425: Renasant Corporation to Acquire The First Bancshares, Inc. in Stock Deal

Renasant Corporation announces the acquisition of The First Bancshares, Inc. in an all-stock transaction aimed at expanding its presence in the Southeast.

Summary

• Renasant Corporation is set to acquire The First Bancshares, Inc. in a 100% stock acquisition with a 1:1 exchange ratio.
• The deal is expected to close in the first half of 2025.
• The combined company will have approximately $25 billion in total assets.
• Renasant anticipates approximately 30% EPS accretion from the acquisition.
• The acquisition is projected to increase Renasant's ROA to 1.3% and return on tangible common equity to the high teens.
• The efficiency ratio is expected to be in the mid-50s.
• The combined company's loan-to-deposit ratio is expected to decline to 86% at closing, with a 19% cash and securities to assets ratio.
• The CET1 ratio is projected to be approximately 11% and the total risk-based capital ratio around 15% at close, building by approximately 70 to 80 basis points annually.
• The company is modeling 30% cost savings, with 40% achieved in 2025 and 100% achieved thereafter.
• $75 million of after-tax deal charges are expected.
• A 1.5% allowance for credit losses is assumed for the first loan portfolio.
• The acceptable yield double count is projected to be $48 million, netted against The First's existing purchase accounting marks.
• An interest rate mark of $189 million is assumed on the loan portfolio, approximately 3.6%.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook on the acquisition, highlighting the expected financial benefits, strategic fit, and growth opportunities. Management expresses confidence in the integration process and the future performance of the combined company.

Positives

• The acquisition is expected to be 30% accretive to Renasant's earnings per share.
• The deal is projected to improve Renasant's ROA to 1.3% and return on tangible common equity to the high teens.
• The combined company will have a stronger deposit base and enhanced liquidity.
• The acquisition expands Renasant's presence in key Southeastern markets, including Florida, Georgia, Mississippi, Louisiana, and Alabama.
• The First has a strong credit culture and a granular customer base with limited loan concentrations.
• The combined company is expected to have strong capital ratios, with the CET1 ratio projected to be approximately 11% and the total risk-based capital ratio around 15% at close.
• The company anticipates cost savings of 30%.

Negatives

• The company expects $75 million in after-tax deal charges.
• The company is assuming a $189 million interest rate mark on the loan portfolio or approximately 3.6%.

Risks

• The integration of the two companies may present challenges.
• Regulatory approvals are required and may result in conditions that could adversely affect the combined company.
• The anticipated benefits of the business combination may not be realized.
• The business combination may be more expensive to complete than anticipated.
• There is potential for adverse reactions or changes to business or employee relationships.
• Changes in Renasant's share price before the closing of the business combination could impact the deal.
• The issuance of Renasant common stock in the business combination could have a dilutive effect.

Future Outlook

The acquisition is expected to transform Renasant's financial position, enhance its footprint, and provide strong capital and liquidity levels. The combined company anticipates continued growth and improved profitability.

Management Comments

• Mitch Waycaster: 'This acquisition is a great fit for us...this one checks all the boxes.'
• Milton Cole: 'With Renasant, we could not ask for a better partner to continue down this path.'
• Kevin Chapman: 'This acquisition meaningfully improves our financial condition.'
• James Mabry: 'Deposit and liquidity positions are enhanced by this transaction.'

Industry Context

This acquisition reflects a trend of consolidation in the banking industry, as institutions seek to gain scale, expand their geographic footprint, and improve efficiency. The deal positions Renasant to better compete in the dynamic Southeastern market.

Comparison to Industry Standards

• The projected ROA of 1.3% is comparable to other well-performing regional banks.
• The efficiency ratio in the mid-50s is considered strong and indicates good cost management.
• The CET1 ratio of approximately 11% and the total risk-based capital ratio around 15% at close are healthy and above regulatory minimums.
• The cost savings target of 30% is in line with typical merger synergies in the banking sector.

Stakeholder Impact

• Shareholders of both companies will be impacted by the merger, with Renasant shareholders experiencing potential dilution and The First shareholders receiving Renasant stock.
• Employees of both companies may experience changes as a result of the integration, including potential job losses or new opportunities.
• Customers of both banks will have access to a broader range of products and services.
• The communities served by both banks will benefit from the community benefits plan.

Next Steps

• Obtain regulatory approvals.
• Obtain shareholder approvals from both Renasant and The First.
• Complete the integration of the two companies.
• Execute the community benefits plan.
• Restructure the securities portfolio.

Key Dates