DEFM14A: First Savings to Merge with First Merchants in $245M Stock Deal

First Savings Financial Group will merge into First Merchants Corporation in an all-stock transaction valued at approximately $245.4 million, creating a combined entity with $21.1 billion in assets.

Summary

• First Savings Financial Group, Inc. (First Savings) will merge with and into First Merchants Corporation (First Merchants) in an all-stock transaction, with the merger agreement dated September 24, 2025.
• Each share of First Savings common stock will be converted into the right to receive 0.85 shares of First Merchants common stock, with cash paid for any fractional shares.
• The implied value of First Savings common stock was approximately $33.60 per share on September 24, 2025, and $31.45 per share on October 15, 2025, based on First Merchants' closing prices.
• The aggregate implied transaction value is approximately $245.4 million, based on 6,976,558 First Savings shares and 431,155 stock options, and First Merchants' closing price of $39.53 on September 19, 2025.
• The combined company will operate 127 full-service branch locations across Indiana, Ohio, and Michigan.
• Pro forma, the combined company will have approximately $21.1 billion in assets, $15.2 billion in loans, $16.5 billion in deposits, and $2.6 billion in total shareholders' equity, based on data as of June 30, 2025.
• The merger is expected to be completed during the first quarter of 2026, pending regulatory and shareholder approvals.
• First Savings' Board of Directors unanimously recommends shareholders vote FOR the Merger Agreement, the Merger-Related Compensation Proposal, and the Adjournment Proposal.
• The merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.
• First Savings shareholders are not entitled to dissenters' rights under Indiana law.
• Estimated pre-tax annual cost savings of approximately $15.8 million are anticipated, phased in 67% in 2026 and 100% in 2027, with 4% growth from 2028.
• A total pre-tax restructuring charge of approximately $29.0 million is estimated in connection with the mergers.
• First Savings executive officers are expected to receive an aggregate of $6.0 million in cash payments and accelerated equity awards due to change-in-control provisions.

Sentiment

Score: 7

Explanation: The merger is presented as strategically beneficial with expected EPS accretion and significant cost savings, indicating a positive outlook for the combined entity. However, the dilution to tangible book value and the inherent risks of integration and market fluctuations temper the overall sentiment. The premium offered to First Savings shareholders is also a positive for them.

Positives

• The merger expands First Merchants' business into demographically attractive markets in southern Indiana.
• It will increase First Merchants' core deposit base, an important funding source for the combined entity.
• The combined company will benefit from an experienced management team and quality bank branches from First Savings.
• First Merchants will have the opportunity to cross-sell its broad array of products to First Savings' client base.
• The transaction is expected to be accretive to First Merchants' estimated earnings per share (excluding one-time transaction costs) in 2026, 2027, and 2028.
• Estimated pre-tax annual cost savings of approximately $15.8 million are anticipated, phased in 67% in 2026 and 100% in 2027, with 4% growth from 2028.
• The merger offers a liquidity event for First Savings shareholders due to First Merchants' significantly larger market capitalization and higher historical trading volume.
• First Merchants pays a higher regular quarterly cash dividend ($0.306 per share adjusted for the 0.85 exchange ratio) compared to First Savings' current quarterly dividend of $0.16 per share.
• The combined company will achieve greater scale and geographic diversity, enhancing its capabilities and strengthening its competitive position.

Negatives

• The transaction is expected to be dilutive to First Merchants' estimated tangible book value per share at closing and in 2026 and 2027.
• First Savings is expected to incur approximately $11.8 million in pre-tax merger-related expenses.
• First Merchants is expected to incur approximately $17.2 million in pre-tax merger-related expenses, excluding contract termination fees.
• A total pre-tax restructuring charge of approximately $29.0 million is estimated in connection with the mergers.
• The fixed exchange ratio means First Savings shareholders are not protected against a decline in First Merchants' stock price, unless the decline relative to a broad bank market index is significant enough to trigger a termination right for First Savings (which First Merchants could counter by increasing the exchange ratio).

