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Business Combinations (Notes) | 6 Months Ended
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Jun. 30, 2019
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] | ote 8 -- Business Combinations SCB Bancorp, Inc. On June 12, 2018, The Company and Project Almond Merger Sub LLC, a newly formed Illinois limited liability company and wholly-owned subsidiary of the Company (“Almond Merger Sub”), entered into an Agreement and Plan of Merger (the “SCB Merger Agreement”) with SCB Bancorp, Inc., an Illinois corporation (“SCB”), pursuant to which, among other things, the Company agreed to acquire 100% of the issued and outstanding shares of SCB pursuant to a business combination whereby SCB will merge with and into Almond Merger Sub, whereupon the separate corporate existence of SCB will cease and Merger Sub will continue as the surviving company and a wholly-owned subsidiary of the Company (the “SCB Merger”). Subject to the terms and conditions of the SCB Merger Agreement, at the effective time of the SCB Merger, each share of common stock, par value $7.50 per share, of SCB issued and outstanding immediately prior to the effective time of the SCB Merger were converted into and became the right to receive, at the election of each stockholder, either $307.93 in cash or 8.0228 shares of common stock, par value $4.00 per share, of the Company and cash in lieu of fractional shares, less any applicable taxes required to be withheld. In addition, immediately prior to the closing of the proposed merger, SCB paid special dividend to its shareholders in the aggregate amount of approximately $25 million. The SCB Merger was subject to customary closing conditions, including the approval of the appropriate regulatory authorities and of the stockholders of SCB. The SCB Merger was completed on November 15, 2018 and an aggregate of 1,330,571 shares of common stock were issued, and approximately $19,046,000 was paid, to the stockholders of SCB, including cash in lieu of fractional shares. Soy Capital Bank and Trust Company ("Soy Capital Bank") merged with and into First Mid Bank on April 6, 2019. At the time of the bank merger, Soy Capital Bank's banking offices became branches of First Mid Bank. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce costs through economies of scale. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations ("ASC 805"),” and accordingly the assets and liabilities were recorded at their estimated fair values as of the date of acquisition. Fair values are subject to refinement for up to one year after the closing date of November 15, 2018 as additional information regarding the closing date fair values become available. The total consideration paid was used to determine the amount of goodwill resulting from the transaction. As the total consideration paid exceeded the net assets acquired, goodwill of $18.3 million was recorded for the acquisition. Goodwill recorded in the transaction, which reflects the synergies and economies of scale expected from combining operations and the enhanced revenue opportunities from the Company’s service capabilities, is not tax deductible, and was all assigned to the banking segment of the Company. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of the SCB acquisition (in thousands).
| Acquired Book Value |  | Fair Value Adjustments |  | As Recorded by SCB
Assets |  |  |  |  |
Cash and due from banks | $ | 65,112 |  |  | $ | — |  |  | $ | 65,112 |
Investment Securities | 97,545 |  |  | (41 | ) |  | 97,504 |
Loans | 255,429 |  |  | (7,868 | ) |  | 247,561 |
Allowance for loan losses | (4,491 | ) |  | 4,491 |  |  | — |
Other real estate owned | 783 |  |  | (345 | ) |  | 438 |
Premises and equipment | 10,115 |  |  | 953 |  |  | 11,068 |
Goodwill | 6,745 |  |  | 11,589 |  |  | 18,334 |
Core deposit intangible | — |  |  | 7,269 |  |  | 7,269 |
Other Intangibles | 1,228 |  |  | 11,070 |  |  | 12,298 |
Other assets | 24,858 |  |  | (5,813 | ) |  | 19,045 |
Total assets acquired | $ | 457,324 |  |  | $ | 21,305 |  |  | $ | 478,629 |
Liabilities |  |  |  |  |
Deposits | $ | 348,314 |  |  | $ | (343 | ) |  | $ | 347,971 |
Securities sold under agreements to repurchase | 21,180 |  |  | — |  |  | 21,180 |
FHLB advances | 19,000 |  |  | (29 | ) |  | 18,971 |
Other borrowings | 7,724 |  |  | — |  |  | 7,724 |
Junior subordinated debentures | — |  |  | — |  |  | — |
Other liabilities | 15,477 |  |  | — |  |  | 15,477 |
Total liabilities assumed | 411,695 |  |  | (372 | ) |  | 411,323 |
Net assets acquired | $ | 45,629 |  |  | $ | 21,677 |  |  | $ | 67,306 |
Consideration Paid |  |  |  |  |
Cash |  |  |  |  | $ | 19,046 |
Common Stock |  |  |  |  | 48,260 |
Total consideration paid |  |  |  |  | $ | 67,306 |
