Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - FIRST MERCHANTS CORP | d536579d8k.htm |
| EX-2.1 - EX-2.1 - FIRST MERCHANTS CORP | d536579dex21.htm |
| EX-99.1 - EX-99.1 - FIRST MERCHANTS CORP | d536579dex991.htm |
| EX-10.1 - EX-10.1 - FIRST MERCHANTS CORP | d536579dex101.htm |
 Announces Definitive Agreement to Acquire
CFS Bancorp, Inc.
May 13, 2013
“An Excellent Addition to Our Franchise”
Filed by First Merchants Corporation pursuant to Rule 425 under the Securities Act
of 1933 Subject Company: CFS Bancorp, Inc. Commission
Securities Exchange Act File No: 000-24611 Exhibit 99.2
First Merchants
Corporation |
 THE STRENGTH
OF BIG. THE SERVICE OF SMALL. 2
“An Excellent Addition to Our Franchise”
Forward-Looking Statement
This presentation contains forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements can often, but not always, be identified by the use of words like “believe”, “continue”,
“pattern”, “estimate”, “project”, “intend”,
“anticipate”, “expect” and similar expressions or future or conditional verbs such as “will”, “would”,
“should”, “could”, “might”, “can”, “may”, or similar
expressions. These forward-looking statements include, but are not limited to, statements
relating to the benefits of the proposed merger (the “Merger”) between First Merchants
Corporation (the “First Merchants”) and CFS Bancorp, Inc.
(“Citizens”), including future financial and operating results, cost savings, enhanced revenues, and accretion/dilution to
reported earnings that may be realized from the Merger, as well as other statements of expectations
regarding the Merger, and other statements of First Merchants’ goals, intentions and
expectations; statements regarding the First Merchants’ business plan and growth
strategies; statements regarding the asset quality of First Merchants’ loan and investment
portfolios; and estimates of First Merchants’ risks and future costs and benefits, whether
with respect to the Merger or otherwise. These
forward-looking statements are subject to significant risks, assumptions and uncertainties that may cause results to differ materially
from those set forth in forward-looking statements, including, among other things: the risk that
the businesses of the First Merchants and Citizens will not be integrated successfully or such
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 governmental and stockholder
approvals, and the ability to complete the Merger on the expected timeframe; possible changes
in economic and business conditions; the existence or exacerbation of general geopolitical instability and uncertainty; the
ability of First Merchants and Citizens to integrate recent acquisitions and attract new customers;
possible changes in monetary and fiscal policies, and laws and regulations; the effects of
easing restrictions on participants in the financial services industry; the cost and other
effects of legal and administrative cases; possible changes in the credit worthiness of customers and
the possible impairment of collectability of loans; fluctuations in market rates of interest;
competitive factors in the banking industry; changes in the banking legislation or regulatory
requirements of federal and state agencies applicable to bank holding companies and banks like First
Merchants’ affiliate banks; continued availability of earnings and excess capital
sufficient for the lawful and prudent declaration of dividends; changes in market, economic,
operational, liquidity, credit and interest rate risks associated with the First Merchants’
business; and other risks and factors identified in each of First Merchants’ filings with
the Securities and Exchange Commission. First Merchants does
not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters
discussed in this presentation or news release. In addition, First Merchants’ and
Citizens’ past results of operations do not necessarily indicate either of their
anticipated future results, whether the Merger is effectuated or not.
|
 THE STRENGTH
OF BIG. THE SERVICE OF SMALL. 3
“An Excellent Addition to Our Franchise”
Additional Information
The proposed Merger will be submitted to First Merchants’ and Citizens’ stockholders for
their consideration. In connection with the proposed Merger, First Merchants will file
with the SEC a Registration Statement on Form S-4 that will include a Joint Proxy Statement for First
Merchants and Citizens and a Prospectus of First Merchants, as well as other relevant documents
concerning the proposed transaction.
STOCKHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE CORRESPONDING PROXY
STATEMENT AND PROSPECTUS REGARDING THE MERGER WHEN THEY BECOME AVAILABLE, AS
WELL AS ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, TOGETHER WITH ALL
AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, AS THEY ALL CONTAIN IMPORTANT
INFORMATION. Once filed, you may obtain a free copy of the Proxy Statement
and Prospectus, when they become available, as well as other filings containing information
about First Merchants and Citizens, at the SEC’s Web Site (http://www.sec.gov). You
may also obtain these documents, free of charge, by accessing First Merchants’ Web site
(http://www.firstmerchants.com) under the tab “Investors,” then under the heading
“Financial Information,” and finally under the link “SEC Filings,” or by
accessing Citizens’ Web Site (http://www.mybankcitizens.com) under the “Investor Relations” tab, then under the
“Financial Documents” tab, and finally under the link “SEC Filings.” First Merchants and Citizens and their respective directors and
executive officers may be deemed to be participants in the solicitation of proxies from the
stockholders of First Merchants and Citizens in connection with the proposed Merger. INFORMATION ABOUT THE
DIRECTORS AND EXECUTIVE OFFICERS OF FIRST MERCHANTS IS SET FORTH IN THE DEFINITIVE PROXY STATEMENT
FOR FIRST MERCHANTS’ 2013 ANNUAL MEETING OF SHAREHOLDERS FILED WITH THE SEC ON MARCH 29, 2013
AND FIRST MERCHANTS’ ANNUAL REPORT ON FORM 10-K FILED ON MARCH 15, 2013.
INFORMATION ABOUT THE DIRECTORS AND EXECUTIVE OFFICERS OF CITIZENS IS SET FORTH IN THE DEFINITIVE
PROXY STATEMENT FOR CITIZENS’ 2013 ANNUAL MEETING OF SHAREHOLDERS FILED WITH THE SEC ON
APRIL 2, 2013. Additional
information regarding the interests of those participants and other persons who may be deemed
participants in the transaction may be obtained by reading the Proxy Statement and Prospectus
regarding the proposed Merger when they become available. Free copies of these documents may be obtained as
described in the preceding paragraph. |
 4
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
“An Excellent Addition to Our Franchise”
Pro Forma Highlights
Ticker:
FRME
Headquarters:
Muncie, IN
Founded:
1893
Branches:
96
Assets:
$5.4 Billion
Loans:
$3.6 Billion
Deposits:
$4.3 Billion
Strategic Market Expansion |
 5
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Deal Value:
$114.7 Million*
Consideration
100% Stock; Fixed 0.65 Exchange Ratio, Tax-Free
Implied Price Per Share
$10.49*
Required Approvals:
Regulatory and Shareholder
Key Assumptions:
Cost Savings Estimated to be 30% or $11.5 Million
Pre-Closing Charges of Approximately $10 Million
Estimated One-Time Transaction Costs of $3.5 Million
Credit and OREO Mark of Approximately $58 Million
Capital Impact:
Accretive to EPS Beginning in 2014
Tangible Book Value Earn Back Within Three Years
Minimal Impact to Capital Ratios
Termination Fee:
$4.5 Million
Anticipated Closing:
4 Quarter 2013
“An Excellent Addition to Our Franchise”
* (based on FRME closing price on May 10, 2013)
Transaction Overview
th |
 6
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Headquartered in Munster, Indiana
Founded in 1934
Operates 20 Banking Centers
12 in Northwest Indiana
8 in Northeast Illinois, South of Chicago
Market Capitalization: $101 Million
Balance Sheet as of March 31, 2013
$1,146 Million in Assets
$ 653 Million in Net Loans
$ 974 Million in Deposits
TCE/TA: 9.84%
Income Statement for Quarter End March 31, 2013
Net Income of $1.5 Million
Net Interest Margin of 3.23%
Capital
Structure
–
No
TARP,
No
TRUPS
“An Excellent Addition to Our Franchise”
CFS Bancorp, Inc. Overview |
 7
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
New Management in 2007
48 New Senior Managers Hired
4 out of 5 Executive Officers Hired
Four Key Objectives
Reduce Non-Performing Assets
“An Excellent Addition to Our Franchise”
Non-Performing Loans and OREO
12/31/12
12/31/10
12/31/11
3/31/13
54,492
45,587
26,933
25,048
22,324
19,091
23,347