Risks

• Combining the two companies may be more difficult, costly, or time-consuming than expected, and anticipated benefits and cost savings may not be fully realized.
• The value of the consideration received by First Savings shareholders will fluctuate with First Merchants' common stock market price.
• The merged company's allowance for credit losses may not be adequate to cover actual loan losses, especially given that approximately 65% of the combined loan portfolio consists of commercial real estate and commercial lines of credit and term and development loans.
• Deterioration in loan quality will adversely affect the merged company's results of operations and financial condition.
• Changes in interest rates may reduce the merged company's net interest income.
• Changes in economic conditions and the geographic concentration of the merged company's markets (Midwest Region of the United States) could adversely affect its financial condition.
• The combined company may be unable to retain First Savings personnel successfully after the merger, and its ability to implement growth strategy may be harmed if it cannot attract additional key personnel.
• Anti-takeover defenses in First Merchants' Articles of Incorporation and Bylaws and Indiana law may delay or prevent future mergers.
• If the merger is not completed, the parties will have incurred substantial expenses (First Savings: $11.8 million pre-tax; First Merchants: $17.2 million pre-tax) without realizing the expected benefits.
• The merger agreement may be terminated, which could have a negative impact on First Savings, including the potential payment of a $10,000,000 termination fee under certain circumstances.
• The termination fee and restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire First Savings.
• First Savings shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.
• The fairness opinion received by the First Savings Board of Directors has not been updated to reflect changes in circumstances since September 24, 2025.
• First Merchants will assume First Savings' outstanding debt obligations, and the combined company's level of indebtedness could adversely affect its ability to raise additional capital and meet existing obligations.
• Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company.
• Certain First Savings directors and executive officers have interests in the merger that may differ from the interests of First Savings shareholders generally.
• First Savings and First Merchants will be subject to business uncertainties and contractual restrictions while the merger is pending, which may disrupt operations and employee/customer relationships.
• The shares of First Merchants common stock to be received by First Savings shareholders will have different rights from the shares of First Savings common stock.
• The merger may fail to qualify as a tax-free reorganization for federal income tax purposes, potentially resulting in recognition of taxable gain or loss for First Savings shareholders.

Future Outlook

The merger is expected to be completed during the first quarter of 2026. The transaction is anticipated to be accretive to First Merchants' estimated earnings per share (excluding one-time transaction costs and expenses) in 2026, 2027, and 2028, but dilutive to First Merchants' estimated tangible book value per share at closing and in 2026 and 2027. The combined company expects to realize approximately $15.8 million in pre-tax annual cost savings, phased in 67% in 2026 and 100% in 2027, with 4% growth from 2028.

Management Comments

• We believe the Merger is in the best interests of both companies and our respective shareholders.
• The Merger will bring together two complementary institutions to create a strategically, operationally, and financially strong company that is positioned for further growth.
• The Merger will give the combined company greater scale and geographic diversity, not only for serving existing customers more efficiently, but also for future expansion.
• We believe the Merger will enhance our capabilities to provide banking and financial services to our customers and strengthen the competitive position of the combined organization.
• We strongly support the Merger of our companies.
• First Savings Board of Directors unanimously recommends that you vote FOR the Merger Agreement.

Industry Context

The merger reflects a growing trend toward consolidation in the financial services industry, allowing the combined entity to achieve greater scale, geographic diversity, and enhanced capabilities to compete more effectively in the Midwest banking market. The strategic rationale emphasizes expanding into demographically attractive markets and leveraging cross-selling opportunities, which are common drivers for regional bank mergers seeking efficiency and growth in a competitive landscape.

Comparison to Industry Standards

• Piper Sandler & Co. compared First Savings to a peer group of major exchange-traded banks headquartered in the Midwest with total assets between $1.5 billion and $3.5 billion. First Savings' Price/LTM Earnings Per Share of 8.9x was below the peer group median of 13.3x and mean of 13.7x. First Savings' Price/Tangible Book Value of 109% was below the peer group median of 120% and mean of 122%.
• Piper Sandler & Co. compared First Merchants to a peer group of major exchange-traded banks in the continental US with total assets between $15.0 billion and $25.0 billion (excluding Mechanics Bancorp). First Merchants' Price/Annualized LTM Earnings Per Share of 10.4x was below the peer group median of 13.4x and mean of 14.0x. First Merchants' Price/Tangible Book Value of 145% was below the peer group median of 157% and mean of 165%.
• The transaction metrics for the First Merchants/First Savings merger (Transaction Price / LTM GAAP EPS of 11.1x, Transaction Price / Tangible Book Value Per Share of 138%, Core Deposit Premium of 4.6%, 1-Day Market Premium of 24.9%) were compared to a nationwide group of precedent bank merger and acquisition transactions with target assets between $2 billion and $3 billion.
• The merger's Transaction Price / LTM EPS of 11.1x was below the median (12.2x) and mean (12.6x) of the Nationwide Precedent Transactions.
• The merger's Transaction Price / Tangible Book Value Per Share of 138% was below the median (146%) and mean (142%) of the Nationwide Precedent Transactions.
• The merger's Core Deposit Premium of 4.6% was below the median (7.7%) and mean (8.2%) of the Nationwide Precedent Transactions.
• The merger's 1-Day Market Premium of 24.9% was above the median (18.3%) but below the mean (27.8%) of the Nationwide Precedent Transactions.

