Heritage Southeast finds another buyer, a month after the VyStar deal crumbled

Dive Brief:

Mississippi-based The First Bank agreed to acquire Georgia-based Heritage Southeast Bank in a deal worth roughly $207 million that is expected to close by the first quarter of 2023, the banks announced Wednesday.
Heritage Southeast last month ended a merger agreement that would have seen it acquired by Jacksonville, Florida-based VyStar Credit Union. That deal, proposed in March 2021 at a price tag of $195.7 million, saw three delays before the parties scrapped the tie-up, citing a “lack of a clear path forward to obtaining the regulatory approvals needed for closing.”
Acquiring Heritage Southeast would give The First Bank an entry point to serve the Atlanta, Jacksonville and Savannah markets and increase the lender’s footprint to encompass more than 100 branches across five states, the Mississippi-based bank said. (Heritage had 23 in two states as of June.)

Dive Insight:

The Heritage Southeast deal comes on the heels of an April announcement that The First Bank would acquire Fort Walton Beach, Florida-based Beach Bank for $116.7 million in stock. The addition of $620 million-asset Beach would give The First Bank seven new branches across the Florida Panhandle and the Tampa market. That deal is set to close by the end of this year.

“Individually, each transaction is extremely attractive and enhances our organizations’ franchise value,” The First Bank CEO Ray Cole said in a press release Wednesday. “Collectively, they are transformative for our company providing meaningful market share in some of the most dynamic, fastest growing markets in the South.”

Upon the VyStar tie-up’s termination, Heritage Southeast appeared to signal that it was ready to test the market again.

“The termination of the purchase agreement positions HSBI to benefit from an improved post-COVID-19 economic climate, stronger capital position and focus on the consistent growth and value creation we have delivered through the years,” CEO Leonard Moreland said in June. “Additional strategic initiatives that have been delayed and designed to improve efficiencies can now be pursued along with strategic partnerships that will enhance shareholder value.”

The addition of Heritage Southeast’s $1.7 billion in assets, $1.1 billion in loans and $1.5 billion in deposits would give The First Bank roughly $8 billion in assets, $7 billion in deposits and $5 billion in loans after completion, the Mississippi-based bank said.

“We are proud to join The First, which has a similar culture and approach to business as Heritage Southeast Bank,” Moreland said. “This partnership will add to the momentum that both banks are already experiencing in Georgia and Florida.”

Heritage Southeast shareholders will receive 0.965 shares of First Bancshares common stock for each HSBI share they hold, according to Wednesday’s press release. That puts the deal’s value at $28.64 per share, or roughly $207 million, based on First Bancshares’ $29.68 closing price Tuesday.

Certain Heritage Southeast shareholders who are expected to own more than 4.9% of First Bancshares common stock after the merger will be restricted from selling their First Bancshares shares for 90 days after the deal’s completion, the banks said.

The terminated Heritage Southeast-VyStar tie-up sparked an outcry from community bank advocates who said the not-for-profit credit unions’ tax-exempt status gives them greater purchasing power and an unfair advantage over community banks.

“VyStar has either closed, moved, sold or consolidated half of the branches acquired” from a bank acquisition the credit union undertook in 2019, the Independent Community Bankers of America (ICBA) and the Community Bankers Association of Georgia wrote in a joint letter to the Federal Deposit Insurance Corp. last year, urging the regulator to reject the Heritage Southeast deal.