Dive Brief:
- Winter Haven, Florida-based SouthState Corp. has agreed to buy McKinney, Texas-based Independent Bank Group in an all-stock transaction valued at roughly $2 billion, the companies announced Monday.
- Following the acquisition, the combined company will have total assets of $65 billion, deposits of $55 billion, $48 billion in loans and a market capitalization of roughly $8.2 billion, SouthState said.
- The deal, expected to close by the first quarter of 2025, will expand SouthState’s footprint in the Dallas/Fort Worth, Austin and Houston areas in Texas, and the Denver, Colorado Springs and Fort Collins areas in Colorado.
Dive Insight:
The move will expand SouthState’s branch network to 343 locations, give it a presence in 12 out of 15 fastest-growing metropolitan areas in the U.S. and establish it as the fifth-largest regional bank in the South, according to the bank’s investor presentation on the acquisition.
It’s SouthState’s first deal since 2022, when the lender acquired Atlantic Capital Bancshares to expand into Atlanta.
“With a local, geographic management model, an industry-leading track record on credit and a presence in some of the best markets in the country, Independent Bank Group is a great fit,” SouthState CEO John C. Corbett said in a statement.
During Monday’s call with analysts, Corbett expressed his long-standing interest in expanding into Texas. He cited the state's diverse economic landscape, favorable operating costs driven by moderate regulations and lack of a state income tax, and its burgeoning metropolitan populations.
Corbett highlighted markets such as Austin, which have experienced substantial growth in this decade, partially fueled by an influx of residents from high-cost states such as California seeking more affordable living.
“We are regularly asked on earnings calls about our ideal M&A partner. We've said we would be comfortable with a partner that would make up about a third of the company, and we wanted to invest in high-growth markets, and we've specifically called out Tennessee and Texas,” Corbett said, according to American Banker. “We also believe it's wise to allocate capital where people are moving to, not where they're leaving from.”
Founded in 1988, Independent Bank Group has $18.9 billion in assets, $15.7 billion in deposits and $14.5 billion in loans. It operates 92 branches and has 1,511 employees, the presentation noted.
“We are excited about the opportunity to join SouthState, a company whose culture, business model and credit discipline matches well with ours,” David R. Brooks, Independent’s CEO, said in a statement Monday. “The combination of these two companies operating in growing markets provides a great opportunity for our Independent Bank Group teammates, clients and communities to flourish.”
SouthState expects to earn back tangible book value dilution of 9.6% within two years. The bank forecasted $175 million in pre-tax merger expenses. SouthState also estimates cost savings of 25% on Independent’s 2025 non-interest expense base, the company said in the presentation.
If the deal falls through, either Independent Bank will pay SouthState a termination fee of $60.9 million, or SouthState will pay Independent Bank $186 million, Reuters reported.
As part of the deal, Independent Bank shareholders will receive 0.60 shares of SouthState common stock for each outstanding share of Independent common stock.
Once the deal closes, three Independent Bank Group directors, including Brooks and G. Stacy Smith, the bank’s lead independent director, will join the boards of both SouthState Corp. and the bank, according to Monday’s release.
