First Merchants to carve $8M from Lincoln

September 10, 2008

The Muncie bank that last week announced plans to buy Lincoln Bancorp anticipates slashing $8 million in expenses from the Plainfield institution. First Merchants Corp. disclosed the figure in a regulatory filing yesterday.

The savings would amount to roughly one-third of the $25 million in expenses Lincoln reported last year. About 75 percent of the savings will be realized next year and the balance in 2010, First Merchants said.

First Merchants announced the $75 million acquisition on Sept. 3. The price was a 35-percent premium over the $10.35 where Lincoln shares were trading.

First Merchants Corp. CEO Mike Rechin said most of the cost savings will be realized through consolidating back-office operations. Both banks outsource processing to Fidelity National Information Services of Orlando, Fla.

Rechin said some Indianapolis-area employees will be laid off, but that it is too early to know a definite number.

The bank had 225 workers as of the end of last year, a regulatory filing shows.

Lincoln CEO Jerry Engle, who will join First Merchants as president of its Central Indiana arm, said, "It's not a pleasant thing. But at the same time it's a reality of the business that we're in."

Financial realities persuaded Lincoln to seek a buyer in order to boost its stock price. Lincoln was competing for deposits with large banks that paid high interest rates for deposits, leaving Lincoln little wiggle room to generate profits.

First Merchants, which already operated in Indianapolis' northern suburbs, is sweeping in Lincoln branches in the western and southern suburbs through the acquisition.

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