First Financial in Ind. to enter two states with HopFed acquisition

First Financial in Terre Haute, Ind., has agreed to buy HopFed Bancorp in Hopkinsville, Ky.

The $3 billion-asset First Financial said in a press release Monday that it will pay $128.3 million in cash and stock for the $905 million-asset HopFed. The deal, which is expected to close in the second quarter, priced HopFed at 152% of its tangible book value.

HopFed has 18 bank branches and three loan production offices in Kentucky and Tennessee. It has $664 million in loans and $727 million in deposits.

HopFed “provides us with an opportunity to leverage our capabilities and expand into new markets,” Norman Lowery, First Financial’s president and CEO, said in the release. “We look forward to continuing Heritage's commitment to its customers and the communities it serves.”

First Financial said it expects the deal to be 13% accretive to its 2020 earnings per share. It should take about four years for First Financial to earn back any dilution to its tangible book value.

First Financial plans to cut 30% of HopFed’s annual noninterest expenses.

John Peck, HopFed’s president and CEO, will become a market president for First Financial.

The sale comes less than a year after HopFed reached a truce with Stilwell Group, an activist investor in New York.

Stilwell had repeatedly complained about Peck’s salary and a bank acquisition that was eventually called off. The firm successfully nominated a representative to HopFed’s board in 2013, but the individual eventually stepped down.

Stilwell filed a lawsuit against HopFed in 2017 after the company changed its bylaws to bar anyone with a consent order with the Securities and Exchange Commission from pursuing a board seat. Though HopFed later backed off, it was ordered to pay more than $600,000 in Stilwell’s legal fees.

The two sides compromised last April when HopFed agreed to put a Stilwell representative on its board.

Stilwell disclosed in a statement Tuesday that it still owned about 9.4% of HopFed's shares.

First Financial was advised by Raymond James and SmithAmundsen. HopFed was advised by Sandler O'Neill and Jones Walker. Keefe, Bruyette & Woods provided a fairness opinion to HopFed.