Southern Missouri Bancorp Inc., the parent company of Southern Bank, agreed to acquire Kansas City, Mo.-based Citizens Bancshares Co., the parent company of Citizens Bank and Trust Co., in a stock-and-cash transaction.
Citizens Bancshares' shareholders will have the right to elect either a fixed exchange ratio of 1.1448 shares of Southern Missouri Bancorp common stock or a cash payment of $53.50 for each share of Citizens Bancshares that they own. The election is subject to adjustment based on Citizens Bancshares' capital and the company's total outstanding shares at closing.
The aggregate transaction value is approximately $140 million, based on Southern Missouri Bancorp's average closing stock price of $52.53 over the 20-day trading period ended Sept. 19.
The deal value equates to 150% of Citizens Bancshares' tangible capital at June 30, represents a 5.9% premium to core deposits, and is a multiple of 7.1x Citizens Bancshares' projected forward earnings including fully phased-in cost savings, which are estimated at 35%.
At announcement, S&P Global Market Intelligence calculates the deal value to be 148.50% of common equity, 152.64% of tangible common equity, 15.91% of deposits, 14.02% of assets and 27.50x earnings. The ratio of tangible book premium to core deposits is 5.87%
Market Intelligence valuations for bank and thrift targets in the Midwest region between Sept. 20, 2021, and Sept. 20, 2022, averaged 149.53% of book and 154.47% of tangible book values and had a median of 15.98x last-12-months earnings, on an aggregate basis.
Excluding certain one-time merger charges and including Southern Missouri Bancorp's additional provision for credit losses, the transaction is anticipated to be accretive to EPS by approximately 5% in the fiscal year ending June 30, 2023, and by 17% in the fiscal year ending June 30, 2024. Tangible book value per common share is expected to be diluted by about 8% at closing, with a projected earnback period of less than three years, based on the crossover method.
The merger agreement was unanimously approved by the boards of Southern Missouri Bancorp and Citizens Bancshares.
Southern Missouri Bancorp and Citizens Bancshares expect the transaction to be completed early in the first calendar quarter of 2023, subject to satisfaction of customary closing conditions, including regulatory and shareholder approvals for both parties.
When the deal closes, Southern Missouri Bancorp will expand in Missouri by 14 branches and be ranked No. 12 in the state with a 1.32% share of about $243.59 billion in total market deposits, according to Market Intelligence data.
At June 30, Citizens Bancshares' consolidated assets were $1.0 billion, including net loans of $465 million, while deposits totaled $879 million. Southern Missouri Bancorp reported total assets at June 30 of $3.2 billion, including net loans of $2.7 billion, and total deposits of $2.8 billion.
On a pro forma basis, following the acquisition, the combined company will have total assets of approximately $4.5 billion, net loans of $3.3 billion and total deposits of $3.8 billion.
Piper Sandler & Co. was financial adviser and Silver Freedman Taff & Tiernan LLP was legal adviser to Southern Missouri Bancorp. D.A. Davidson & Co. was financial adviser and Stinson LLP was legal adviser to Citizens Bancshares.
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