DEFA14A: First Savings Financial Group to Merge with First Merchants

First Savings Financial Group, Inc. will merge with First Merchants Corporation in an all-stock transaction valued at approximately $241.3 million, expanding First Merchants' Indiana footprint.

Summary

• First Savings Financial Group, Inc. (FSFG) will merge with and into First Merchants Corporation (First Merchants) in an all-stock transaction.
• Immediately following the merger, First Savings Bank will merge with and into First Merchants Bank.
• FSFG shareholders will receive 0.85 shares of First Merchants common stock for each share of FSFG common stock owned.
• Based on First Merchants' closing stock price of $39.53 on September 24, 2025, the implied merger consideration is $33.60 per FSFG share, totaling approximately $241.3 million.
• The transaction is expected to close in the first calendar quarter of 2026, with system integration scheduled for the second quarter of 2026.
• The merger is intended to qualify as a tax-free reorganization for federal income tax purposes.
• FSFG's directors and certain executive officers have entered into a voting agreement to support the merger.

Sentiment

Score: 8

Explanation: The merger presents a strong strategic fit and is projected to be financially accretive for First Merchants, expanding its market presence and diversifying its business lines. While there is tangible book value dilution, the earnback period is reasonable, and management expresses confidence in the integration and future growth.

Positives

• The combination creates a $20 billion+ asset bank, ranking 4th in deposit market share in Indiana and establishing a statewide footprint for First Merchants.
• First Merchants anticipates approximately 11% earnings per share accretion in 2027, the first full year of combined operations, with fully-phased cost savings.
• The tangible book value earnback period is estimated at 3.0 years using the crossover method, inclusive of all transaction expenses.
• First Merchants finds FSFG's specialty businesses (Triple-Net-Lease Finance, SBA Lending, First Lien HELOCs) attractive and intends to continue investing in them, offering diversified loan growth.
• The lack of market overlap is expected to preserve customer-facing jobs.
• The pro forma tangible common equity to tangible assets is estimated at ~8.7% and CET1 capital ratio at ~10.9% at closing, indicating strong capital positions.
• FSFG's Board of Directors received a fairness opinion from Piper Sandler & Co. stating the merger consideration is fair to FSFG shareholders from a financial point of view.

Negatives

• The transaction will result in a 4.8% tangible book value dilution at closing, inclusive of all transaction expenses.
• An estimated ~$0.8 million annual after-tax reduction in noninterest income is expected due to the Durbin interchange impact.

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, are not guaranteed.
• Possible changes in monetary and fiscal policies, and laws and regulations, could impact the combined entity.
• The cost and other effects of legal and administrative cases could adversely affect the combined company.
• Possible changes in the creditworthiness of customers and the possible impairment of collectability of loans pose financial risks.
• Fluctuations in market rates of interest and competitive factors in the banking industry could impact profitability.
• Changes in banking legislation or regulatory requirements applicable to bank holding companies and banks could affect operations.
• The continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends is subject to various factors.
• 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 inherent to First Merchants' business.
• The impacts of epidemics, pandemics, or other infectious disease outbreaks could affect financial performance.

Future Outlook

The combined entity is expected to become a leading Midwest banking franchise with over $20 billion in assets, offering higher growth potential through an expanded Indiana footprint and continued investment in FSFG's specialty lending platforms. First Merchants anticipates attractive earnings accretion and a manageable tangible book value earnback period, positioning the company to 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 CEO of First Savings, stated, '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, commented, '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 represents a continuation of consolidation trends within the regional banking sector, allowing First Merchants to enhance its scale and expand its geographic presence in Indiana, particularly into the high-growth Louisville Metropolitan Statistical Area. The acquisition of First Savings' specialty lending lines also reflects a strategy to diversify revenue streams and loan portfolios beyond traditional community banking, a common approach for regional banks seeking sustainable growth and resilience across economic cycles.

Comparison to Industry Standards

• The combined company will have approximately $21.0 billion in assets, making First Merchants the second largest financial holding company headquartered in Indiana.
• Pro forma, First Merchants will rank 4th in Indiana deposit market share, with significant presence in key MSAs such as Indianapolis (7th rank, 30.0% of pro forma franchise deposits), Louisville/Jefferson County, KY-IN (2nd rank, 8.3% of pro forma franchise deposits), and Muncie, IN (1st rank, 10.9% of pro forma franchise deposits).
• FSFG's specialty lending lines, including Triple-Net-Lease Finance, SBA Lending, and First Lien HELOCs, offer differentiated products that can be scaled on First Merchants' larger balance sheet, potentially enhancing fee income and loan growth compared to traditional community bank models.

Management Changes

Corporate Governance

Related Party Transactions

• All directors of First Savings Financial Group, Inc. and certain executive officers of FSFG and/or First Savings Bank have entered into a voting agreement with First Merchants Corporation, agreeing to vote their shares in favor of the merger.

Stakeholder Impact

• Shareholders of First Savings Financial Group, Inc. will receive First Merchants common stock, participating in the combined entity's future growth and benefiting from the implied premium.
• Employees of First Savings and its subsidiaries will be entitled to participate in First Merchants' employee benefit plans, with prior service recognized for eligibility, vesting, vacation, and severance.
• Employees not offered employment or terminated within 12 months post-merger (other than for cause) will receive severance benefits based on years of service (2 weeks per year, min 4, max 52 weeks).
• Customers of First Savings Bank will become customers of First Merchants Bank, benefiting from an expanded branch network and broader service offerings.
• The communities served by First Savings Bank are expected to continue receiving dedicated service, with First Merchants intending to invest in and grow the acquired markets and continue the First Savings Charitable Foundation.

Next Steps

• First Savings Financial Group, Inc. shareholders must approve the Merger Agreement.
• Requisite regulatory approvals from the Federal Reserve Board, Indiana DFI, FDIC, and other governmental authorities must be obtained.
• The merger is expected to close in the first calendar quarter of 2026.
• System integration for the combined banking business is scheduled for the second quarter of 2026.
• Larry W. Myers, President and CEO of FSFG, will be appointed to the First Merchants Board of Directors.
• First Merchants Bank will form a new Bank Advisory Board, inviting other First Savings directors to join.

Key Dates

Recommendation

For First Savings Financial Group, Inc. shareholders, the recommendation is 'hold' as the company is being acquired in an all-stock transaction with a fixed exchange ratio. The implied merger consideration of $33.60 per share represents a premium based on the acquiring company's stock price at the time of the announcement. Shareholders should hold their shares to receive the First Merchants common stock upon the merger's completion, which is expected to be accretive to the acquiring company's earnings and offers strategic benefits.

Keywords

Banking, Merger, Acquisition, Financial Services, Indiana, First Merchants, First Savings, FSFG, FRME, Community Bank, Specialty Lending, Bank Holding Company