Top brass at First Clover Leaf Bank didn’t take a merger with First Mid-Illinois Bank and Trust lightly.
According to President and CEO P. David Kuhl, the bank wouldn’t sell itself to just anyone. It had to be a bank big and strong enough to thrive in a climate where bank mergers have become more common but small enough to still care about its customers and the communities they call home.
Mattoon-based First Mid-Illinois made the grade. Despite its larger size — it operates 46 locations in 33 Illinois communities with assets totaling $2.1 billion compared to First Clover Leaf’s seven branches and $650 million in assets — Kuhl said the banks are similar: Dedicated to playing positive roles in the communities they serve while also trying grow in an age when size matters.
Money will change hands in the $90 million deal sometime in the third or fourth quarter this year, Kuhl said. The merger will be complete around this time next year, at which point former First Clover Leaf shareholders will represent 21 percent of First Mid-Illinois’ total shareholders.
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As for Kuhl, he said he’s still exploring opportunities with the bank post-merger, but he said he won’t be its CEO.
Q: Why did First Mid-Illinois Bank and Trust want to merge with First Clover Leaf Bank?
A: “Size matters when it comes to banking when it comes to all the regulation that’s going on and all the expenses that banks have to incur to run a business. It used to be very easy to have a small community bank of $50 million to $150 million (in assets). However, with the costs continuing to rise, you start to need to reach a certain level of asset size to spread all those costs over in order to provide an adequate return to your shareholders. Many banking analysts today would say that you almost have to be $2 billion in size to be profitable. We’re at $650 million, and we had a strategic plan that we wanted to grow to $1.5 billion. Unfortunately, we couldn’t find acquisition targets that we could afford and that would make sense for us. In that process you look at it and say ‘If we can’t do it that way, can we look for a partner with a similar culture and a similar commitment to community, shareholders and customers and merge together?’ That’s what happened in this case. First Mid-Illinois has a focus very similar to us. They’re laser-focused on giving back to the community, to providing great customer service and just being that community-minded bank. We didn’t want to find a partner like a Bank of America or a large regional bank.”
Q: Will there be any changes to First Clover Leaf Bank’s current branches in Edwardsville, Swansea, Highland, Wood River and Clayton, Mo.?
A: “That’s the beauty of this. Our branch networks do not overlap significantly. The branch network should be unaffected. Their acquiring us because we have good branches, because we have good people, because we have a tremendous customer base. They want to maintain all of that. There’s no intention at this point to close any branches. What will happen is we will do a complete analysis of our branch network and where there will be some branch overlap, we’ll analyze what’s best for the customer.”
Q: Does the same go for bank employees? Will there be no need to eliminate jobs?
A: “That’s correct. (First Mid-Illinois) has grown very rapidly over the last couple of years. They had an acquisition of Old National Bank, about $500 million and 12 branches down in Southern Illinois. With the influx of that growth, their staffing levels haven’t necessarily kept up, so they’re looking at us to help bolster some of that staffing level. We anticipate that most of any job reductions would occur through natural attrition.”
Q: What about customers’ money? What will happen to customers’ deposits throughout the merger process?
A: “Your money is absolutely safe. You’re insured here up to $250,000 by the FDIC (Federal Deposit Insurance Corporation). And even if you’re one of those fortunate people that would have more than that in each of our banks, the government allows a six-month period to adjust. So when the banks combine you’re still insured on both accounts.”
Q: Is it correct to assume that First Clover Leaf Bank only agreed to the takeover by First Mid-Illinois Bank because leadership felt customers would be in good hands?
A: “Right. As part of this transaction, our shareholders will end up owning 21 percent of First Mid-Illinois Bank. We performed a due diligence ourselves. We looked at their books; we looked at all of their records; we analyzed their financial results for the last several years. We took a deep dive into their whole operation to make sure we were comfortable with it, that we could recommend to our shareholders to approve this. Because our shareholders will become their shareholders. And after doing that, we found them to be a very, very conservatively-run, profitable organization that we felt comfortable recommending to our shareholders. In addition, we hired the banking firm Raymond James to provide a fairness opinion. They said this is a fair deal financially, and this is a strong bank operationally.”
Q: Why was it important for First Clover Leaf to merge with another local bank instead of just any big bank?
A: “We’ve always prided ourselves on being a community bank, and I think our customers recognize that we provide a lot of value to the community either in civic or charitable contributions or a lot of involvement. So when we went in search of a merger partner, to try to grow enough in size to spread some of those regulatory costs over a larger base, we specifically went looking for community-minded banks just like us who would pay attention to the community, customers and employees. That’s what we found in First Mid-Illinois Bank and Trust. They are a community-focused organization operating in 33 separate communities. They’re just like us in that regard. We felt very comfortable forming a partnership with a bank like them as opposed to some big regional bank that may operate out of another large city.”
P. David Kuhl
Job: President and CEO, First Clover Leaf Bank
On the merger: “We’re very confident this is going to be a good thing for the customers.”