EX-99.2 4 fmbh-ex992_11.htm EX-99.2 fmbh-ex992_11.htm

 

Exhibit 99.2

 

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information is the result of combining the Company’s reported historical financial information with LINCO’s historical financial information and making adjustments to the combined information to reflect events that have occurred or that are assumed to have occurred because of the acquisition. The pro forma information should be read in conjunction with the Company’s previously reported historical financial statements and the LINCO financial statements included in this filing.

 

The unaudited pro forma condensed combined statements do not assume or include any possible cost savings or revenue opportunities that may be realized as a result of the combination. This condensed combined pro forma information is provided for illustrative purposes only and is not necessarily indicative of the results of operations or financial position which would have resulted if the combination had been effected at the beginning of the periods presented or as of the date indicated or the financial position or results of operation which might be obtained in the future.

The following unaudited pro forma condensed combined financial information presents the financial position of the Company, including the effects of the purchase accounting adjustments and acquisition expenses, had the acquisition taken place at the dates identified (in thousands):

 

 

 

First Mid

 

 

LINCO

 

 

Pro Forma

 

 

 

 

 

 

 

As of December 31, 2020

 

Bancshares, Inc.

 

 

Bancshares, Inc.

 

 

Transactions

 

 

Note

 

Pro Forma

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

417,281

 

 

$

35,578

 

 

$

(103,500

)

 

(1)

 

$

349,359

 

Investment Securities

 

 

887,169

 

 

 

124,440

 

 

 

264

 

 

(2)

 

 

1,011,873

 

Loans

 

 

3,138,419

 

 

 

865,967

 

 

 

(9,401

)

 

(3)

 

 

3,994,985

 

Allowance for loan losses

 

 

(41,910

)

 

 

(8,592

)

 

 

6,583

 

 

(4)(5)

 

 

(43,919

)

Other real estate owned

 

 

2,489

 

 

 

8,435

 

 

 

1,422

 

 

(6)

 

 

12,346

 

Premises and equipment

 

 

58,206

 

 

 

23,605

 

 

 

5,853

 

 

(7)

 

 

87,664

 

Goodwill

 

 

104,992

 

 

 

20,503

 

 

 

(11,547

)

 

(8)

 

 

113,948

 

Core deposit intangible

 

 

23,128

 

 

 

137

 

 

 

2,025

 

 

(9)

 

 

25,290

 

Bank owned life insurance

 

 

68,955

 

 

 

30,275

 

 

 

-

 

 

 

 

 

99,230

 

Right of use asset

 

 

17,209

 

 

 

-

 

 

 

794

 

 

(10)

 

 

18,003

 

Other assets

 

 

50,410

 

 

 

13,802

 

 

 

1,736

 

 

(11)

 

 

65,948

 

Total assets

 

$

4,726,348

 

 

$

1,114,150

 

 

$

(105,771

)

 

 

 

$

5,734,727

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

3,692,784

 

 

$

894,884

 

 

$

2,081

 

 

(12)

 

$

4,589,749

 

Securities sold under agreements to repurchase

 

 

206,937

 

 

 

-

 

 

 

-

 

 

 

 

 

206,937

 

FHLB borrowings

 

 

93,969

 

 

 

39,441

 

 

 

975

 

 

(13)

 

 

134,385

 

Junior subordinated debentures, net

 

 

19,027

 

 

 

-

 

 

 

-

 

 

 

 

 

19,027

 

Subordinated debt, net

 

 

94,253

 

 

 

-

 

 

 

-

 

 

 

 

 

94,253

 

Lease liability

 

 

17,351

 

 

 

-

 

 

 

794

 

 

(10)

 

 

18,145

 

Other liabilities

 

 

33,799

 

 

 

6,979

 

 

 

(610

)

 

(14)(15)

 

 

40,168

 

Total liabilities

 

 

4,158,120

 

 

 

941,304

 

 

 

3,240

 

 

 

 

 

5,102,664

 

Stockholders' equity

 

 

568,228

 

 

 

172,846

 

 

 

(109,011

)

 

(16)(17)

 

 

632,063

 

Total liabilities and stockholders' equity

 

$

4,726,348

 

 

$

1,114,150

 

 

$

(105,771

)

 

 

 

$

5,734,727

 

 

 

 

 

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, had the acquisition taken place at the beginning of the period (dollars in thousands):

 

 

 

First Mid Bancshares, Inc.

 

 

LINCO Bancshares, Inc.

 

 

Pro Forma Transactions

 

 

 

 

 

 

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

Note

 

Pro Forma

 

Interest income

 

$

144,141

 

 

$

44,470

 

 

$

3,681

 

 

(18)

 

$

192,292

 

Interest expense

 

 

16,729

 

 

 

9,198

 

 

 

(2,506

)

 

(19)

 

 

23,421

 

Net interest income

 

 

127,412

 

 

 

35,272

 

 

 

6,187

 

 

 

 

 

168,871

 

Provision for credit losses

 

 

16,103

 

 

 

2,139

 

 

 

11,483

 

 

(20)

 

 

29,725

 

Non-interest income

 

 

59,520

 

 

 

6,708

 

 

 

-

 

 

 

 

 

66,228

 

Non-interest expense

 

 

111,087

 

 

 

32,357

 

 

 

2,935

 

 

(21)(22)

 

 

146,379

 

Income before taxes

 

