First Merchants (FRME) in Muncie, Ind., had healthy competition in its effort to buy CFS Bancorp (CITZ) in Munster, Ind.

CFS hired River Branch Capital last fall to help it explore options. The investment bank contacted 12 Midwestern banks in late 2012 and early this year in an effort to gauge interest in buying CFS, First Merchants disclosed in a Wednesday regulatory filing.

First Merchants was among five banks that expressed an interest in the $1.1 billion-asset CFS, signed non-disclosure agreements and conducted preliminary due diligence. The unnamed institutions also reviewed CFS' loan portfolio and discussed details with River Branch.

In early March, the $4.3 billion-asset First Merchants and two other banks submitted letters of interest that included offers. A fourth bank decided to back out after completed due diligence that included a review and discussions about credit matters at CFS, the filing said. First Merchants' proposal was the highest of the initial offers and all three suitors expressed an interest in keeping certain members of the seller's management team.

Credit quality has been a challenge for CFS. Nonperforming assets comprised 4.25% of total assets at March 31. The company recorded a $2.1 million loan-loss provision in the first quarter.

CFS' management continued to meet with leaders of First Merchant and one other bank. Five weeks after receiving the first letter of interest, CFS' board unanimously voted to negotiate a sale to First Merchants.

It took several more weeks before CFS' board approved a merger agreement with First Merchants. The companies announced the $115 million deal in mid-May.

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