Beach Bancorp in Fort Walton Beach, Fla., made overtures to more than a dozen credit unions before agreeing to sell to First Bancshares in Hattiesburg, Miss.
The $6.2 billion-asset First agreed to buy the $620 million-asset Beach in April for $117 million.
Months earlier, Beach, through its investment bank, contacted 16 potential credit union buyers as part of its sales process, according to a regulatory filing tied to the pending acquisition.
Though seven credit unions signed nondisclosure agreements to access confidential data, none advanced the dialogue due to either poor timing, incompatible geography or less-than-ideal financial considerations.
Beach decided to seek a buyer in October 2021 after its board held a special strategic planning session.
The bank’s board and management spent most of November preparing by, among other things, finalizing a targeted buyers’ list, completing marketing materials and preparing due diligence information.
The goal was to contact banks and credit unions with $1 billion to $25 billion of assets.
Chaney, Reeves and two other Beach executives met remotely on Feb. 23 with executives from a $1.3 billion-asset credit union based in the Mid-Atlantic region. But Beach learned that the credit union did not yet have “consensus level” board backing and that the “regulatory approval process was unproven and not certain,” the filing said.
The credit union never sent Beach an indication of interest.
First and Beach went back and forth on First’s letter in late February, with First agreeing to consider adding a Beach director to its board. Reeves signed the letter on Feb. 28.
After reverse due diligence, Beach’s board discussed an unrealized loss in First’s bond portfolio, deciding that it “was on par with peers and mitigated through strength of earnings, balance sheet liquidity and of no material impact to regulatory capital levels.”
Beach’s board approved the merger during an April 21 meeting. The deal, which was announced on April 26, is expected to close by the end of this year. It priced Beach at 143% of its tangible book value.
“We are thrilled to be joining forces with Beach Bank and continuing to grow our presence in Florida,” Cole said in a press release announcing the deal. “In addition to strengthening our northwest Florida markets, Beach will add the Tampa metro and central Florida area to our footprint.”
The deal is expected to be 2.3% accretive to First’s 2023 earnings per share, and 4.7% accretive the next year. It should take less than two years for First to earn back less than 1% dilution to its tangible book value.
First plans to cut half of Beach’s annual noninterest expense, or roughly $8.2 million. It expects to incur $12.3 million of merger-related expenses.
First will pay Reeves nearly $1.2 million to extinguish his employment agreement at Beach. Reeves also agreed to an 18-month noncompete agreement and a three-year non-solicitation agreement beginning whenever his employment at First ends.