First Mid Bancshares (FMBH) to Buy LINCO for $144.9 Million

Shares of First Mid Bancshares, Inc. FMBH gained 10.8% following the announcement of a definitive merger agreement with LINCO Bancshares, Inc., the holding company for Providence Bank. Per the deal, which is anticipated to close in first-quarter 2021, First Mid Bancshares will acquire all of the outstanding shares of LINCO for $144.9 million.

The merger is expected to help First Mid Bancshares in revenue enhancement with expansion of its Wealth Management and Insurance business lines.

Once the merger is complete, First Mid Bancshares will have nearly $5.3 billion in total assets, excluding Paycheck Protection Program (“PPP”) loans.

Notably, the deal has already been approved by the board of directors of the companies.

Terms & Financial Details of the Deal

Per the agreement, shareholders of LINCO will receive $116.5 million in cash and 1,262,246 shares of First Mid Bancshares’ common stock.

One member from LINCO’s board will join the board of directors of First Mid Bancshares.

Pre-tax, the deal expenses are anticipated to be $15.5 million.

Excluding the impact of one-time transaction expenses, the deal is expected to be accretive to earnings per share in the first full year after close by 20%.

Moreover, the estimated tangible book value per share dilution to First Mid Bancshares will likely be earned back in 2.25 years under the crossover method, including CECL “Day 2” accounting treatment.

Further, the merger is expected to result in cost savings of 33%, of which 75% will likely be realized in 2021 and the remaining by 2022.

Joe Dively, chairman and CEO of First Mid Bancshares, stated, “Providence has a long history of providing excellent service to the communities it serves and we are looking forward to combining forces and providing even more financial solutions for customers and communities. We have consistently shared our strategic intent to diversify our geographic footprint and this merger expands our presence in the Mid-Missouri and St. Louis Metro markets.”

Dively added, “In addition to St. Louis, Providence has deep relationships in Columbia, where it is headquartered, and in the Jefferson City and Osage Beach markets. It has also successfully operated outside of Missouri in the high performing and growth markets of Grapevine, Texas and through its loan production office in Indianapolis, Indiana.”

The chairman of LINCO and Providence Bank, Bill Laurie, stated, “Our family is excited to partner with First Mid to achieve our goal of creating a larger banking organization that will broaden and strengthen the products and services available to our customers. Providence Bank and First Mid share a like-minded focus on commitment to the communities we serve and First Mid is a perfect fit culturally and strategically for our customers, employees and shareholders.”

So far this year, shares of First Mid Bancshares have lost 29.2% compared with a decline of 42.4% recorded by the industry.

Currently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

So far this year, consolidations in the banking sector have been few and far between, as the virus outbreak and the resultant economic slowdown put brakes on the same. Nonetheless, a few notable deals this year include CapStar Financial Holdings, Inc.’s CSTR merger with Tennessee-based FCB Corporation, and First Horizon National Corporation FHN and IBERIABANK Corporation’s all-stock merger of equals.

Recently, Summit Financial Group, Inc. SMMF announced that it has signed a definitive merger agreement to acquire WinFirst Financial Corp in an all-cash deal.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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