German American to enter three Ky. markets with First Security deal

German American Bancorp in Jasper, Ind., will enter several new markets with a deal to buy First Security in Owensboro, Ky.

The $3.1 billion-asset German American said in a press release Tuesday that it agreed to pay $101 million in cash and stock for the $586 million-asset parent of First Security Bank. The deal, which is expected to close in the fourth quarter, priced First Security at 162% of its tangible book value.

German American also plans to convert First Security’s convertible subordinated debt at closing.

The deal will give German American its first branches in the Kentucky markets of Owensboro, Bowling Green and Lexington.

The acquisition “represents a strategic opportunity for German American to expand our community-focused, customer-centric business model,” Mark Schroeder, the company’s chairman and CEO, said in the release.

First Security “has built a solid community banking franchise in these three distinct Kentucky markets in which German American can provide our extensive offerings … and services to First Security’s current and prospective clients,” Schroeder added.

Michael Beckwith, First Security’s president and CEO, will become German American’s Kentucky divisional president. A member of First Security’s board will become a German American director.

The deal is expected to be 7% accretive to German American’s earnings per share during the 12 months after closing. It should take three years to earn back the expected 3.1% dilution to German American’s tangible book value.

German American said it expects to cut about 38% of First Security’s annual noninterest expense. The company expects to incur roughly $6.5 million in merger-related charges.

Sandler O’Neill & Partners and Bingham Greenebaum Doll advised German American. Raymond James and Frost Brown Todd advised First Security.