Two Iowa banking companies announced Wednesday that they plan to merge to better compete against giants such as Wells Fargo & Co. and U.S. Bancorp.
The $678 million-asset ISB Financial Corp. in Iowa City and the $742 million-asset MidWestOne Financial Group Inc. in Oskaloosa are billing their deal as a merger of equals, though ISB is technically the buyer.
Under terms of the $96.5 million deal, MidWestOne shareholders are to get 0.95 of an ISB share for each of their shares, valuing their stock at about $26.13 per share, a 54% premium over its Tuesday closing price.
The resulting company would be named MidWestOne Financial Group Inc., with headquarters in Iowa City, and the merged bank subsidiaries would be named MidWestOne Bank.
Charles N. Funk, the president and chief executive officer of ISB's Iowa State Bank and Trust, is to be the president and CEO of the post-merger company. In an interview Wednesday, he said the deal would help the new company achieve economies of scale and enable it to offer more products and serve larger customers in its southeastern Iowa markets. Thus, its customers and employees would be less inclined to defect to larger banking companies, he said.
"Banking has become an industry where some scale does matter," Mr. Funk said. "While we're not ever going to be Wells Fargo in terms of scale, a $1.4 billion-asset banking company can be much more efficient than a company half" that size.
Wells has the No. 1 market share in Iowa with nearly 9% of its deposits and U.S. Bank, at No. 2, has about 7.3%, according to Federal Deposit Insurance Corp. data. The combined ISB and MidWestOne would rank No. 8, with 1.77% of deposits, based on June 30, 2006 data.
The post-merger company's board would have 12 members, six from each company's current board. W. Richard Summerwill, the chairman and CEO of ISB Financial, is to be chairman of the new MidWestOne and Charles S. Howard, the chairman, president, and CEO of MidwestOne, is to be vice-chairman. The deal is expected to close in the first quarter.
