First Merchants in Indiana Issues Debt to Exit SBLF, Pay Off B of A Loan

First Merchants (FRME) in Muncie, Ind., has issued $70 million in debt to pay off a loan from Bank of America (BAC).

The $4.3 billion-asset company said in a regulatory filing Monday that it issued the debt to four unnamed institutional investors. The debt issuance, which mostly consists of a 6.75% interest rate for 10 years before converting to a floating rate, closed last week.

The company will use the proceeds to pay off a $55 million credit facility with B of A that was set to expire in 2015 and to redeem the preferred shares it issued to the Treasury Department through the Small Business Lending Fund. First Merchants has $34 million of preferred shares outstanding through the SBLF, which was launched in 2011 to help community banks fund small businesses. First Merchants redeemed half its SBLF shares in July.

In May, First Merchants agreed to pay about $115 million to buy CFS Bancorp (CITZ), a $1.1 billion-asset company in Muncie. First Merchants, which has received shareholder and regulatory approval for the acquisition, expects to complete the transaction in mid-November.

First Merchants' third-quarter earnings fell 7% from a year earlier, to $10.4 million.