First Bancshares in Hattiesburg, Miss., has agreed to buy Southwest Banc Shares in Chatom, Ala.

The $1.8 billion-asset First Bancshares said in a press release Tuesday that it will pay $60 million in cash and stock for the parent of the $398.4 million-asset First Community Bank. The deal, which is expected to close in the first quarter, prices Southwest at 166% of its tangible book value.

First Bancshares also announced that it plans to raise $45 million in capital by selling common stock. Proceeds will be used to fund the cash portion of the Southwest deal and for other potential acquisitions.

First Community has nine branches, $279 million in loans and $352 million in deposits in markets around Mobile, Ala.

“This combination will significantly increase our market share in Mobile … and the surrounding communities,” Hoppy Cole, First Bancshares’ president and CEO, said in the release. “Growing our presence in Mobile and south Alabama is a major component of our strategic plan, and we believe that the region will provide continued opportunity for growth.”

First Bancshares said it expects to incur about $6 million in merger-related costs; it plans to cut about 40% of First Community’s annual noninterest expenses. The transaction is expected to be accretive in 2019.

It should take First Bancshares about two years to earn back any dilution to its tangible book value.

Performance Trust Capital Partners and Alston & Bird advised First Bancshares. Hovde Group and Jones Walker advised Southwest.

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