BancorpSouth to Buy Texas First, Expand in Central Texas

BancorpSouth Bank BXS announced plans to merge with Texas First Bancshares, with an objective of boosting presence in the Central Texas region. Notably, this agreement provides a collar with respect to the total deal value ranging from $38.8-$46.5 million. Upon receiving all the necessary regulatory approvals, the deal is expected to close in first-half 2020.

Founded in 1906, the company and its subsidiary, Texas First State Bank, operate through six banking offices in the Waco, Texas and Killeen-Temple, Texas metropolitan statistical areas. As of June 2019-end, the group reported total assets, loans and deposits of $391.3 million, $162.6 million and $356.6 million, respectively.

Per the terms of the agreement, BancorpSouth will issue 1,065,000 shares of common stock and pay $13 million in cash, for all outstanding shares of Texas First, subject to certain conditions and potential adjustments.

In order to maintain the deal value within specified collar, the number of shares of BancorpSouth common stock may be adjusted downward or the cash consideration may be adjusted upward.

With this deal, BancorpSouth seeks to boost its deposit market share and exploit opportunities for continued expansion along the rapidly growing I-35 corridor between Austin and Dallas/Fort Worth, TX.

Prior Acquisitions Closed in 2019

In September, the company completed proposed mergers with Van Alstyne Financial Corporation and Summit Financial Enterprises. With this merger, BancorpSouth will fortify foothold in Dallas-Fort Worth, TX (CMSA) and Florida.

Further, in April, it acquired Jackson, AL-based Merchants Trust, Inc. and its wholly-owned subsidiary, Merchants Bank, along with Casey Bancorp, Inc. and its arm, Grand Bank of Texas.

Our Take

BancorpSouth’s inorganic moves reflect its strong capital position, and focused approach to expand reach and product offerings. However, elevated merger-related expenses and investments in digital offerings might deter its bottom-line growth in the near term.

Year to date, the stock has rallied nearly 12% compared with 16.8% growth recorded by the industry.

 

Currently, the stock carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the finance space are Royal Bank of Canada RY, Mackinac Financial Corporation MFNC and Salisbury Bancorp, Inc. SAL. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Royal Bank of Canada for the current year has been slightly revised upward in the past 60 days. The company’s share price has gained 18.2% so far this year.

Mackinac Financial’s earnings estimates for 2019 have been raised 4.1% upward in the past 30 days. Its share price has risen 14.5% year to date.

Salisbury Bancorp’s shares have gained 9.8% year to date. Its earnings estimates for 2019 have moved up 1.5% in the past 60 days.

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