Midland States expands south of Chicago with HomeStar purchase

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Midland States Bancorp in Effingham, Ill., has agreed to buy HomeStar Financial Group in Manteno, Ill.

The $5.6 billion-asset Midland said in a press release Tuesday that it will pay $9.9 million in stock for the parent of the $375 million-asset HomeStar Bank. The final consideration could change based on HomeStar’s shareholders’ equity at closing.

Midland will also provide $23.5 million in cash to redeem HomeStar’s outstanding trust-preferred securities, generating an expected gain of roughly $11.7 million. Prior to closing, HomeStar will sell its interests in an insurance agency and a title company.

The deal is expected to close in the third quarter.

HomeStar Bank has five branches, $223 million in loans and $333 million in deposits.

Midland said it expects the deal to be about 9% accretive to its 2020 earnings per share. It will likely take Midland two years to earn back the estimated 2% dilution to its tangible book value.

“HomeStar has a deep history and strong commitment to their customers, employees and communities as evidenced by their leading market share position,” Jeff Ludwig, Midland’s president and CEO, said in the release.

The deal “is consistent with our strategy of partnering with institutions that have attractive deposit bases and a proven commitment to their local customers," Ludwig added.

Keefe, Bruyette & Woods and Barack Ferrazzano Kirschbaum & Nagelberg advised Midland. Monroe Financial Partners and Gerrish Smith Tuck advised HomeStar.

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