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BancorpSouth (BXS) Gets Regulatory Nod to Buy Texas First

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BancorpSouth Bank BXS has received regulatory approval from the Federal Deposit Insurance Corporation (“FDIC”) to close its merger deal with Texas First Bancshares. The deal was announced in September 2019, with an objective of boosting its presence in the Central Texas region.

The transaction is expected to be completed on Jan 1, 2020, subject to the satisfaction of other customary closing conditions.

BancorpSouth’s chairman and CEO, Dan Rollins, stated, “I'm looking forward to welcoming Texas First's teammates and customers to BancorpSouth. This merger will provide us with a greater presence in Central Texas and with a respected team of bankers who share our commitment to exceeding customers' expectations and improving our communities.”

Notably, the total deal value ranges within $38.8-$46.5 million.

At the time of announcement of the deal, it was agreed that 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.

Founded in 1906, Texas First Bancshares 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 the end of September, the group reported total assets, loans and deposits of $398.1 million, $175.6 million and $287.6 million, respectively.

Our Take

Backed by a solid liquidity position, BancorpSouth has been making strategic investments through mergers and acquisitions for the past few years. The bank’s inorganic moves reflect its focused approach to expand reach and product offerings. The company has maintained an acquisition spree, fortifying its footprint in various areas. These transactions are anticipated to keep being accretive to earnings.

However, elevated merger-related expenses and investments in digital offerings might deter its bottom-line growth to some extent in the near term.

Shares of the company have rallied 24.5% so far this year, marginally outperforming 23.7% growth recorded by the industry.

Currently, BancorpSouth carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Of late, consolidation in the banking sector has been rising, thanks to the easing of stringent regulations. Several banks, including Fifth Third Bancorp FITB, SVB Financial Group (SIVB - Free Report) and Prosperity Bancshares, Inc PB, have undertaken opportunistic buyouts, which will not only result in geographic expansion but also help diversify revenue bases.

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