The Company has recognized approximately $3.6 million, pre-tax, of acquisition costs for the SCB acquisition. Of this amount, $2.7 million was recognized during 2019. These costs are included in legal and professional and other expense. Of the $7.9 million fair value adjustment to loans, approximately $7.2 million is being accreted to interest income over the remaining term of the loans. The differences between fair value and acquired value of the assumed time deposits of $(343,000), and the assumed FHLB advances $(29,000), are being amortized to interest expense over the remaining life of the liabilities. The core deposit intangible assets, with a fair value of $7.3 million, will be amortized on an accelerated basis over its estimated life of 10 years. In addition, the Company recorded a $4.2 million intangible asset for customer list of Soy Bank's Ag service business line and $8.1 million intangible asset for the customer list for Soy Bank's Insurance business line. These intangibles are being amortized over the estimated life of 12 years and 11 years, respectively. The following unaudited pro forma condensed combined financial information presents the results of operations of the Company, including the effects of the purchase accounting adjustments and acquisition expenses, had the SCB acquisition taken place at the beginning of the period (dollars in thousands):
| Three months ended |  | Six months ended
| June 30, 2018 |  | June 30, 2018
Net interest income | $ | 30,817 |  |  | $ | 57,368 |
Provision for loan losses | 1,877 |  |  | 2,932 |
Non-interest income | 12,765 |  |  | 25,469 |
Non-interest expense | 27,222 |  |  | 51,440 |
Income before income taxes | 14,483 |  |  | 28,465 |
Income tax expense | 3,422 |  |  | 7,007 |
Net income | $ | 11,061 |  |  | $ | 21,458 |
Earnings per share |  |  |
Basic | $ | 0.72 |  |  | $ | 1.46 |
Diluted | 0.72 |  |  | 1.46 |
Basic weighted average shares outstanding | 15,287,245 |  |  | 14,647,966 |
Diluted weighted average shares outstanding | 15,304,607 |  |  | 14,665,269 |
The unaudited pro forma condensed combined financial statements do not reflect any anticipated cost savings and revenue enhancements. Accordingly, the pro forma results of operations of the Company as of and after the SCB business combination may not be indicative of the results that actually would have occurred if the combination had been in effect during the periods presented or of the results that may be attained in the future. First BancTrust Corporation On December 11, 2017, the Company and Project Hawks Merger Sub LLC (formerly known as Project Hawks Merger Sub Corp.), a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company (“Hawks Merger Sub”), entered into an Agreement and Plan of Merger (as amended as of January 18, 2018, the “First Bank Merger Agreement") with First BancTrust Corporation, a Delaware corporation (“First Bank”), pursuant to which, among other things, the Company agreed to acquire 100% of the issued and outstanding shares of First Bank pursuant to a business combination whereby First Bank will merge with and into Hawks Merger Sub, with Hawks Merger Sub as the surviving entity and a wholly-owned subsidiary of the Company (the “First Bank Merger”). At the effective time of the First Bank Merger, each share of common stock, par value $0.01 per share, of First Bank issued and outstanding immediately prior to the effective time of the First Bank Merger (other than shares held in treasury by First Bank and shares held by stockholders who had properly made and not withdrawn a demand for appraisal rights under Delaware law) converted into and become the right to receive, (a) $5.00 in cash and (b) 0.800 shares of common stock, par value $4.00 per share, of the Company and cash in lieu of fractional shares, less any applicable taxes required to be withheld and subject to certain adjustments, all as set forth in the First Bank Merger Agreement. On May 1, 2018, the Company issued an aggregate total of 1,643,900 shares of common stock valued at $37.32 per share and approximately $10,275,000, including cash in lieu of fractional shares. First Bank’s wholly-owned bank subsidiary, First Bank & Trust, IL (“First Bank & Trust”), merged with and into First Mid Bank on August 10, 2018. At the time of the bank merger, First Bank & Trust’s banking offices became branches of First Mid Bank. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce costs through economies of scale. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations ("ASC 805"),” and accordingly the assets and liabilities were recorded at their estimated fair values as of the date of acquisition. Fair values are subject to refinement for up to one year after the closing date of May 1, 2018 as additional information regarding the closing date fair values become available. The total consideration paid was used to determine the amount of goodwill resulting from the transaction. As the total consideration paid exceeded the net assets acquired, goodwill of $26.5 million was recorded for the acquisition. Goodwill recorded in the transaction, which reflects the synergies and economies of scale expected from combining operations and the enhanced revenue opportunities from the Company’s service capabilities, is not tax deductible, and was all assigned to the banking segment of the Company. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of the First Bank acquisition (in thousands).