Management Changes

Corporate Governance

Related Party Transactions

• Certain executive officers of First Savings and First Savings Bank have employment agreements and long-term incentive awards that provide for cash payments and accelerated vesting of equity awards upon a change in control. The aggregate estimated value for named executive officers is $6.0 million. These agreements are being amended to eliminate the resignation requirement for benefits in exchange for non-competition and non-solicitation covenants enforceable by First Merchants.
• Larry W. Myers, President and CEO of First Savings, will be appointed to the First Merchants Board of Directors and will receive compensation for his service.

Stakeholder Impact

• Shareholders (First Savings): Will receive First Merchants common stock, offering a liquidity event and potentially higher dividends, but will have reduced ownership and voting interest in the larger combined entity. Subject to market fluctuations of First Merchants stock.
• Shareholders (First Merchants): Will not receive any consideration but will continue to own the same number of shares. The merger is expected to be accretive to EPS but dilutive to tangible book value.
• Employees (First Savings): Key employees may experience uncertainty about future roles. Those not offered employment with substantially similar salary and bonus opportunities or terminated without cause will receive severance benefits (two weeks of base compensation per year of service, min 4 weeks, max 52 weeks). Employee benefit plans will transition to First Merchants' plans, with service credit recognized for eligibility, vesting, vacation, and severance.
• Executive Officers (First Savings): Will receive significant cash payments and accelerated equity vesting due to change-in-control provisions, subject to non-competition and non-solicitation covenants.
• Customers (First Savings Bank): Will become customers of First Merchants Bank, potentially gaining access to a broader array of products and services from a larger institution.
• Communities (Southern Indiana): The merger is expected to expand First Merchants' business in these markets and maintain quality bank branches.
• Creditors (First Savings): First Merchants will assume First Savings' outstanding debt obligations.

Next Steps

• First Savings shareholders to vote on the Merger Proposal, Merger-Related Compensation Proposal, and Adjournment Proposal at a special meeting on December 19, 2025.
• First Merchants and First Savings to obtain necessary regulatory approvals from the Indiana Department of Financial Institutions (Indiana DFI), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve Board.
• First Merchants to cause shares of its common stock to be issued in the merger to be approved for listing on the Nasdaq Global Select Market.
• First Savings to amend employment agreements and change in control agreements for executive officers to eliminate resignation requirements for severance benefits in exchange for non-competition and non-solicitation covenants.
• First Savings to terminate its Employee Stock Ownership Plan (ESOP) immediately prior to the Effective Time.
• First Savings to terminate and liquidate its supplemental executive retirement agreement (SERP) and director deferred compensation plans immediately prior to closing.
• First Merchants to appoint one current First Savings Board member (Larry W. Myers) to the First Merchants Board of Directors, with renomination commitment through the 2029 annual meeting.
• First Merchants Bank to form a new Bank Advisory Board for at least three years, inviting other First Savings directors.
• The merger is expected to be completed during the first quarter of 2026.

Key Dates

Recommendation

The merger offers a premium to First Savings shareholders based on recent trading prices, and the combined entity is projected to achieve EPS accretion and significant cost synergies, which are positive long-term indicators. However, the immediate dilution to tangible book value for First Merchants, along with the inherent risks of integration, regulatory uncertainties, and potential employee retention challenges, suggest a 'hold' stance. Investors should monitor the integration process, realization of synergies, and market conditions for First Merchants' stock post-merger before making further investment decisions. The fixed exchange ratio also means First Savings shareholders are exposed to First Merchants' stock price fluctuations until closing.

Keywords

Merger, Acquisition, Banking, Financial Services, First Merchants Corporation, First Savings Financial Group, FRME, FSFG, Stock Exchange, SEC Filing, Corporate Governance, Risk Factors, Shareholder Vote, Indiana, Ohio, Michigan, Community Banking, Financial Holding Company