Allegiance Bancshares (ABTX) and CBTX, Inc. (CBTX) partner to create premier banking franchise in Texas


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Allegiance Bancshares, Inc. (NASDAQ: ABTX) (Allegiance), the holding company of Allegiance Bank, and CBTX, Inc. (NASDAQ: CBTX) (CBTX), the parent company of CommunityBank of Texas, NA, jointly announced today ‘hui that they have reached a definitive agreement whereby the companies will come together in a peer-to-peer merger to create a combined company with a market capitalization of around $ 1.5 billion and the 17th largest share of deposit market in the state of Texas.

Pursuant to the definitive merger agreement, Allegiance shareholders will receive 1.4184 common shares of CBTX for each common share of Allegiance they own. Based on the number of Allegiance and CBTX shares outstanding as of November 5, 2021, Allegiance shareholders will own approximately 54% and CBTX shareholders will own approximately 46% of the combined company.

“We are very pleased to partner with CBTX with whom we share a culture, strategic vision and commitment to our stakeholders. This transaction is a true merger of equals, combining the best of our highly respected community banks that positions us better to serve our customers and improve financial performance, ”said Steve Retzloff, CEO of Allegiance.

“Our companies complement each other wonderfully and the combined company will be a formidable competitor in our markets. The combination is poised to deliver long-term value to our shareholders, customers, employees and communities. I have long admired Bob’s leadership and the top-quality community banking franchise that CBTX has built. I am delighted that we are on the same team and look forward to working closely together as together we become the premier community bank in Texas, ”continued Retzloff.

CBTX President, CEO and President Bob Franklin said, “Bringing together two of the best community banks in the Houston area is great for our communities. Allegiance is a trusted local bank and there is no better team to unite to work together. to uphold the tradition of community banking, while meeting the diverse needs of the customers we serve. “

Mr. Franklin continued, “I have immense respect for Steve and the Allegiance team and look forward to building on our respective strengths as we focus on our shared future. We are committed to the idea that the Houston area needs a financial institution on a scale that works with the culture of a community bank and local decision-making led by banking professionals with deep experience. The combination enhances our ability to deliver to our communities, shareholders, customers and employees in a better way than either company could do alone and gives us the ability to compete in the next generation of banking services. The combined company will unify under a new brand image which will be identified prior to the completion of the merger. This will be important because we will make the best of both to build our future. “

Merger financially attractive to shareholders

Improved profitability: On a pro forma basis, the combined company expects to improve its performance, with a target return on average assets in 2023 of approximately 1.3%, an average tangible return on equity of approximately 12% and a ratio of efficiency of about 52%.

Opportunity for cost synergy: The merger is expected to generate cost synergies estimated at $ 35.5 million by 2023, which represents approximately 15% of combined annual operating expenses.

Significant earnings per share and increased profits: The merger aims to generate a 40% and 17% increase in earnings per share of CBTX and Allegiance in 2023, respectively (first full year of cost savings achieved).

Strong Combined Capital Levels: The combined company is expected to have a tangible equity ratio of greater than 9.5% at closing. The strong capital ratios expected from the combined company will support growth and capital management strategies.

Executive leadership

Reflecting the contribution the two organizations make to the merged company, the highly respected board of directors and management team, which are made up of individuals with significant financial services experience, will draw on both sides.

  • Steve Retzloff, CEO of Allegiance, will be the executive chairman of the combined company
  • Bob Franklin, Chairman, CEO and President of CBTX, will be CEO of the Combined Company
  • Ray Vitulli, Chairman of Allegiance, to be Chief Executive Officer of Combined Bank
  • Paul Egge, CFO of Allegiance, will be CFO of the merged company
  • Joe West, Chief Credit Officer of CBTX, will be Chief Credit Officer of Combined Bank
  • The board of directors of the combined company will initially consist of 14 directors – seven from Allegiance and seven from CBTX
  • Both Mr. Retzloff and Mr. Franklin will be appointed directors of the amalgamated company

Approval and timeline

The merger is expected to be finalized early in the second quarter of 2022, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals and shareholder approvals of each company.

Transaction advisors

Raymond James & Associates, Inc. served as financial advisor to Allegiance with Bracewell LLP serving as legal advisor. Stephens Inc. served as financial advisor to CBTX, with Fenimore Kay Harrison LLP and Norton Rose Fulbright US LLP as legal advisers.

Joint conference call and webcast details

A joint conference call with investors will be held at 9:30 a.m. Central Time today, November 8, 2021, to discuss the transaction. Individuals and investment professionals can participate in the call by dialing (877) 279-2520. The conference ID number is 8261126. A simultaneous audio webcast and accompanying presentation can be accessed through the Investor Relations section of Allegiance’s website at https://ir.allegiancebank.com and the CBTX website at https://ir.cbtxinc.com/events-and-presentations. If you cannot participate in the live webcast, the webcast will be archived through the websites listed above.

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