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First Midwest Bancorp to buy Northern States Financial for $91M

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First Midwest Bancorp to buy Northern States Financial for $91M

Chicago-based First Midwest Bancorp Inc. is acquiring Waukegan, Ill.-based Northern States Financial Corp. in a deal valued at approximately $91.0 million.

Shareholders of Northern States will receive 0.0369 share of First Midwest Bancorp common stock for every Northern States common share they hold.

The company said the price is 1.7x tangible book value per share and 10.8x last-12-months earnings. It expects 2% accretion to EPS in 2020, an earnback period of 2.5 years for dilution to tangible book value, and an internal rate of return of more than 20%. It also anticipates a reduction in Northern States' noninterest expense base of about 50%, to be fully phased in in 2020.

The deal has a one-day premium of 28.89%, based on Northern States' June 6 closing price of 78 cents, and a one-month premium of 34.97%, based on its May 5 closing price of 74.5 cents.

On a per share basis, SNL calculates the deal value to be 174.6% of book and tangible book value.

For comparison, SNL valuations for bank and thrift targets in the Midwest region between June 7, 2017, and June 7, 2018, averaged 161.83% of book, 169.45% of tangible book and had a median of 20.57x last-12-months earnings, on an aggregate basis, and averaged 162.04% of book, 181.76% of tangible book and had a median of 21.31x last-12-months earnings, on a per-share basis.

First Midwest Bancorp will expand in Lake County, Ill., by eight branches to be ranked third with an 8.34% share of approximately $21.11 billion in total market deposits.

First Midwest Bank, a unit of First Midwest Bancorp, had $14.31 billion in assets as of March 31. Meanwhile, Northern States unit NorStates Bank has about $500 million in assets, $400 million in deposits and $320 million in loans, according to the press release.

The deal, which is subject to regulatory and Northern States shareholders' approvals, is expected to close in the fourth quarter.

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