First Merchants Corporation (NASDAQ:FRME) and CFS Bancorp (NASDAQ: CITZ) are getting married!

On Monday, the two bank holding companies -- which own, respectively, First Merchants Bank and Citizens Financial Bank -- announced that they have entered into a definitive merger agreement whereby CFS will merge into First Merchants. Pursuant to the agreement, First Merchants will "pay" CFS shareholders 0.65 shares of First Merchants for each CFS share that they own. This transaction should take place sometime in Q4.

At the conclusion of the merger, CFS and Citizens will disappear, leaving only First Merchants Bank and its parent remaining. Integration of the two banks should be completed during Q1 2014. At that time, First Merchants Bank will have combined assets of $5.4 billion, making it the second largest financial holding company headquartered in Indiana. The bank will have nearly 100 branches in Indiana, plus branches in a handful of counties in Ohio and Illinois.

The parties value the deal at approximately $115 million, based on First Merchants' closing price at the end of last week.

First Merchants shares closed 1.9% lower on the news Monday, at $15.83. Citizens, in contrast, being the party bought at the premium, saw its shares rise 8.8% to close at $10.03.