The deal between Northwest and MutualFirst will create a bank with $12.7bn in assets and $10.3bn in deposits, serving through 221 branches

Northwest Bancshares

Image: Northwest to acquire MutualFirst. Photo: Courtesy of Gerd Altmann/Pixabay

Pennsylvania-headquartered Northwest Bancshares has signed an agreement to acquire MutualFirst Financial for $346m.

MutualFirst Financial, based in Muncie, Indiana, was established in 1889. The bank has $2.1bn in assets, $1.6bn in total deposits and $1.5bn in loans. It operates 39 full-service retail financial centres, offering a full range of financial services such as commercial and business banking, personal banking, wealth management and trust services.

Under the terms of the agreement, the bank will pay MutualFirst Financial $39.89 per share, based on closing stock price on 23 October 2019. The value equates to price to tangible book value ratio of 172%.

MutualFirst shareholders will receive 2.4 shares of Northwest common stock for each common share of MutualFirst. The exchange ratio is fixed and the transaction is expected to qualify as a tax-free exchange for the shareholders.

The transaction is expected to close in Q2 of next year

The merger is expected to close in the second quarter of next year after customary conditions, including regulatory and MutualFirst shareholders’ approvals, are received.

After the closure of the deal, the merger will create a bank with approximately $12.7bn in total assets and $10.3bn in deposits, offering banking services through 221 branches across four states.

The deal will immediately be accretive to Northwest’s earnings per share, excluding merger costs, and increase its stand-alone earnings per share by more than 10% on a run-rate basis. It will also provide access to a new region with prospective customers.

Northwest president and CEO Ronald J Seiffert said: “Indiana is an attractive market with a business friendly environment which we have targeted as part of our Mid-Atlantic and Midwest expansion plans.

“MutualFirst represents a unique and sizable opportunity that is highly accretive to both Northwest’s franchise value and shareholder value. Maintaining MutualFirst’s executive management team and the presence of similar cultures allows us to consistently serve the customer base with little to no disruption.

“We believe MutualBank’s customers and employees will embrace Northwest’s culture and values and appreciate the additional products and services of a larger community bank which should also create additional growth potential.

“Northwest will maintain a robust capital position following the merger, giving the combined company significant capital to pursue future acquisitions, pay attractive dividends and continue to grow organically, all of which enhance shareholder value.”

MutualFirst president and CEO David W Heeter will be named regional CEO and market leader for Northwest’s Indiana franchise after the merger. He will report directly to Seiffert.

Heeter said: “During our proud 130 year history, MutualBank has been committed to serving our clients and local communities. Through a consistent level of superior quality service, our dedicated staff has grown a loyal commercial and retail customer base. We are very excited about joining the Northwest team.

“Northwest has demonstrated a similar commitment to its clients, employees and the communities it serves, shares our core values and has an outstanding record of enhancing shareholder value.”

According to Northwest, the book value dilution, including the restructuring costs, of nearly $0.33, or 3.5%, are expected to be earned back in about 2.8 years.