| Acquired Book Value |  | Fair Value Adjustments |  | As Recorded by First Bank
Assets |  |  |  |  |
Cash & due from banks | $ | 20,598 |  |  | $ | — |  |  | $ | 20,598 |
Investment Securities | 59,906 |  |  | (320 | ) |  | 59,586 |
Loans | 371,156 |  |  | (7,875 | ) |  | 363,281 |
Allowance for loan losses | (4,412 | ) |  | 4,412 |  |  | — |
Other real estate owned | 547 |  |  | (12 | ) |  | 535 |
Premises and equipment | 10,126 |  |  | (689 | ) |  | 9,437 |
Goodwill | 543 |  |  | 25,948 |  |  | 26,491 |
Core deposit intangible | — |  |  | 5,224 |  |  | 5,224 |
Other assets | 16,389 |  |  | (256 | ) |  | 16,133 |
Total assets acquired | $ | 474,853 |  |  | $ | 26,432 |  |  | $ | 501,285 |
Liabilities and Stockholders' Equity |  |  |  |  |
Deposits | $ | 384,323 |  |  | $ | 1,301 |  |  | $ | 385,624 |
FHLB advances | 31,000 |  |  | (328 | ) |  | 30,672 |
Subordinated debentures | 6,186 |  |  | (1,451 | ) |  | 4,735 |
Other liabilities | 8,665 |  |  | (36 | ) |  | 8,629 |
Total liabilities assumed | 430,174 |  |  | (514 | ) |  | 429,660 |
Net assets acquired | $ | 44,679 |  |  | $ | 26,946 |  |  | $ | 71,625 |
Consideration Paid |  |  |  |  |
Cash |  |  |  |  | $ | 10,275 |
Common stock |  |  |  |  | 61,350 |
Total consideration paid |  |  |  |  | $ | 71,625 |
The Company has recognized approximately $5.2 million, pre-tax, of acquisition costs for the First Bank acquisition. Of this amount, $167,000 was recognized during 2019. These costs are included in legal and professional and other expense. Of the $7.9 million fair value adjustment to loans, approximately $3.6 million is being accreted to interest income over the remaining term of the loans. The differences between fair value and acquired value of the assumed time deposits of $1.3 million, of the assumed FHLB advances of $(328,000) and of the assumed subordinated debentures of $(1,451,000), are being amortized to interest expense over the remaining life of the liabilities. The core deposit intangible asset, with a fair value of $5.2 million, will be amortized on an accelerated basis over its estimated life of 10 years. The following unaudited pro forma condensed combined financial information presents the results of operations of the Company, including the effects of the purchase accounting adjustments and acquisition expenses, had the First Bank acquisition taken place at the beginning of the period (dollars in thousands):
| Three months ended |  | Six months ended
| June 30, 2018 |  | June 30, 2018
Net interest income | $ | 29,062 |  |  | $ | 57,035 |
Provision for loan losses | 1,927 |  |  | 3,132 |
Non-interest income | 8,640 |  |  | 16,960 |
Non-interest expense | 21,870 |  |  | 43,654 |
Income before income taxes | 13,905 |  |  | 27,209 |
Income tax expense | 3,307 |  |  | 6,715 |
Net income | $ | 10,598 |  |  | $ | 20,494 |
Earnings per share |  |  |
Basic | $ | 0.76 |  |  | $ | 1.42 |
Diluted | 0.76 |  |  | 1.42 |
Basic weighted average shares outstanding | 13,956,674 |  |  | 14,407,273 |
Diluted weighted average shares outstanding | 13,974,048 |  |  | 14,424,576 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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