BancorpSouth on Buyout Spree, Closes Texas First Merger

Recently, BancorpSouth Bank BXS completed its proposed merger with Texas First Bancshares, effective Jan 1, 2020. Notably, the company had announced the acquisition last September, marching ahead with its efforts to strengthen the bank’s footprint through strategic opportunities.

Last month, BancorpSouth also received the Federal Deposit Insurance Corporation’s (FDIC) regulatory approval for the completion of this transaction.

"We're delighted to announce the completion of our merger with Texas First," said BancorpSouth chairman and chief executive officer Dan Rollins. "Both of our banks share similar philosophies and a strong commitment to our customers and communities. This is a positive step in our growth strategy, and we're excited to welcome Texas First's customers and teammates to BancorpSouth and expand our geographic footprint," Rollins further added.

Currently, clients will use existing branches, checks, bank cards, online banking and other banking services as usual. Also, Texas First customers will be informed prior to the system conversions.

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.

Terms of the Merger

At the time of announcement, the acquisition of Texas First was valued in terms of stock and cash, with a boundary in place for a total deal value of $38.8-$46.5 million.

Per the terms, 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 the 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

In 2018, BancorpSouth completed the acquisitions of Icon Capital Corporation, Ouachita Bancshares Corp. and Central Community Corporation. These deals together added loans worth about $1.9 billion and $2.5 billion in deposits.

Further, last April, the company completed the buyouts of Merchants Trust, Inc. and Casey Bancorp, Inc. With these, the company gained access to six full-service banking offices in Clarke and Mobile counties; and four other full-service banking offices in the cities of Dallas, Grand Prairie, Horseshoe Bay and Marble Falls.

Additionally, last September, BancorpSouth completed the proposed mergers with Van Alstyne Financial Corporation and Summit Financial Enterprises. With these mergers, the company fortified its foothold in Dallas-Fort Worth, TX (CMSA), giving access to seven full-service branches, along with additional locations north of Dallas, TX, and one in Oklahoma, and expanded BancorpSouth's presence in Florida.

Our Take

BancorpSouth’s inorganic initiatives reflect its strong capital position and focused approach, in a bid to expand the company’s reach and product offerings. Furthermore, its efforts to strengthen customer relationships through improved technology offerings bode well for the long term. However, elevated merger-related expenses might deter bottom-line growth in the near term.

In the past year, this Zacks Rank #4 (Sell) stock has rallied nearly 16.2%, underperforming 18.8% growth recorded by the industry.

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