Four years after entering the Dallas market, Business First Bancshares is extending its Texas footprint south to Houston.
The $4.4 billion-asset Business First, the holding company for b1BANK, announced Thursday that it agreed to acquire Texas Citizens Bancorp in Houston for $52.9 million in stock. The deal is expected to close in the first quarter of 2022.
Baton Rouge, Louisiana-based Business First entered Dallas in 2017, opening a loan production office in the city. It has expanded that toehold to three full-service branches, with $600 million in loans and another $150 million in the pipeline.
Now, Business First is looking to make a similar move in Houston.
“We feel we can overlay our Dallas strategy on top of a healthy platform in a strong market,” Business First CEO Jude Melville said in an interview. “It’s an opportunity for us to accelerate our transition into a regional institution.”
Thursday’s deal would give Business First six Houston-area branches, $350 million of loans and $450 million of deposits. Texas Citizens CEO Duncan Stewart is expected to join the combined company as chairman of its Houston region. Mike Cornett, Texas Citizens' president, will become vice chairman.
Melville didn’t rule out additional deals or expansion.
“We’ll be opportunistic,” he said. “If the right opportunity came up, we’d consider it.”
Around the same time Business First was expanding in Dallas, an investment banker introduced Melville to Stewart, whose company had signed a formal agreement with the Office of the Comptroller of the Currency in December 2019 that required it to strengthen risk management and establish strategic and capital plans. The agreement was terminated earlier this month, according to Stewart.
“We believe that our partnership with b1BANK will further strengthen the bank by enhancing our customer experience and our long-term contributions to the local community,” Stewart said in a press release.
Though Texas Citizens has grappled with elevated levels of nonperforming loans throughout 2020 and 2021, its profitability has improved in recent months. After reporting net income of $1.7 million for all of 2020, it said its profit jumped to $2.4 million for the first six months of 2021, according to Federal Deposit Insurance Corp. statistics.
“There was a couple-year period where they needed to make some investments, upgrade some things, but it made them a better bank,” Melville said.
The enforcement action “never impacted the quality of their client base or the strength of the deposit franchise,” Melville added.
Texas Capital shareholders will receive 0.7 Business First shares for each of their existing shares. They will own 9.7% of the combined company. The $52.9 million sale price represents 151% of Texas Citizens' tangible book value. For Business First, a tangible book value dilution of 5% would be earned back in three years.
