Illinois Bank & Trust agreed to acquire substantially all the assets and assume substantially all the deposits and certain other liabilities of Rockford Bank and Trust Co., a unit of Moline, Ill.-based QCR Holdings Inc.
Under the terms of the purchase and assumption agreement, Illinois Bank & Trust will acquire substantially all of Rockford Bank and Trust's assets for a cash amount that will be determined by the following formula: the purchase price premium, plus the aggregate net book value of the acquired assets, minus the aggregate net book value of the assumed liabilities. The purchase price premium is equal to 8% of Rockford Bank and Trust's tangible assets, multiplied by 0.345.
Based on Rockford Bank and Trust's balance sheet as of June 30, the purchase price premium would be $13.4 million and the total payment would be $59.2 million. The actual purchase price premium and the payment will be determined based on the aggregate net book value of the acquired assets and liabilities assumed by Illinois Bank & Trust on the closing date.
The deal is expected to close in the fourth quarter of 2019, with a systems conversion planned for the first quarter of 2020.
On an aggregate basis, S&P Global Market Intelligence calculates that the deal value is 129.1% of common equity and of tangible common equity. It is also 11.31% of assets, 13.06% of deposits, and the tangible book premium-to-core deposits ratio is 4.67%.
S&P Global Market Intelligence valuations for bank and thrift targets in the Midwest region between Aug. 13, 2018, and Aug. 13, 2019, averaged 155.58% of book and 156.96% of tangible book and had a median of 18.34x last-12-months earnings, on an aggregate basis.
Heartland Financial USA will expand in Winnebago County, Ill., by two branches to be ranked second with a 15.38% share of approximately $5.58 billion in total market deposits.
Once the transaction is complete, Illinois Bank & Trust will continue to operate under its existing brand. Jeffrey Hultman, Illinois Bank & Trust's president and CEO, will continue as CEO of the bank. Thomas Budd, president and CEO of Rockford Bank and Trust, will assume the role of president of Illinois Bank & Trust.
As of June 30, Rockford Bank and Trust had $523 million in total assets, $423 million of gross loans outstanding and $453 million of deposits. Illinois Bank & Trust, a subsidiary of Dubuque, Iowa-based Heartland Financial USA Inc., had $853 million in total assets as of the same date, according to a news release.
The completion of the deal will create Heartland Financial's fifth-largest bank subsidiary with assets of approximately $1.3 billion. Following the completion of the transaction, Heartland Financial will have total assets of approximately $12.6 billion.
Panoramic Capital Advisors Inc. served as financial adviser and Dorsey & Whitney LLP served as legal counsel to Heartland Financial in connection with the transaction. Barack Ferrazzano Kirschbaum & Nagelberg LLP served as QCR Holdings' legal counsel.