Affirmative shareholder votes Tuesday cleared the way for Renasant to begin a $119 million acquisition of Kosciusko’s First M&F Corp.
The acquisition gives the $4.2-billion regional bank based in Tupelo a central Mississippi presence and increased market shares in the northern part of the state as well as in Tennessee and Alabama.
Tupelo’s Renasant announced the acquisition of First M&F, parent of the $1.6-billion Merchant & Farmers Bank, in February, with terms that included a $119-million common stock transaction. The combined company will make Renasant the fourth-largest bank in Mississippi. In total, Renasant will gain 36 locations in Mississippi, Alabama and Tennessee, though how many will remain open has not been decided, Renasant officials say.
With the expected green light from shareholders of both institutions, Renasant will seek to complete the deal by the third quarter and begin convergence of banking operations in the final quarter. All locations will carry the Renasant name upon completion of the convergence.
Renasant will gain 36 locations, though how many remain open will depend on overlap between the two. Renasant locations will also be examined for overlap and some could be closed, said Scott Cochran, president of Renasant’s Mississippi Division.
While Cochran noted it is “still a moving number” on closings, he said the banks have seven branches within a mile or two of each other and another 15 within seven miles.
“We’re going to make some closings,” he said, and noted branches from both banks would be among ones shut down.
One of Renasant’s two Oxford branches will be merged into the First M&F location on The Square in Oxford, Cochran said. “It’s a better facility and more conducive to our needs.”
With the acquisition, Renasant gains nine First M&F’s metro Jackson branches scattered around Flowood, Brandon, Pearl and Clinton.
Just what the merged operations mean for the 100 or so employees at First M&F’s Kosciusko headquarters is not yet clear. Some will continue to serve the combined bank’s operation through remote locations. Some job cuts are planned, however, according to Renasant.
Not all of the support service employees need to be in Tupelo, Cochran said, indicating some First M&F employees in Kosciusko could possibly continue to work from there.
Ultimately, the merged operation must be lean but effective, he said. “For this transaction to be of shareholder value, we have to gain efficiencies.”
Hugh Potts, chairman and CEO of First M&F, will step down after 40 years at First M&F. Potts said previously that the merger will give First M&F customers a menu of services that a much larger financial institution can offer and “a high degree of service found in a local community bank.”
Potts will stay on through the transition, likely to the end of the year, according to Jeff Lacey, First M&F’s president and chief banking officer.
Lacey will oversee the Southern branches, “primarily the ones that don’t have overlap,” he said in an interview.
In addition to entry to the Jackson market, the acquisition gives Renasant some good branching overlap and “synergies for cost-savings and market-reach pickup,” Lacey added.
Renasant will grow its property & casualty insurance operations by about a quarter and expand its mortgage lending as well. Both companies maintain their mortgage lending headquarters in Birmingham. Plans are for Renasant to move its operations into what is now the First M&F mortgage headquarters, according to Cochran.
On the insurance front, Renasant gets to expand its agent locations beyond Tupelo and Louisville to vastly more locations throughout the multi-state region, Cochran noted.
Matt Olney, analyst with Stephens Inc., said he expects the acquisition to propel Renasant to a 16 percent increase in earnings per share, from $1.47 to $1.71. Olney set a EPS price target of $1.89 for 2015.
First M&F’s Lacey said his bank was not looking to be acquired, having worked through a lot of its real estate lending difficulties, primarily from loans in the Memphis market. “It started with a friendly phone call to Hugh Potts,” he said.
“We looked at the transaction and decided it was a good deal for shareholders.”
In the end, he said, “It’s going to make a very strong bank.”