- What’s at stake: First Merchants in Muncie, Indiana, has agreed to pay $241 million in stock for First Savings Financial Group in Jeffersonville.
- Key insight: Acquiring the $2.4 billion-asset First Savings extends First Merchants’ footprint to Louisville, Kentucky.
- Expert quote: The deal is “100% understandable if you want to make a go at a critical metro market in your footprint,” Hovde analyst Brendan Nosal wrote Friday.
This story has been updated with comments from First Merchants’ CEO Mark Hardwick.
First Merchants in Muncie, Indiana, agreed Thursday to pay $241 million in stock for a smaller, in-state competitor. Acquiring the $2.4 billion-asset First Savings Financial Group in Jeffersonville gives First Merchants an entry point into the growing Louisville, Kentucky, banking market, along with exposure to three specialty lending verticals.
“We view First Savings Bank as a meaningful addition to our Indiana deposit network,” First Merchants CEO Mark Hardwick said in a press release. “Its presence strengthens our southern Indiana growth potential.
Founded as a depositor-owned thrift in 1938, First Savings maintains substantial positions in Small Business Administration 7(a), single tenant and first lien home equity lending. The verticals support “steady, diversified loan growth across economic cycles,” Hardwick said.
Access to First Merchants’ larger, more liquid balance sheet should give the First Savings specialty lending businesses ample fuel to grow, Brian Martin, who covers the $18.6 billion-asset First Merchants for Janney Montgomery Scott, wrote Friday in a research note.
“Overall, we see the transaction as a positive, as it is strategically compelling and financially attractive,” Martin wrote.
The 132-year-old First Merchants, parent to First Merchants Bank, ranks as the second-largest Indiana-based bank, behind the $71 billion-asset Old National Bancorp. Even so, First Merchants has only a limited presence in the southern end of the Hoosier State. It has none in the increasingly attractive Louisville region, where both
Already a major player in Chicago, Detroit, Columbus and Indianapolis, First Merchants indicated in a Securities and Exchange Commission filing Thursday that entering Louisville and capitalizing on commercial lending opportunities there was an important component of the strategic calculus that prompted it to buy First Savings.
“It is directly across the river [from Louisville],” Hardwick told American Banker in an interview. “We feel like we can invest in a commercial banking team to take about the average of the greater Louisville MSA.”
First Savings holds a 3% share of Louisville’s $45 billion deposit market, with 12 of its 16 branches located within the Derby City’s metropolitan statistical area.
The deal, expected to close in the first quarter of 2026, will also expand First Merchants’ SBA lending capacity, adding an operation significantly larger than its own. First Savings has closed 7(a) loans totaling $111 million so far in SBA’s 2025 fiscal year, compared to just under $8 million for First Merchants.
“It’s exciting for us to have more scale in the SBA space to be more active throughout our entire footprint,” Hardwick said. “They are making SBA loans nationwide. We’ll continue to do that, but I’m most excited about the fact we can bring that scale to our current markets.”
Ironically, First Savings saw its SBA production nosedive earlier in the decade following the departure of several key executives. The company considered exiting the space, but decided ultimately to
First Savings is also heavily invested in single tenant leasing and first tenant home equity lines of credit. Combined, the two business lines comprise about 58% of the company’s $2 billion loan portfolio.
The single tenant lease portfolio, which is based on properties leased by one business, typically a large, nationally known brand, is characterized by excellent credit, Hardwick said. “They’ve had very few losses. It doesn’t require much in terms of credit marks because its so bond-portfolio-like.”
Hovde analyst Brendan Nosal described First Financial as an outlier among community banks given what he termed its “over-reliance” on specialty lending verticals. At the same time, acquiring First Financial makes outstanding geographic sense, especially in light of the Louisville beachhead it offers First Merchants. It’s “100% understandable if you want to make a go at a critical metro market in your footprint,” Nosal wrote in a research note.
The deal would create a $21 billion institution with 127 branches, $15.3 billion of loans and $16.6 billion of deposits. First Merchants is projecting 11% earnings accretion in the last nine months of 2026, along with cost savings equal to 27.5% of First Savings operating expense base. First Savings CEO Larry Myers is expected to join First Merchants’ board at closing.
According to Hardwick, the deal came together after months of informal discussions with Myers, then about 90 days of more intense negotiation and due diligence that followed the execution of a letter of intent in June.
“I was really pleased after all that work that Larry and his board made the decision we were the right partners,” Hardwick said.
Investor reaction to the news was mixed, with First Merchants’ shares trading down about 1.3% at $39.01 midday Thursday.