Northwest Bancshares Inc. has agreed to acquire MutualFirst, the Muncie, Indiana-based holding company and parent of MutualBank, in an all-stock transaction valued at $39.89 per share, or approximately $346 million. The transaction is expected to increase Northwest’s standalone earnings per share by over 10 percent on a run-rate basis. Further, it gives Northwest access to an attractive new region of prospective customers.

The acquisition provides Northwest, which is headquartered in Warren, Pennsylvania, with an additional $2.1 billion in assets, $1.6 billion in deposits, $1.5 billion in loans and 39 banking locations.

The merger is expected to be consummated and converted to Northwest in the second quarter of 2020, after satisfying customary closing conditions, including regulatory approvals and the approval of MutualFirst shareholders.

The two banking companies will create a bank with approximately $12.7 billion in total assets and $10.3 billion in deposits, providing banking services through 221 branch locations in four states.

MutualFirst President and CEO David W. Heeter will be named regional CEO and market leader for Northwest’s Indiana franchise after the merger is consummated and will report directly to Northwest President and CEO Ronald J. Seiffert.

In addition to Heeter, Christopher L. Caldwell, senior vice president of commercial banking at MutualBank, will lead the commercial lending team in the Indiana market for Northwest and Christopher D. Cook, current CFO of MutualFirst, will transition to COO in the Indiana market.

Under the merger agreement, which has been approved unanimously by the boards of both companies, shareholders of MutualFirst will receive 2.4 shares of Northwest common stock for each common share of MutualFirst. The exchange ratio is fixed and the transaction is expected to qualify as a tax-free exchange for MutualFirst shareholders.

The deal is valued at $346 million, or $39.89 per share, which equates to a tangible book value ratio of 172 percent and a price to earnings ratio, after cost savings, of under 10x based on consensus estimates for MutualFirst’s 2020 earnings per share and cost savings of approximately 30 percent. The tangible book value dilution, including all restructuring costs, of approximately $0.33, or 3.5 percent, is expected to be earned back in approximately 2.8 years when including the impact of current expected credit losses.

As part of the merger, one MutualFirst director will be added to Northwest’s bank and holding company boards.

Riley FBR, Inc. is serving as financial advisor and Luse Gorman PC is serving as legal counsel to Northwest. Keefe, Bruyette & Woods, A Stifel Company is serving as financial adviser and Silver, Freedman, Taff & Tiernan LLP is serving as legal counsel to MutualFirst.