 

59,742

 

 

 

7,484

 

 

 

(8,231

)

 

 

 

 

58,995

 

Income tax expense (benefit)

 

 

14,472

 

 

 

-

 

 

 

(1,975

)

 

(23)

 

 

12,497

 

Net income (loss)

 

$

45,270

 

 

$

7,484

 

 

$

(6,256

)

 

 

 

$

46,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.71

 

 

 

 

 

 

 

 

 

 

 

 

$

2.59

 

Diluted

 

 

2.70

 

 

 

 

 

 

 

 

 

 

 

 

 

2.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares

 

 

16,716,880

 

 

 

 

 

 

 

1,262,246

 

 

(24)

 

 

17,979,126

 

Diluted weighted average shares

 

 

16,762,856

 

 

 

 

 

 

 

1,262,246

 

 

(24)

 

 

18,025,102

 

 

 

Note 1 - Basis of Presentation

The Company acquired LINCO on February 22, 2021. The acquisition is accounted for under the acquisition method of accounting and, accordingly the assets and liabilities of LINCO, presented in these unaudited pro forma condensed combined financial statements have been adjusted to their fair values based upon conditions as of the merger date and as if the transaction had been effective on January 1, 2020 for statement of income data. Since these are unaudited pro forma statements, the Company cannot assure that the amounts reflected in these financial statements would have been representative of the actual amounts earned had the companies combined at that time. The fair values are estimates as of the date hereof and are subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available.

 

Note 2 - Pro Forma Adjustments Footnotes

 

(1)

Cash portion paid for purchase of $103,500,000

 

(2)

Adjustment to reflect investments securities acquired at fair value

 

(3)

Adjustment to record loans acquired at fair value. Adjustment includes discounts based on expected lifetime credit losses for non-purchase credit impaired (“PCD”) loans, adjustments for interest rate differentials and elimination of existing fair value marks and deferred fees. Of this amount approximately $11.1 million is being accreted to interest income over the remaining term of the loans

 

(4)

To eliminate LINCO’s existing allowance for loan losses

 

(5)

Adjustment to reflect the credit discount on PCD loans

 

 

 

 

(6)

Adjustment to reflect other real estate owned acquired at fair value

 

(7)

Adjustment to reflect buildings and equipment acquired at fair value

 

(8)

Adjustment to record goodwill of $8.9 million resulting from the difference between the purchase price and the identifiable net assets as follows (in thousands):

Total purchase price

 

 

 

 

 

$

147,691

 

Allocated to book value of assets and liabilities

 

 

 

 

 

 

153,202

 

 

 

 

 

 

 

 

(5,511

)

Adjustments to record assets and liabilities at fair value:

 

 

 

 

 

 

 

 

Investments

 

$

(264

)

 

 

 

 

Loans

 

 

9,401

 

 

 

 

 

Allowance for credit losses

 

 

(6,583

)

 

 

 

 

Other real estate owned

 

 

(915

)

 

 

 

 

Premises and equipment

 

 

(6,360

)

 

 

 

 

Right of use asset

 

 

(794

)

 

 

 

 

Core deposit intangible

 

 

(2,025

)

 

 

 

 

Other assets

 

 

17,973

 

 

 

 

 

Time deposits

 

 

2,081

 

 

 

 

 

FHLB borrowings

 

 

975

 

 

 

 

 

Lease liability

 

 

794

 

 

 

 

 

Other liabilities

 

 

184

 

 

 

 

 

 

 

 

 

 

 

 

14,467

 

 

 

 

 

 

 

$

8,956

 

 

 

 

 

(9)

To record core deposit intangible asset of $2,148,000, to be amortized over ten years, and to eliminate LINCO’s existing core deposit intangible asset of $123,000

 

(10)

To record initial value of right of use asset and lease liability

 

(11)

To record deferred tax asset for the effects of the acquisition accounting and other miscellaneous adjustments

 

(12)

Adjustment to reflect time deposits assumed at fair value. Amount is being accreted over the remaining term of the deposits

 

(13)

Adjustment to reflect FHLB advances assumed at fair value. Amount is being accreted over the remaining term of the advances

 

(14)

Adjustment to reflect deferred compensation liability at fair value

 

(15)

To eliminate LINCO’s existing allowance for off balance sheet credit exposure

 

(16)

To eliminate LINCO’s stockholders' equity and reflect fair value of 1,262,246 shares of the Company's common stock issued as consideration for the acquisition

 

(17)

To record special dividend paid to LINCO’s stockholders of $13 million and acquisition costs not recorded as of the balance sheet date

 

(18)

To reflect accretion of fair value adjustments on loans

 

(19)

To reflect accretion of fair value adjustments on time deposits and FHLB borrowings

 

(20)

To record initial allowance for credit losses for non-PCD loans. While the Company adopted CECL on January 1, 2020, no further adjustments to the historical amounts of LINCO’s provision for credit losses have been included in the unaudited pro forma condensed combined financial information

 

(21)

To record amortization of core deposit intangible

 

 

 

 

(22)

To reflect additional transactions costs incurred of approximately $2.6 million. Approximately $525,000 of costs were included in the results of operations of the Company as of December 31, 2020.

 

(23)

To reflect the tax effect on pro forma adjustments at the Company’s effective tax rate of 24%

 

(24)

To reflect the increase in common shares issued as consideration of the acquisition