Tupelo’s Renasant Bank continued its march through Georgia last week with a definitive agreement to acquire Albany’s $1.9 billion Heritage Financial Group Inc., parent of HeritageBank of the South, through a stock purchase.
Renasant, which a couple years ago began establishing a presence in North Georgia with acquisitions in Blairsville and suburban Atlanta, will gain entry to a number of localities elsewhere in Georgia. In addition to Albany, Renasant will get bank branches in the South Georgia cities of Statesboro and Savannah.
Based on the publicly held Renasant’s 20-day average closing price of $29.14 per share as of Dec. 9, the aggregate deal value is about $258 million, or $27 per share. Heritage stockholders are to receive 0.9266 shares of Renasant common stock for each share of Heritage common stock.
The transaction will give Renasant about $7.5 billion in total assets, $5.2 billion in gross loans and $6.1 billion in deposits with 171 banking, mortgage, insurance, wealth management and investment offices in Georgia, Mississippi, Alabama, Tennessee and Florida.
Analysts with Sterne Agee say they expect the acquisition will benefit Renasant EPS by 11 percent, even though the balance sheet will grow by 23 percent of the assets. “Given the lack of strategic fit, we would have preferred a much more financially attractive deal given Heritage’s concentration in mortgage and the weaker demographic trends of its footprint,” Sterne Agee said in a flash note shortly after the acquisition announcement.
Pricing seems reasonable but not reflective of a bargain, the analyst report said.
The acquisition could move Renasant closer to becoming a seller, the analysts noted. Renasant “will have $7.6 billion of assets on a pro forma basis, which is much closer to the troublesome $10 billion asset mark. As a result, Renasant could become a target within a year or two,” the report predicted.
With the deal, Renasant will gain $1.2 billion in loans and $1.3 billion in deposits, and 48 banking, mortgage and investment offices in Alabama, Georgia and Florida, including Heritage’s pending previously announced branch acquisition from The PrivateBank and Trust Company of a branch in Norcross, Ga.
O. Leonard Dorminey, president and CEO of Heritage, will join Renasant as executive vice president and serve as the president of Renasant’s Georgia region. He has been with HeritageBank since 2001 and has served as president and CEO of Heritage since 2003. Dorminey began his career in banking as a lender more than 32 years ago.
The acquisition is expected to close in the third quarter of 2015 and is subject to Renasant and Heritage stockholder approval as well as regulatory approval.
Renasant in October reported the highest quarterly income increase in its 110-year history. Third quarter earnings went from $6.6 million in the third quarter of last year to $15.5 million in this year’s third quarter, the banking company said.
The multi-state Tupelo banking company attributed a similar earnings spike in the second quarter (from $8 million in Q2 2013 to $14.8 million in Q2 this year) to its takeover of Kosciusko’s First M&F Bank. The acquisition added $1.6 billion in assets and 42 banking and insurance locations throughout Renasant’s Mississippi, Alabama and Tennessee market.
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