Allegiance Bancshares Inc. and CBTX Inc. touted the benefits of scale from their merger of equals that will create a company with about $11 billion in total assets.
With a larger size, the company will need to address a "broader market" and emphasize larger-sized loans, but management said the pro forma bank will continue to focus on the small to medium-sized businesses that have been core to both Allegiance and CBTX.
"There's an underserved market out there of those small to medium-sized customers that a bank like this in combination can really do an exceptional job for," said Allegiance CEO Steve Retzloff on the deal call.
Retzloff also noted that the bank could see some noninterest income opportunities thanks to the greater scale. And management said the combined company should be able to attract more talent.
"We will be attractive to anyone that wants to come into the business and also existing guys out there looking for a new home," said CBTX Chairman, President and CEO Bob Franklin Jr. "We're going to provide career paths to people that maybe we didn't have necessarily at our past size."
Markets reacted positively to the deal: Allegiance's shares were up 6.7%, and CBTX's shares gained 3.6% at around 1:20 p.m. ET. The KBW Nasdaq Bank Index was up 0.3% at the same time.
The companies also touted the cultural similarities between the two organizations, which should ease the integration process. Raymond James analyst David Feaster agreed with the take, writing in a note that the cultures appeared well aligned.
Franklin pointed out how the two companies will play to each others' strengths.
"Allegiance has spent a lot of time on a little more granular portfolio with some smaller loans that are spread out to spread the risk a bit, but a little bit higher yield and also a greater growth rate than we have," he said. "We provide a really strong, low-cost deposit base that is really important ... I think there's some things we can do to help on the Allegiance side to maybe harvest more of those deposits that are out there. … And they can help us with some higher-yielding loans and some additional growth."
The combined company will leap past the critical regulatory threshold of $10 billion in total assets, but management expects the impact of the Durbin Amendment to be modest, Allegiance CFO Paul Egge said.
The deal is expected to be about 40% accretive to CBTX's 2023 earnings per share and about 17% accretive to Allegiance's 2023 EPS. Tangible book value per share dilution is projected to be about 3.9% with an earnback period of less than a year.
"The strategic merits of the ... MOE are obvious," Raymond James' Feaster wrote. "We view the deal positively and see significant growth opportunity for the combined entity in Houston, and [Texas] more broadly."
