A $547 million-asset thrift company in eastern Indiana is planning to buy a smaller nearby rival in a $27 million stock deal.

Muncie-based Mutual First Financial Inc. said it would acquire Marion Capital Holdings Inc., the $199 million-asset parent of the First Federal Savings Bank of Marion. Mutual said the merger would yield first-year cost savings of about $1.2 million, or 6.9% of the combined company's operating expenses.

The thrift companies expect to complete the merger by yearend.

The deal, announced Thursday, calls for Mutual to exchange 1.862 shares of its stock for each share of Marion. At Mutual's closing price Wednesday of $10.82 a share the deal would be worth about $20.16 per share to Marion stockholders - a 20% premium above Marion's $16.75 closing price that day.

By midafternoon Friday, Marion stock had risen to $19.375 and Mutual shares had slipped to $10.6875

Marion's three-branch First Federal Savings Bank would probably be merged into Mutual's subsidiary, Mutual Federal Savings Bank, which has 13 branches. Mutual said it does not expect to close any branches.

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