First Mid Bancshares to acquire Blackhawk Bancorp for $90.3M

First Mid Bancshares (FMBH) and Blackhawk Bancorp (BHWB) announced the execution of a definitive agreement under which Blackhawk will merge with First Mid in a 100% stock transaction.Blackhawk is the parent company of Blackhawk Bank and is headquartered in Beloit, Wisconsin, operating 10 branches in Wisconsin and Illinois. As of December 31, 2022, Blackhawk had approximately $1.32 billion in total assets, $782 million in loans and $1.19 billion in deposits. Blackhawk has been a pillar of the Beloit community since 1881 and expanded into northern Illinois in 1996. Under the terms of the agreement, First Mid will acquire 100% of the outstanding shares of Blackhawk and Blackhawk shareholders will receive 1.15 shares of FMBH common stock for each share of BHWB common stock. Based on First Mid’s price per share at closing on March 20, 2023 of $27.13, the aggregate consideration to be paid by First Mid is approximately $90.3 million, subject to certain conditions and adjustments. The transaction is estimated to be approximately 22% accretive to earnings per share in 2024. Estimated tangible book value per share dilution to First Mid is expected to be earned back in 1.9 years under the crossover method. First Mid expects to achieve cost savings of approximately 31% of Blackhawk’s noninterest expense. While revenue synergies are anticipated, they have not been included in the estimates. As of December 31, 2022, Blackhawk had a loan-to-deposit ratio of approximately 65% and a fourth quarter cost of deposits of 0.51%. In addition, Blackhawk had only 8.5% of its balances as uninsured deposits. All of these ratios strengthen the funding sources for First Mid. Based on the December 31, 2022 ratios, the pro forma company will have a loan to deposit ratio of approximately 85%, a pro forma cost of deposits of 0.67%, and pro forma uninsured deposits of only 21%. In addition to these benefits, Blackhawk’s available for sale securities portfolio of approximately $444 million at December 31, 2022 will be marked to fair value through purchase accounting at the close of the transaction. This will provide significant flexibility and an additional liquidity source for the combined company. The transaction has been unanimously approved by each company’s board of directors and is expected to close in the second half of 2023, subject to regulatory approvals, the approval of Blackhawk’s stockholders and the satisfaction of customary closing conditions.