First Mid Bancsh (FMBH) Announces Acquisition of Blackhawk Bancorp for $90.3 Million

First Mid Bancshares, Inc. (NASDAQ: FMBH) (“First Mid”) and Blackhawk Bancorp, Inc. (OTCQX: BHWB) (“Blackhawk”) announced today 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 (excluding nonrecurring transaction expenses). 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 (excluding preferred 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% (excluding preferred deposits). 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.

“Blackhawk has a long history of providing excellent service with a community-minded focus that aligns very well with First Mid’s philosophy,” said Joe Dively, Chairman and Chief Executive Officer of First Mid. “We have been talking to Todd and his team for a number of years about a possible combination of our organizations. And, while there is volatility in the equity markets for banks today, the discussions which led to today’s announcement started a long time ago. We have partnered with Blackhawk on many projects over the last several years and could not be more confident in the cultural and strategic alignment. The combined company will be an approximately $8.1 billion financial institution with significant wealth management and insurance services. We look forward to welcoming Blackhawk’s shareholders, employees and customers to the First Mid team.”

Todd James, Chairman, President and Chief Executive Officer of Blackhawk commented, “This has been a very long process culminating in today’s announcement, which has reinforced our belief in the strength of these two organizations and the opportunities it will provide once combined. We are excited to join forces with First Mid, a like-minded partner that shares our commitment to supporting the communities we serve and building strong long-term relationships with customers. Our communities, customers, employees and shareholders will benefit from access to a larger banking organization offering larger loan limits and a broader array of services, including wealth management, trust, insurance and agricultural services.”

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.

Piper Sandler & Co. served as exclusive financial advisor and rendered a fairness opinion to Blackhawk. Reinhart Boerner Van Deuren S.C. served as legal advisor to Blackhawk. Janney Montgomery Scott LLC served as exclusive financial advisor to First Mid. ArentFox Schiff LLP served as legal advisor to First Mid.

A slide presentation relating to the transactions can be accessed under the investor relations section of First Mid’s website at www.firstmid.com. In addition, the presentation is included as an exhibit to the Form 8-K filed with the Securities and Exchange Commission announcing the transaction.

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