Old Second National Bancorp, Inc. OSBC entered into a definitive merger agreement to acquire Bancorp Financial, Inc. (“Bancorp Financial”) and its wholly-owned subsidiary, Evergreen Bank Group (“Evergreen Bank”). The transaction is valued at roughly $197 million. The consideration will be paid in 75% stock and 25% cash.

Details of the Acquisition Pursued by OSBC

Per the agreement, Old Second National Bancorp will pay $15.93 per share in cash alongside 2.5814 OSBC shares for each share of Evergreen. The merger agreement has been approved by the board of directors of both entities.
 
The deal is anticipated to be completed in the third quarter of 2025, subject to requisite regulatory approvals and the approval of Bancorp Financial’s shareholders. Upon closure, Bancorp Financial will be merged with OSBC.

Oak Brook, IL-based Bancorp Financial, founded in 2007, operates two branches in the west and one branch in the south Chicago suburbs alongside a loan production office in Reno, NV. As of Dec. 31, 2024, the firm had roughly $1.5 billion in assets, $1.2 billion in gross loans and $1.2 billion in deposits.

Upon the deal's completion, Darin Campbell, chairman of Bancorp Financial, will join Old Second National Bancorp’s board and will lead Consumer Lending. Further, Darin Campbell and Jill Voss will join OSBC’s subsidiary, Old Second National Bank’s board.

The combined entity is anticipated to have roughly $7.1 billion in total assets, $5.2 billion in total loans, and $6 billion in total deposits.

OSBC’s Rationale Behind the Acquisition

This transaction is likely to improve OSBC’s deposit mix through low-cost and core deposit franchise with a top-quartile deposit beta and robust retail deposit concentration. It will also increase the scale of the bank, creating the second-largest community bank under $10 billion in assets in the Chicago market. Further, it will expand OSBC’s reach into new markets through Evergreen’s Powersport lending business.

James Eccher, president and CEO of Old Second National Bancorp, stated, “The partnership provides us with an exciting opportunity to continue to expand our presence in the greater Chicago markets as well as adding meaningful consumer lending capabilities that we have long lacked. I believe this transaction offers a terrific pro forma balance sheet profile by combining the strength of Old Second's funding profile with the yield resiliency of Evergreen's unique asset strategies. We believe the combined income statement offers significantly less volatility and a stronger earnings profile in all rate environments.”

OSBC will likely benefit from expected cost-savings of 30% of Evergreen’s 2025 non-interest expense, 50% of which will be phased in 2025, and the rest will be realized thereafter. Also, roughly $17.6 million of one-time pre-tax merger expenses will be incurred.

The deal is anticipated to be roughly 16% accretive to OSBC’s 2026 earnings per share, assuming the execution of cost savings. Further, the company projects a common equity tier 1 capital of 11.7% at closing and a 20% internal rate of return.

Also, tangible book value is expected to dilute by 5.9%, with a projected earn-back period of approximately three years. Further, OSBC projects an improvement of 267 basis points (bps) in return on average tangible common equity and 13 bps in return on average assets, alongside a 152 bps increase in return on average equity by 2026, adjusting for the phased-in cost savings.

This move aligns with the company’s inorganic growth strategy. In December 2024, the company acquired five Illinois branches alongside certain branch-specific loans and deposits of First Merchants Corp. These branches are located in Southeast Chicago MSA, reflecting its emphasis on strategic buyouts to expand its presence in the Chicago region and capitalize on revenue and cost benefits.

OSBC’s Zacks Rank & Price Performance

Shares of Old Second National Bancorp have risen 7.8% compared with the industry’s growth of 7.1% in the past six months. 

Image Source: Zacks Investment Research

Currently, OSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Steps by Other Finance Firms

Earlier this week, Apollo Global Management Inc. APO agreed to acquire Bridge Investment Group Holdings Inc. as it seeks to expand its real estate offerings. APO agreed to acquire Bridge in an all-stock transaction with an equity value of $1.5 billion.

The transaction is expected to be immediately accretive to APO’s fee-related earnings upon closing.

Similarly, last month, Moody’s MCO agreed to acquire CAPE Analytics, a leader in geospatial artificial intelligence for residential and commercial properties.

This acquisition will combine MCO’s Intelligent Risk Platform and catastrophe risk modeling capabilities with CAPE’s advanced geospatial AI analytics, aiming to deliver instant, address-specific risk insights through a sophisticated property database.

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