8-K: Southern States Bancshares to Acquire CBB Bancorp, Expanding Georgia Footprint

Southern States Bancshares will acquire CBB Bancorp in a merger expected to close in the third quarter of 2024, significantly enhancing its presence in Georgia.

Summary

• Southern States Bancshares, Inc. (SSBK) has agreed to acquire CBB Bancorp, the parent company of Century Bank of Georgia.
• The merger is expected to close in the third quarter of 2024, pending regulatory approvals.
• Upon completion, Southern States Bank will have approximately $2.8 billion in assets, $2.3 billion in deposits, and $2.0 billion in loans.
• The combined entity will operate 15 full-service branches and two loan production offices across Alabama and Georgia.
• 48% of the combined bank's deposits will be located in Georgia, with an increased presence in the Atlanta metro market.
• CBB Bancorp shareholders can elect to receive either 1.550 shares of Southern States common stock or $45.63 in cash for each share, with cash elections capped at 10% of outstanding shares.
• The implied value per share is $38.38 based on Southern States stock price of $24.24 as of February 27, 2024, with an aggregate transaction value of $27 million.
• Century Bank has approximately $310 million in assets, $130 million in loans, and $290 million in deposits as of December 31, 2023.
• Century Bank's deposit base includes nearly 40% demand deposits and has an average cost of deposits of 1.21% in the most recently reported quarter.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook on the merger, highlighting strategic benefits, financial accretion, and growth opportunities. The language is optimistic and forward-looking, suggesting a strong belief in the success of the transaction.

Positives

• The acquisition will significantly enhance Southern States' presence in the high-growth Georgia market.
• Century Bank has a strong core deposit base with a low average cost of deposits.
• The merger is expected to be accretive to Southern States' earnings per share.
• Senior members of Century Bank's management team will remain in important roles.
• The combined company will have a larger scale and enhanced franchise value.
• The transaction is expected to improve Southern States' liquidity position and balance sheet fundamentals.

Negatives

• The transaction will result in an initial tangible book value dilution of approximately 8%.
• The tangible book value earnback period is estimated to be around 2.5 years.
• The transaction value will fluctuate with changes in Southern States' stock price.

Risks

• The merger may not close as expected or at all due to regulatory, shareholder, or other approvals not being received or satisfied.
• There is a risk of delays in closing the transaction.
• Legal proceedings could be instituted against Southern States or CBB Bancorp.
• The businesses of Southern States and CBB Bancorp may not be integrated successfully.
• Cost savings and synergies may not be fully realized or may take longer than expected.
• The merger could disrupt relationships with employees, customers, or other parties.
• Management time could be diverted to merger-related issues.
• The shares of Southern States common stock issued in the merger could have a dilutive effect.
• The reaction of customers, employees, and counterparties to the merger is uncertain.

Future Outlook

The combined company expects to capitalize on economic growth in the communities they serve, with Southern States expecting to enhance its presence in Georgia and deliver an increased level of products and services. The merger is expected to be accretive to Southern States' earnings per share and improve its balance sheet.

Management Comments

• Southern States President and CEO Mark A. Chambers stated that the merger will bolster their presence in Georgia and aligns with their strategic plan of pursuing disciplined M&A in high-growth markets.
• Richard E. Drews Jr., CEO of Century Bank of Georgia, commented that the partnership will allow the combined company to more effectively capitalize on the economic momentum in the local communities of Georgia that they serve.

Industry Context

This merger reflects a trend of consolidation in the banking industry, particularly among community banks seeking to expand their market presence and improve their financial performance. The acquisition allows Southern States to increase its footprint in the attractive Georgia market, which is experiencing strong population and income growth.

Comparison to Industry Standards

• The document notes that Century Bank has a deposit beta of 20.1%, compared to a Southeast average of 26.8%, indicating a lower sensitivity to interest rate changes.
• Century Bank's average cost of deposits is 1.21%, which is attractive compared to the Southeast average.
• The document highlights that Century Bank has the #1 community bank deposit market share in Bartow County.
• The document compares Southern States to other community banks in Georgia, noting that it will be the 11th largest by deposits after the merger.
• The document notes that Southern States will be the 4th largest bank headquartered in Alabama by asset size after the merger.

Management Changes

Stakeholder Impact

• Shareholders of CBB Bancorp will receive either Southern States stock or cash for their shares.
• Employees of Century Bank will be retained by Southern States Bank.
• Customers of Century Bank will have access to additional products and services.
• The merger is expected to create value for the combined company's customers, employees, and stakeholders.

Next Steps

• Southern States will file a Registration Statement on Form S-4 with the SEC.
• CBB Bancorp will hold a shareholder meeting to vote on the merger.
• The merger is expected to close in the third quarter of 2024, subject to regulatory approval.
• Century Bank's locations will operate as Southern States Bank locations after the merger.

Key Dates

Keywords

merger, acquisition, bank, Southern States Bancshares, CBB Bancorp, Century Bank of Georgia, Georgia, community banking, financial institution, M&A