Old Second Bancorp, Inc. OSBC signed an agreement with First Merchants Corp. to acquire five Illinois branches alongside certain branch-specific loans and deposits. These branches are located in Southeast Chicago MSA.

Details of the Acquisition by Old Second Bancorp

OSBC will pay a total cash consideration of roughly $23 million, equivalent to a 7.5% deposit premium to First Merchants. The company expects to assume roughly $304 million in deposits and almost $12 million in loans associated with these branches.

The deal is expected to be completed by 2024-end, subject to regulatory approvals. Until then, these five branches will continue to operate under First Merchants’ name. These will be rebranded as Old Second Bancorp’s branches immediately upon closure of the transaction.

OSBC’s Strategic Rationale Behind the Deal

The acquisition is expected to strengthen OSBC’s status as one of the largest banks headquartered in Chicagoland and significantly expand its existing branch network, specifically in the Southeast Chicago market.

For First Merchants, this divestiture completes its branch exit from suburban Chicago markets.

This move aligns with Old Second Bancorp’s inorganic growth strategy to deepen its presence in the Illinois market. In December 2021, the company acquired West Suburban Bancorp, Inc. to enhance its presence in the west suburban Chicago area. The deal comprised the buyout of 34 branches with a retail and commercial client mix of loans and deposits.

Zacks Rank & Price Performance

Year to date, shares of Old Second Bancorp have risen 7.3% compared with the industry’s 14% growth.

Image Source: Zacks Investment Research

Currently, OSBC carries a Zacks Rank #4 (Sell).
 
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Steps by Other Financial Services Firms

Earlier this month, State Street Corporation’s STT asset management unit, State Street Global Advisors, announced an investment in a leading Australian fintech platform, Raiz Invest Limited. As part of the equity investment agreement, State Street Global Advisors will acquire 5% of Raiz’s share capital through a placement.

Through this partnership, State Street Global Advisors’ trusted brand and deep knowledge of markets will come together with Raiz’s mobile-first platform, which will help retail investors in Australia with micro-investments primarily in exchange-traded funds and model portfolios.

U.S. Bancorp’s USB lead banking division, U.S. Bank, expanded its focus on the healthcare industry with the acquisition of Salucro Healthcare Solutions LLC. The buyout was completed on Aug. 21, 2024. The financial terms of the deal were kept under wraps.

Based in Tempe, AZ, Salucro is a provider of healthcare financial technology with a primary focus on patient payments and billing. Previously, Salucro had been a partner of Elavon, a subsidiary of U.S. Bank. In 2022, U.S. Bank made its initial investment in Salucro, and its platform was sold through Elavon as MedEpay.

The acquisition of Salucro extends U.S. Bank's more than a century of service to healthcare-focused clientele. Following the acquisition, Salucro’s employees have now become part of U.S. Bank and will be integrated into Elavon, one of the largest global payments processing firms.