit plans, with prior service recognized for eligibility, vesting, vacation, and severance. Severance benefits are outlined for non-agreement employees.
• Customers of FSFG are expected to benefit from access to a larger bank's resources and product offerings, with continuity of service through preserved customer-facing jobs and a local advisory board.
• Directors of FSFG will see one director join the First Merchants Board, and others may be invited to an FMB Advisory Board, maintaining some influence and local representation.
• Communities in Southern Indiana are expected to benefit from First Merchants' stated intention to invest in and grow in these markets, including the continuation of the First Savings Charitable Foundation.

Next Steps

• First Savings will convene a shareholder meeting to approve the Merger Agreement.
• First Merchants will file a Registration Statement on Form S-4 with the SEC.
• First Merchants and First Savings will seek requisite regulatory approvals from the Federal Reserve Board, Indiana DFI, and FDIC.
• First Merchants will cause its shares to be approved for listing on the Nasdaq Global Select Market.
• First Merchants will appoint one current FSFG director to its Board of Directors.
• First Merchants Bank will form a new Bank Advisory Board, inviting certain FSFG directors.
• The merger is expected to close in Q1 2026.
• System integration for the combined company is expected in Q2 2026.

Key Dates

Recommendation

The acquisition of First Savings Financial Group by First Merchants Corporation is strategically sound, expanding First Merchants' footprint into high-growth Southern Indiana markets and integrating profitable specialty lending businesses. The projected 11% EPS accretion for First Merchants in the first full year of combined operations (2027) and a manageable 3.0-year tangible book value earnback period are attractive financial outcomes. First Merchants' proven track record of successful integrations and shareholder value creation further supports the positive outlook. While there is initial TBV dilution and integration risks, the long-term strategic benefits and financial projections make this a compelling investment opportunity.

Keywords

Bank Merger, Financial Acquisition, Regional Banking, Indiana Banking, First Merchants Corporation, First Savings Financial Group, FSFG, FRME, Specialty Lending, SBA Lending, Triple-Net-Lease Finance, HELOCs, Deposit Market Share, Louisville MSA, Bank Holding Company