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BancorpSouth Closes Summit Financial & Van Alstyne Mergers

Zacks Equity Research

Recently, BancorpSouth Bank BXS completed the proposed mergers with Van Alstyne Financial Corporation and Summit Financial Enterprises. Notably, the company had announced the transactions this March, marching ahead with its efforts to strengthen footprint through strategic opportunities.

Last month, BancorpSouth also received the Federal Deposit Insurance Corporation’s (FDIC) regulatory approvals for the completion of these transactions.

"We're pleased to combine with these two great community banks that share our core values," said BancorpSouth chairman and chief executive officer Dan Rollins. "These partnerships allow us to build scale and add talented bankers in strategically important markets for us in Florida and Texas," noted Rollins.

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

Terms of the Mergers

At the time of announcement, the acquisition of Van Alstyne Financial was valued in terms of stock and cash, with a boundary in place for a total deal value of $80 million to $86.7 million.

Per the terms, BancorpSouth will issue 2.1 million shares of its common stock and distribute $20.5 million in cash, for all outstanding shares of Van Alstyne Financial’s capital stock. However, if need be, the share count or the cash consideration may be adjusted in accordance with the respective caps of the deal value.

With this merger, BancorpSouth will fortify its foothold in Dallas-Fort Worth, TX (CMSA), giving access to seven full-service branches, along with additional locations north of Dallas, Texas and one in Oklahoma.

In case of Summit Financial, the acquirer will issue 2.5 million shares plus $20 million in cash, for all outstanding shares of the former. This deal too comes with a cap placed on either side of the total deal value of $95 million to $107.5 million.

The merger will substantially expand BancorpSouth's presence in Florida. Summit Financial operates from four offices located in Panama City, Panama City Beach, Fort Walton Beach and Pensacola. It offers a comprehensive range of personal and business accounts, lending solutions, wealth management and investment services.

Prior Acquisitions

In 2018, BancorpSouth completed the previously-announced 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, this April, the company completed the buyouts of Merchants Trust, Inc. and Casey Bancorp, Inc.

With these buyouts, 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.

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.

Year to date, this Zacks Rank #3 (Hold) stock has rallied nearly 3.8% compared with 9% growth recorded by the industry.

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