Business Combinations (Notes)

9 Months Ended

Sep. 30, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Business Combination

On August 14, 2015, First Mid-Illinois Bank completed the acquisition of twelve Illinois bank branches ("ONB Branches") from Old National Bank, a national banking association having its principal office in Evansville, Indiana. The acquisition expanded First Mid Bank's service area into Southern Illinois and provided a stable source of core deposits. Pursuant to the terms of the Branch Purchase and Assumption Agreement, dated January 30, 2015, as amended, by and between First Mid Bank and Old National Bank, First Mid Bank, among other matters, assumed certain deposit liabilities and acquired certain loans, as well as cash, real property, furniture, and other fixed operating assets associated with the ONB Branches. The deposit and loan balances assumed were approximately $453 million and $156 million at book value, respectively. First Mid Bank also assumed certain leases, and entered into certain subleases, related to the ONB Branches.

First Mid Bank agreed to pay Old National Bank the sum of: (i) a deposit premium of 3.6% on the amount of deposit accounts of the ONB Branches, other than brokered deposits and municipal deposits, which equated to approximately $15.9 million, (ii) $500,000, representing the fixed deposit premium related to the municipal deposits of the Branches, (iii) the principal amount of the loans being purchased, plus the accrued but unpaid interest, (iv) the aggregate net book value of the other assets purchased including facilities of approximately $4.5 million, and (v) the aggregate amount of cash on hand of $2.7 million as of the closing. The acquisition was settled by Old National Bank paying cash of approximately $276.8 million to First Mid Bank for the difference between these amounts and the total deposits assumed.

The purchase was accounted for under the acquisition method in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations,” and accordingly the assets and liabilities were recorded at their fair values on the date of acquisition. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands).

	Acquired Book Value		Fair Value Adjustments			As Recorded by First Mid Bank
Assets
Cash	279,468		—			279,468
Loans	155,774		(3,377		)	152,397
Premises and equipment	4,547		(125		)	4,422
Goodwill	—		14,015			14,015
Core deposit intangible	—		6,216			6,216
Other assets	1,433		—			1,433
Total assets acquired	$	441,222	$	16,729		$	457,951
Liabilities
Deposits	$	452,810	$	837		$	453,647
Securities sold under agreements to repurchase	3,797		—			3,797
Other liabilities	507		—			507
Total liabilities assumed	$	457,114	$	837		$	457,951

The Company has recognized approximately $1.1 million of costs related to completion of the acquisition during the first nine months of 2015. These acquisition costs are included in legal and professional and other expense. The difference between the fair value and acquired value of the purchased loans of $3,377,000 is being accreted to interest income over the remaining term of the loans. The difference between the fair value and acquired value of the assumed time deposits of $837,000 is being amortized to interest expense over the remaining term of the time deposits. The core deposit intangible asset, with a fair value of $6,216,000, will be amortized on an accelerated basis over its estimated life of ten 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 acquisition taken place at the beginning of the period (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2015		2014		2015		2014
Net interest income	$	16,953	$	15,842	$	47,627	$	45,685
Provision for loan losses	522		96		1,012		651
Non-interest income	6,811		6,283		19,750		19,515
Non-interest expense	15,615		14,178		42,873		42,524
Income before income taxes	7,627		7,851		23,492		22,025
Income tax expense	2,674		2,909		8,384		8,167
Net income	$	4,953	$	4,942	$	15,108	$	13,858
Dividends on preferred shares	550		1,105		1,650		3,313
Net income available to common stockholders	$	4,403	$	3,837	$	13,458	$	10,545
Earnings per share
Basic	$	0.52	$	0.65	$	1.78	$	1.79
Diluted	$	0.51	$	0.59	$	1.69	$	1.65
Basic weighted average shares outstanding	8,421,397		5,881,681		7,553,468		5,881,973
Diluted weighted average shares outstanding	9,784,533		8,386,142		8,916,604		8,386,507

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 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.