Blairsville, Ga.-based United Community Banks Inc. ($9.63 billion) signed adefinitive agreement to acquire Mount Pleasant, S.C.-based ($466.2 million)and unit TidelandsBank, according to an April 4 news release.
Following the deal completion, Tidelands Bank will mergeinto United Community Banks' subsidiary, United Community Bank, and operate under its brand.
Under the terms of the agreement, Tidelands' commonshareholders will receive cash equal to 52 cents per share, or approximately$2.2 million in total. In addition, United Community Banks will pay $9.0 millionin aggregate to the U.S. Treasury Department to redeem all of Tidelands'fixed-rate cumulative preferred stock issued under the Capital PurchaseProgram. The amount represents a 56% discount.
Tideland Bancshares recently reported in its Form 10-K thatthere was substantialdoubt about its ability to continue as a going concern. It hadreceived a notice of default regarding its trust-preferred securities in earlyMarch.
Based on SNL's calculations, the is 0.53% of depositsand 2.41% of assets and has a tangible book premium-to-core deposit ratio of5.54%. Meanwhile, SNL's valuations for bank and thrift targets in the Southeastbetween April 4, 2015, and April 4, 2016, averaged 142.22% of book, 144.12% oftangible book and had a median of 23.64x last-12-month earnings, on anaggregate basis. On a per-share basis, they averaged 162.41% of book, 166.39%of tangible book and had a median of 18.02x last-12-month earnings.
The deal has a one-day premium of 225%, based on Tidelands'closing stock price of 16 cents per share on April 1, and a one-month premiumof 160% based on its closing price of 20 cents per share on March 4.
The transaction is expected to be 9 cents to 10 cents accretiveto United Community Banks' fully diluted EPS in 2017 with all operating expensesavings realized. It is also expected to be approximately 1.5% dilutive to itstangible book value per share at deal completion, with an earnback period ofapproximately two years, including one-time transaction costs.
United Community Banks President and COO Herbert Lynn Hartonsaid the deal increases the likelihood that the bank will end 2016 above the$10 billion asset threshold. The costs associated with this — such as theDurbin amendment effect on interchange fees and higher FDIC insurance costs —are expected to reduce EPS by a little more than 2 cents per share, beginningin the third quarter of 2017 at the earliest.
In South Carolina, the merger will also see United CommunityBanks enter Dorchester County with one branch, to be ranked eighth with a 4.20%share of approximately $1.30 billion in total market deposits. It will alsoenter Beaufort County with one branch, to be ranked No. 14 with a 1.93% shareof approximately $3.80 billion in total market deposits. It will enter HorryCounty with two branches, to be ranked No. 15 with a 2.46% share ofapproximately $5.50 billion in total market deposits. And it will enterCharleston County with three branches, to be ranked No. 14 with a 1.84% shareof approximately $9.04 billion in total market deposits.
The transaction, which is subject to regulatory approvalsand the approval of Tidelands' shareholders, is expected to close in the thirdquarter.
Sandler O'Neill & Partners LP acted as financial adviserto United Community Banks in connection with the transaction, and TroutmanSanders LLP served as its legal adviser. Banks Street Partners LLC served asexclusive financial adviser and rendered a fairness opinion to Tidelands, andNelson Mullins Riley & Scarborough LLP served as its legal adviser.