Under the merger agreement, each share of Bancorp Financial common stock was converted into the right to receive 2.5814 shares of Old Second common stock plus $15.93 in cash, with cash paid in lieu of fractional shares. Based on Old Second's February 24, 2025 closing price of $18.08, the per-share consideration was implied at $62.60, and total consideration was approximately 75% stock and 25% cash, for an aggregate transaction value of approximately $197 million as announced. Bancorp Financial's financial advisor, KBW, used a $202.3 million indicative transaction value based on Old Second's February 14, 2025 closing stock price ($18.80) for its fairness-opinion analyses, implying a value of $64.46 per Bancorp Financial share.
Keefe, Bruyette & Woods (KBW), financial advisor to Bancorp Financial, calculated implied multiples for the deal in its fairness opinion materials: 19.7 times Bancorp Financial's annualized fourth-quarter 2024 EPS, 16.0 times estimated 2025 EPS, and 10.9 times estimated 2026 EPS. In a separate selected-transactions comparison of recent U.S. whole-bank deals, KBW calculated the Old Second/Bancorp Financial transaction at 1.35 times Bancorp Financial's tangible book value (versus a comparable-group 75th percentile of 1.58x, average of 1.34x, median of 1.29x, and 25th percentile of 1.06x), a core deposit premium of 6.7% (versus a group median of 3.3%), and 35.7 times Bancorp Financial's LTM EPS (versus a group median of 12.2x), reflecting Bancorp Financial's depressed trailing earnings relative to its forward estimates.
Old Second disclosed that the combination is expected to deliver approximately 16% EPS accretion to Old Second stockholders in the first full year including fully phased-in cost savings, along with a projected increase in return on average assets of more than 13 basis points and an increase in return on average tangible common equity of more than 267 basis points on a pro forma basis, also assuming fully phased-in cost savings. Old Second said the acquisition would let it deploy excess capital at an estimated internal rate of return above 20%. The companies did not disclose a specific dollar figure or phase-in schedule for merger-related cost savings, nor did they disclose a tangible book value dilution or earnback period for the deal.
Strategically, Old Second said the deal would create the second-largest community bank under $10 billion in assets in the Chicago market, with a pro forma company holding approximately $7.1 billion in assets, $6.0 billion in deposits, and $5.2 billion in loans across 56 branches in the Chicago area. James Eccher, Chairman, President and CEO of Old Second, said the transaction "offers a terrific pro forma balance sheet profile by combining the strength of Old Second's funding profile with the yield resiliency of Evergreen's unique asset strategies," adding that management believed "the combined income statement offers significantly less volatility and a stronger earnings profile in all rate environments." Darin Campbell, Chairman, President and CEO of Bancorp Financial, said the merger was "expected to create a stronger banking institution for our customers and communities," citing the combination of Evergreen's FreedomRoad Financial and Performance Finance powersports lending divisions with Old Second's balance sheet. A key strategic driver cited by Old Second was Evergreen's national powersports lending business, which represented approximately 60% of Evergreen's outstanding loan balances across roughly 88,000 accounts with a 2024 portfolio yield of 8.84%, originated through partnerships with original equipment manufacturers and more than 1,000 authorized dealers.
The proxy statement/prospectus (Form 424B3 filed May 8, 2025, as supplemented May 15, 2025) that registered the Old Second shares issued in the deal under a Form S-4 (filed April 23, 2025, amended May 6, 2025) disclosed the negotiation background. Old Second CEO James Eccher first contacted Bancorp Financial CEO Darin Campbell in late May 2024. Starting in July 2024, Bancorp Financial's board worked with KBW to evaluate strategic alternatives, including remaining independent; KBW contacted one other Chicago-based financial institution on Bancorp Financial's behalf, but that institution indicated it was not interested in acquiring a company with a consumer lending focus, and no other potential acquirers were solicited. Old Second submitted a non-binding letter of intent on December 10, 2024 at an offered price of $195.0 million (approximately 130% of Bancorp Financial's tangible book value as of September 30, 2024), consisting of about $48.8 million cash and the remainder in stock. After further negotiation, the parties agreed to final terms (the 2.5814 exchange ratio and $15.93 cash per share) in mid-February 2025, and the merger agreement was executed February 24, 2025 following unanimous approval by both boards.
The merger agreement provided for a termination fee of $8,500,000 payable by Bancorp Financial to Old Second under certain circumstances, and Bancorp Financial stockholders holding voting agreements, including all Bancorp Financial directors, agreed to vote in favor of the merger. Completion was conditioned on Bancorp Financial stockholder approval, effectiveness of the Form S-4 registration statement, Nasdaq listing approval for the new shares, receipt of required regulatory approvals from the Federal Reserve and the Office of the Comptroller of the Currency, and other customary closing conditions. Bancorp Financial stockholders approved the merger at a special meeting on June 18, 2025, as disclosed in a Form 8-K filed that day, and the deal closed on July 1, 2025. In connection with the closing, Old Second expanded its board by one seat for Darin Campbell and expanded Old Second National Bank's board by two seats for Campbell and Bancorp Financial CFO Jill Voss; Campbell also entered into an employment agreement to serve as EVP of Old Second and President of its National Specialty Lending, FreedomRoad Financial, and Performance Finance units, with an annual base salary of $550,000.
On the financial advisory side, Piper Sandler & Co. served as financial advisor to Old Second, and Keefe, Bruyette & Woods, A Stifel Company, served as financial advisor to Bancorp Financial and rendered a fairness opinion, dated February 18, 2025, to Bancorp Financial's board. On the legal side, Nelson Mullins Riley & Scarborough LLP served as counsel to Old Second, and Vedder Price P.C. served as counsel to Bancorp Financial.
Following closing, Old Second disclosed pro forma combined financials as of March 31, 2025 of approximately $6.98 billion in assets, $5.95 billion in deposits, and $5.09 billion in loans. Audited Bancorp Financial financial statements and unaudited pro forma condensed combined financial statements for the year ended December 31, 2024 were incorporated into the closing Form 8-K by reference to Old Second's Form S-4 amendment filed May 6, 2025; a further pro forma update covering the six months ended June 30, 2025 was indicated to be filed within 71 days of the closing 8-K.