23,698
Non-Performing Loans
OREO
CFS Turnaround
Improve Efficiency Ratio through Revenue
Enhancement and Cost Reduction
Diversified Growth –
Target Small to Medium-
Sized Businesses
Deepen Financial Relationships
Diligently Working Through Problem Credits
Charged Off $59 Million Since 2007, or 7.5%
of Loan Portfolio
Reduced Non-Performing Assets
NPAs Reduced by 37%, or $28.1M Since 2010 |
 Contiguous
Market
Expansion
Financially
Attractive
Accretive to EPS Beginning in 2014
Tangible Book Value Payback Within 3 Years
Significant
Operating
Efficiencies
–
Approximately
30%
Cost
Saves
Attractive
Risk Profile
Comprehensive Due Diligence Process Completed
Cultural Fit, Retention of Key Management Members
Experienced Acquirer, Core Competency in Integration Processes
Market
Opportunity
Leverage First Merchants Model into CFS Markets
Significant Commercial Opportunities (over 258,000 Businesses)
Attractive and Growing Suburban Markets
8
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
“An Excellent Addition to Our Franchise”
Adds 20 Full-Service Banking Centers, $974 Million in Deposits,
$664 Million in Loans
#1 Market Share Position in Munster, Indiana
Transaction Rationale
Strategic
Opportunity |
 9
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
“An Excellent Addition to Our Franchise”
2012
Rank
Company
2012
# of
Branches
2012 Total
Deposits in
Market
2012 Total
Market Share
(%)
1
JP Morgan Chase & Co. (NY)
189
$13.640
13.43
2
PNC Financial Services Group (PA)
160
9.673
9.52
3
Fifth Third Bancorp (OH)
140
7.261
7.15
4
Old National Bancorp (IN)
147
6.768
6.66
5
Pro Forma
86
3.790
3.73
5
Bank of Montreal
78
3.464
3.41
6
1 Source Corp. (IN)
70
3.435
3.38
7
First Merchants Corp (IN)
74
3.101
3.05
8
Wells Fargo & Co (CA)
36
3.028
2.98
9
KeyCorp (OH)
71
2.803
2.76
10
Huntington Bancshares, Inc. (OH)
52
2.682
2.64
26
CFS Bancorp, Inc. (IN)
12
.689
0.68
Financial data at June 30, 2012, per SNL Financial
st
Indiana Market Share |
 10
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Transactions
FRME/CITZ
Recent Transactions
Price/Tangible
Book
Value
1.02x
1.11x
Market Premium (%)
13.8%
42.0%
Core Deposit Premium (%)
0.3%
2.2%
“An Excellent Addition to Our Franchise”
Transaction Pricing |
 11
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
“An Excellent Addition to Our Franchise”
CREDIT REVIEW SUMMARY
(Including 100% Review of NPA’s)
Portfolio Type
% of Total $
Reviewed
Construction & Land
80.3%
Commercial
Real
Estate
–
Non-Owner
Occupied
85.2%
Multi-Family
65.2%
Commercial
Real
Estate
–
Owner
Occupied
68.7%
Commercial
83.5%
Total Commercial Loans
77.9%
ESTIMATED CREDIT MARK
Aggregate Credit Mark of $58 Million, or 8.1% of Total Loans and
OREO
CREDIT MARK SUMMARY
Gross Loan Credit Mark
$52 Million
OREO Mark
$ 6 Million
Gross Credit Mark
$58 Million
Comprehensive Due Diligence |
 12
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
“An Excellent Addition to Our Franchise”
Partner Bank
Closing Dates
Partner Total Assets
(in Millions)
Shelby County Bank
2/10/2012
$ 148
Lincoln Bancorp
12/31/2008
890
CNBC
3/01/2003
317
Lafayette Bancorporation
4/01/2002
746
Francor Financial, Inc.
7/01/2001
158
Decatur Bank & Trust Co.
5/31/2000
130
Anderson Community Bank
4/21/1999
67
Jay Financial Corporation
4/06/1999
103
Union National Bancorp
8/01/1996
156
Randolph County Bancorp
10/02/1996
72
First United Bancorp, Inc.
8/05/1991
47
Merger & Acquisition Growth History |
 13
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Growing Markets and Opportunities . . . Revenue Synergies
Logical Extension of Our Existing Franchise, No Overlap
Diversification of Customers
Geography
Business Mix
Culturally Similar Companies with Similarly Valuable Core Deposit Bases
Win-Win Price, Accretive to FRME, Premium to CITZ
Creates Operational Leverage
Credit Risk Well Understood and Manageable: Loans and OREO Appropriately
Marked “An Excellent Addition to Our Franchise”
®
*FIRST MERCHANTS and the Shield Logo are registered trademarks of First Merchants
Corporation Summary Thoughts |