Texas bank M&A has picked up in the last two months, following a slow start to 2021.
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Through November, 14 deals have been announced with a Texas-based bank target this year, second only to Illinois' 17 deal announcements. November alone saw three deal announcements, including two larger than $500 million.
With weeks to go in 2021, the state has already surpassed its 13 deal announcements in 2020, though it is still well below the 20 or more deals announced each year in 2017, 2018 and 2019.
Even as deal volume lags historical norms, targets of announced acquisitions in the state are getting larger. Banks targeted this year in Texas reported an aggregate $36.18 billion in assets the quarter before deal announcement, well above the average amount over the last decade in the state.
Last year's 13 bank targets reported $107.64 billion in assets as of deal announcement, but that was almost entirely due to PNC Financial Services Group Inc.'s acquisition of Houston-based BBVA USA Bancshares Inc., which reported almost $104 billion in assets and was the largest Texas bank deal target ever. The 22 bank targets in 2019 reported only $15.42 billion in assets prior to deal announcement.
On Nov. 8, in the third-largest Texas deal of the year, Houston-based banks Allegiance Bancshares Inc. and CBTX Inc. announced an $845.6 million merger of equals. Once combined, Allegiance Bank and CommunityBank of Texas NA, the state's 6th- and 11th-largest community banks by assets as of Sept. 30, should have roughly $11 billion in total assets.
On Nov. 19, Pine Bluff, Ark.-based Simmons First National Corp. announced it would acquire Conroe, Texas-based Spirit of Texas Bancshares Inc. for $581.0 million. At the end of September, Spirit of Texas Bank SSB was the 17th-largest Texas community bank by assets.
Texas community banks and thrifts were more profitable than the national median in the third quarter, posting a median return on average equity of 11.92% compared to the national median of 10.39% and the Southwest median of 11.66%. The 3.44% median net interest margin for Texas community banks was 11 basis points higher than the U.S. median, but 11 basis points lower than the Southwest median.
Loans and deposits also grew faster than median U.S. peers at Texas community banks and thrifts. In the third quarter, median deposit growth in Texas was 15.1% year over year, and median loan growth was 2.5%. By comparison, deposits grew by a median 12.9% across the U.S. as a whole, while loans fell by a median 1.1%.
Dallas-based NexBank Capital Inc., parent company of NexBank — Texas' largest community bank under $10 billion in assets — raised $290 million in the third quarter to refinance existing debt and fund growth at NexBank, along with general corporate purposes.
Dallas-based Veritex Community Bank, the state's second-largest community bank, also has its eyes on growth, closing two deals with specialty finance companies since mid-July.
Like most of the rest of the U.S., Texas is seeing more branch closures than openings, as banking continues to go digital. Over the 12 months ended Sept. 30, 247 bank or thrift branches closed in Texas, while 116 opened.
Click here for a list of active Texas community banks.