Old National to approach Chicago in $ 2.5 billion merger with First Midwest


Dive brief:

  • Old National Bank based in Evansville, Indiana and First Midwest Bank based in Chicago announced a merger into shares On Tuesday, that would create a $ 45 billion financial entity and give Old National – the surviving brand – a presence in the country’s third largest city.
  • The deal, worth $ 2.5 billion, according to the Chicago Tribune – is expected to close at the end of this year or early 2022, pending regulatory approval. Former National CEO Jim Ryan, who will retain that title after the merger, said on a call to investors on Tuesday: “We hope to close in the fourth quarter and then get to work on the conversion in the first quarter of 2022. “
  • The combined entity will have dual headquarters: Evansville for the holding company and the bank, and Chicago for commercial loans and community banking. The board will be split evenly – eight members from Old National and eight from First Midwest, but the first investors will own 56% of the company after the merger.

Dive overview:

The merger would make Old National the sixth largest bank in the Midwest and give it a point of entry into the region’s largest city. It previously had three branches in Illinois, none of which are near Chicago. First Midwest owns a 2.7% share in the Chicago market, the ninth largest in the region, according to 2020 data from the Federal Deposit Insurance Corp. (FDIC).

Several mergers and acquisitions in 2021 involved giving the surviving institution access to a coveted geography. M&T Bank, for example, agreed to buy People’s United, based in Bridgeport, Connecticut, in February, in part to expand its presence in the Boston market.

Others this year, such as the purchase of Bryn Mawr Trust by WSFS or the acquisition of Century Bank by Eastern Bank, have strengthened a local bank‘s footprint around a city like Philadelphia in the former case, or Boston in the latter case.

Like a number of recent mergers, the Old National-First Midwest deal creates a dual-bureau bank. BancorpSouth and Cadence Bank, which announced plans to merge in April, said the combined entity would be headquartered in Tupelo, Mississippi and Houston. M&T said it would use the People’s United headquarters in Bridgeport as the New England regional office. And Huntington Bank, which announced in December that it would merge with TCF, said it would run its consumer business from Columbus, Ohio, and its commercial bank from Detroit.

Outside of Evansville, Old National’s footprint includes several clusters near major Midwestern markets such as Minneapolis, Indianapolis, the western suburbs of Detroit, and Madison, Wisconsin. By merging, it is expected to take 108 First Midwest branches, according to the Chicago Tribune – all but about 10 in the Chicago area, according to a branch map released by the two banks on Tuesday.

Together, banks hold $ 34 billion in deposits and $ 33 billion in assets under management. They also identified $ 109 million in cost savings – three-quarters of which are expected to be achieved next year, American banker reported Tuesday.

That aside, the deal would combine Old National’s mortgage and Small Business Administration businesses with First Midwest’s commercial banking arm, giving the surviving bank the ability to revamp digital offerings such as managing commercial treasury.

“It would be difficult for banks our size to build these systems and make the necessary investments,” Ryan said. “Together we can do it.”

Bank CEOs said they had been discussing a deal since January.

“We thought it was a fantastic opportunity, maybe once in a lifetime,” Ryan said on Tuesday’s call.

Following the merger, First Midwest CEO Michael Scudder will assume the role of executive chairman. The surviving bank will also retain other executives from First Midwest – President and COO Mark Sander will assume the same role at the combined bank. The same will be true for the head of community banking, Thomas Prame, and the director of credit, Kevin Geoghegan. Old National will keep its CFO, Brendon Falconer.

Old National and First Midwest have each acquired multiple entities in the run-up to Tuesday’s deal – reaching a total of 16 deals since 2010, according to American banker, including Old National’s 2016 acquisition of Madison-based AnchorBancorp Wisconsin, and First Midwest’s 2017 purchase of Standard Bancshares, which has assets of $ 2.5 billion.

Prior to the transaction, Old National had $ 23.7 billion in assets, while First Midwest had

$ 21.2 billion. First Midwest shareholders will receive 1.1336 Old National common shares for each First Midwest common share they own.

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