to the Hilb Group, a Richmond, Virginia-based agency backed by the Carlyle Group. On Monday, the Jaspar, Indiana-based German American put the capital to work, announcing plans to restructure its securities portfolio, and to acquire Heartland Bancorp in Whitehall, Ohio.
The $330 million, all-stock deal for Heartland gives the $6.2 billion-asset German American its first presence in Ohio. The $1.9 billion-asset Heartland operates 20 branches in Cincinnati and Columbus, "two of the fastest-growing markets in the Midwest," D. Neil Dauby, German American's chairman and CEO, said Monday in a press release.
Monday also saw German American report second-quarter earnings totaling $20.5 million, up 8% from the quarter ending March 31.
Taken as a whole, German American expects the restructuring — which involved the sale of $375 million in low-yielding securities — and the Heartland merger to boost 2025 earnings per share 25%. Return on average assets for the merged company is expected to reach 1.4%, compared to an estimated 1.2% for stand-alone German American.
"At first glance, we really like the quarter and restructuring," Hovde analyst Brendan Nosal wrote Tuesday in a research note. "We also love the target and market expansion."
Heartland reported a $5.1 million second-quarter profit Monday with increases in both loans and deposits. Credit quality was strong, with nonperforming assets amounting to 0.11% of total assets.
Nosal described Heartland as the "most desirable community bank franchise" in the fast-growing Columbus market, "with a strong management team, good organic growth narrative, clean balance sheet and attractive deposit base."
Brian Martin, who covers German American for Janney Montgomery Scott, labeled the deal "strategically compelling," citing its geography, as well as Heartland's strong core deposit franchise.
According to the U.S. Census Bureau, the Columbus metropolitan area's population grew 2% between 2020 and 2023, reaching 2.2 million people. That steady growth is expected to continue over the next decade, according to the Mid-Ohio Regional Planning Commission, driven in part by Intel's plans to invest $28 billion constructing two chip factories. With Intel's expansion projected to create 3,000 jobs, Columbus' median household income is expected to grow, too, reaching $85,000 by 2029.
Though Cincinnati's population is growing more slowly, its metro area added more than 20,000 people between 2020 and 2023, surpassing 2.7 million, according to the Census Bureau.
German American's planned purchase of Heartland comes amid a marked pickup in merger-and-acquisition activity.
The $17 billion-asset Renasant Corp. in Tupelo, Mississippi,
Monday to acquire $8 billion-asset, in-state rival The First Bancshares in Hattiesburg for $1.2 billion in stock. Last week, the $18.1 billion-asset WesBanco
for the $8.8 billion-asset Premier Financial in Defiance, Ohio. A day earlier, on July 25, the $2.6 billion-asset ChoiceOne Financial in Sparta, Michigan,
in-state rival Fentura Financial in Fenton for $180.4 million in stock.
German American plans to complete the acquisition of Heartland in the first quarter of 2025. The merged company would have $7 billion of deposits and loans of $5.7 billion. German American believes it can achieve cost savings equal to 30% of Heartland's noninterest expense base, which totaled $11.8 billion in the quarter ended June 30. It's projecting one-time, pre-tax merger expenses totaling $19.5 million.
While German American plans to merge Heartland's bank subsidiary into its German American Bank unit, the company will operate under a co-branded arrangement in Ohio.
"This strategic partnership allows us to partner with another like-minded, larger community bank that enables us to continue our strong brand and growth trajectory within the markets we serve," G. Scott McComb, Heartland's chairman and CEO, said Monday in a press release.
McComb is expected to join German American as a director. Ronnie Stokes, another current Heartland director, would also join the German American board. Heartland investors would own 21% of the merged company.
