Cadence selling seven branches ahead of BancorpSouth merger

First Bancshares in Hattiesburg, Mississippi, is buying seven branches from Cadence Bancorp as part of an antitrust agreement tied to Cadence’s merger with BancorpSouth Bank.

The $27.6 billion-asset BancorpSouth, of Tupelo, Mississippi, agreed in April to pay about $2.8 billion in stock for the $18.7 billion-asset Cadence, which is based in Houston. As part of that deal, BancorpSouth and Cadence signed an agreement with the Department of Justice to unload the branches to avoid excessive concentration in northeast Mississippi.

Should the merger close in the fourth quarter as expected, BancorpSouth would have between 27% to 37% deposit market share in the three Mississippi markets represented in the branch transaction with First Bancshares, according to Janney analyst Chris Marinac. “This is too much concentration in the eye of the U.S. DOJ, hence the sale agreement,” he said.

The $5.5 billion-asset First Bancshares said it would buy three branches in Starkville, two in West Point and two in Aberdeen. It would pick up about $450 million of deposits for a premium of $1 million and acquire about $42 million of loans at par value.

BancorpSouth and Cadence had previously said they would cut $78 million of annual noninterest expenses, or about 7% of the combined company’s operating costs. The branch sales support that effort. Cost-cutting is expected to help make the deal 17% accretive to BancorpSouth’s 2022 earnings per share, the company said.