Market Overview

KBRA Comments on Allegiance Bancshares, Inc.'s Acquisition of Post Oak Bancshares, Inc.

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Kroll Bond Rating Agency (KBRA) releases a comment on Allegiance
Bancshares, Inc.
's (NASDAQ:ABTX), ("Allegiance" or "the
Company") pending acquisition of Post Oak Bancshares, Inc. ("Post Oak").
Houston, Texas based Allegiance Bancshares, Inc. announced a definitive
merger agreement with Post Oak Bancshares, Inc., the privately held
holding company of Post Oak Bank, N.A, whereby Post Oak would merge with
and into Allegiance. The 100% stock transaction is valued at
approximately $350 million, or 2.23x tangible book value. The
transaction is expected to close in the fourth quarter of 2018,
following regulatory and shareholder approval.

As of March 31, 2018, Post Oak, on a consolidated basis, reported $1.43
billion in total assets, $1.15 billion in total loans, and $1.24 billion
in total deposits. The combined company would have pro forma total
assets of approximately $4.5 billion. The acquisition is expected to
provide operational scale with improved efficiency that includes 35% in
noninterest expense cost savings (0% realized in 2018, 80% in 2019, 100%
thereafter). In KBRA's view, the proposed acquisition is potentially a
credit positive to ABTX over time, strengthening the Company's deposit
franchise by expanding its footprint into four new counties surrounding
the Houston MSA, and pushing Allegiance into a top 10 deposit market
share in the fifth largest MSA in the U.S. Furthermore, ABTX's pro forma
loan-to-deposit ratio would improve to 97%, with a potential decline in
the Company's cost of deposits. Post Oak has a solid earnings profile
with ROAA consistently above 1% since 2015, and an efficiency ratio
below 60%. The all-stock transaction is expected to have minimal impact
on ABTX's strong capital position, carrying a pro forma TCE ratio of
9.6% at close.

In November of 2017, KBRA assigned ratings, including a senior unsecured
debt rating of BBB for Allegiance Bancshares, Inc. and a senior
unsecured debt rating of BBB+ for Allegiance Bank. The Outlook on all
long-term ratings is Stable. Though KBRA does not currently rate Post
Oak Bancshares, Inc. or its subsidiary, Post Oak Bank, N.A., on a
long-term basis, both institutions appear to be in sound financial
condition. This is further evidenced by KBRA's Subscription
Rating Service
financial strength rating of "B" for Post Oak
Bank, N.A.

The ratings are based on KBRA's Global
Bank and Bank Holding Company Rating Methodology
published on
February 19, 2016.

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
recognized by the National Association of Insurance Commissioners as a
Credit Rating Provider and a certified Credit Rating Agency (CRA) by the
European Securities and Markets Authority (ESMA). Kroll Bond Rating
Agency Europe Limited is registered with ESMA as a CRA.

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