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Texas Capital & Independent Bank Terminate Proposed Merger

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·4 min read
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Recently, Texas Capital Bancshares, Inc. TCBI and Independent Bank Group, Inc IBTX mutually terminated the merger agreement announced in December 2019. Per the agreement, Texas Capital was supposed to merge with Independent Bank Group in an all-stock merger of equals.

Given the significant impact of the coronavirus pandemic globally and considering the companies’ capability to fully realize the synergies expected to achieve post-merger, both companies’ boards of directors agreed for the termination. Though Texas lagged behind other states in applying quarantine measures, it still recorded an upsurge in unemployment. Moreover, the energy sector has been hit hard by the sharp decline in oil prices. Notably, Texas Capital is highly concentrated to oil and gas loans in its portfolio.

Additionally, volatile markets have hurt the companies’ ability to work and their stock prices have been impacted as well significantly, as corporate-bond markets recorded price disparities. Therefore, banking stocks have been under pressure as investors’ concerns rose on the coronavirus-related mayhem.

"Due to the unprecedented impact of the COVID-19 pandemic, both companies’ boards of directors believe it is in the best interests of our employees, clients and all of our shareholders to focus on managing our business during this time," said Larry Helm, chairman, Texas Capital Bancshares.

Helm continued, "As a result of our significant multi-year investments, healthy balance sheet, ability to recruit and foster the best talent and history of driving strong results, Texas Capital Bank is well positioned to continue to execute against a standalone strategy. Our team and resources will be focused on leveraging our innovative and differentiated capabilities to continue providing a premier client experience and deliver elevated returns. Further, we maintain the scalability and commitment to operational excellence that will enable us to drive increased efficiencies and profitability and support sustainable, long-term value creation. Our dedicated team, whose tireless efforts to enhance our clients’ experience and the communities where we operate, will continue to guide Texas Capital Bank’s purpose and success."

Neither of the company will be paying any termination fee, as the decision to terminate the merger agreement is mutual.

Following the merger termination, C. Keith Cargill, president and CEO, and a member of the board of directors of Texas Capital has stepped down, effective immediately. However, Cargill, appointed as CEO in 2014, will continue to serve as the vice chairman until the end of this year.

Bottom Line

Banks are moving toward consolidation to dodge the heightened costs of regulatory compliances and increased investments in technology, in a bid to be competitive. Furthermore, the current interest-rate scenario has taken a toll on banks’ net interest margins, thereby clipping overall profitability.

Nevertheless, due to the coronavirus pandemic’s impact on the global markets, banks are retrieving back for mergers in expectation of non-realization of benefits projected at the time of merger. Such moves have instilled pessimism in investors about banks’ growth prospects.

Notably, shares of Texas Capital and Independent Bank Group have lost nearly 52.7% and 37.9%, respectively, over the last six months.

Currently, Texas Capital carries a Zacks Rank #5 (Strong Sell), while Independent Bank Group holds a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

GAIN Capital Holdings, Inc.’s GCAP current-year earnings estimate moved north in 60 days’ time. Further, the company’s shares have appreciated 51.7% over the past six months. At present, it sports a Zacks Rank of 1.

Mackinac Financial Corporation MFNC has witnessed upward earnings estimate revision for the ongoing year in the past 60 days. This Zacks #2 Ranked stock has depreciated 36.9% over the past six months.

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Texas Capital Bancshares, Inc. (TCBI) : Free Stock Analysis Report
Independent Bank Group, Inc (IBTX) : Free Stock Analysis Report
GAIN Capital Holdings, Inc. (GCAP) : Free Stock Analysis Report
Mackinac Financial Corporation (MFNC) : Free Stock Analysis Report
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